Page 346 - 2021 White Paper
P. 346
1 White Paper on the Business Environment in China
their inventory coverage by another week. So, Supply Chain
for most companies, the inventory coverage they
have will allow them to match their supplies with Some scholars believe that after the outbreak,
demand, with no additional supply, for between mistrust among countries will grow and adjustments
two to five weeks, depending on the company’s to their industrial chain policies are certain such as
supply chain strategy (Simchi-Levi). building a more independent, complete and secure
industrial chain of their own. An anti-globalization
The Industrial Raw Materials (IRM) price index trend could emerge, but it will harm all countries
is estimated to have contracted by 8.6% in 2019, and spell disaster for the global economy. Some
reflecting a fall in base metal and crude oil prices. countries might want to reduce their dependence
Plummeting global growth, primarily in China, on China industrially, but that will be difficult for
and the escalating US-China trade war have hurt the global industrial chain to find an alternative
industrial activity and goods trade in both countries. economy to China in the short term. The global
Although the imposition of blanket tariffs on imports industrial chain cannot and should not decouple
of base metals, alloys and related products by the from China. However, because of rising labor costs,
US caused prices to rise in US markets, this was not trade frictions and other factors, the cost of China's
replicated elsewhere, including in Europe, where manufacturing industry has been rising, making it
most of the price series is based. Significantly, it lose its previous competitiveness. For example, some
is estimated that the tariffs caused metal prices to manufacturing enterprises have started moving out
diverge between the US (where supply shortages to lower-cost Southeast Asian nations. The decline
and higher import costs pushed prices up slightly) of manufacturing competitiveness may lead to the
and other economies (where extra supplies, which decline of China's national competitiveness. To
would otherwise have gone to the US, pushed prices establish an independent and complete industrial
down slightly). The IRM price index is expected to system after the epidemic, China must not only
fall by 6.1% in 2020, as the coronavirus pandemic pay attention to traditional manufacturing, but
hurts industrial activity and rise by 6.8% in 2021, also master some core technologies, without which
as depleted stocks and a moderate rise in demand China's development will be under the restraint
push up base metal prices. The base metals sub- of foreign industrial chains. Manufacturing is the
index is now estimated to have fallen by 10.3% year foundation of a country's national economy and
on year in 2019, as economic headwinds created by without it many so-called high-end industries cannot
trade tensions weighed on activity in the industrial be developed at all. Excessive real estate investment
sector. Although some markets tightened, others, and development in China in the past few years
such as steel, were still plagued by oversupply. have led to the flow of bank capital, labor and
Production capacity-bolstered by a surge in other resources to the property sector, driving up
investment during a decade-long boom in prices manufacturing costs. If the country no longer blindly
in the 2000s-still exceeded demand. Metal prices promotes real estate development, it will save large
sagged in early 2019, as the US and China entered amounts of labor, capital and other resources for
into a full-blown trade war. With the exception of the development of other sectors (Cao).
nickel, it is estimated that prices did not recover
to their early-2018 highs over the remainder of Iron and Steel
2019, as the trade war continued to weigh on
business sentiment, particularly in the transport, Stimulatory measures in China and other
manufacturing and construction sectors. However, countries played a pivotal role in reviving economic
policy-led decisions to rein in the supply of some activity and, with that, demand for commodities. The
industrial materials and metals in China, together sustained rally in iron ore prices comes after the price
with continued demand from key emerging sectors of the steel-making ingredient tanked to a trough of
- including electric vehicles - helped to keep a floor US$80 a ton in March 2020. The strong gains came
under base metal prices in 2019. 2021 prices are after Beijing pumped hundreds of billions of dollars
expected to return to growth, as falling stockpiles of fiscal stimulus into its economy to help it bounce
and investments in infrastructure raise demand for back from the coronavirus pandemic. Much of this
industrial metals (Research and Marketing).
346
their inventory coverage by another week. So, Supply Chain
for most companies, the inventory coverage they
have will allow them to match their supplies with Some scholars believe that after the outbreak,
demand, with no additional supply, for between mistrust among countries will grow and adjustments
two to five weeks, depending on the company’s to their industrial chain policies are certain such as
supply chain strategy (Simchi-Levi). building a more independent, complete and secure
industrial chain of their own. An anti-globalization
The Industrial Raw Materials (IRM) price index trend could emerge, but it will harm all countries
is estimated to have contracted by 8.6% in 2019, and spell disaster for the global economy. Some
reflecting a fall in base metal and crude oil prices. countries might want to reduce their dependence
Plummeting global growth, primarily in China, on China industrially, but that will be difficult for
and the escalating US-China trade war have hurt the global industrial chain to find an alternative
industrial activity and goods trade in both countries. economy to China in the short term. The global
Although the imposition of blanket tariffs on imports industrial chain cannot and should not decouple
of base metals, alloys and related products by the from China. However, because of rising labor costs,
US caused prices to rise in US markets, this was not trade frictions and other factors, the cost of China's
replicated elsewhere, including in Europe, where manufacturing industry has been rising, making it
most of the price series is based. Significantly, it lose its previous competitiveness. For example, some
is estimated that the tariffs caused metal prices to manufacturing enterprises have started moving out
diverge between the US (where supply shortages to lower-cost Southeast Asian nations. The decline
and higher import costs pushed prices up slightly) of manufacturing competitiveness may lead to the
and other economies (where extra supplies, which decline of China's national competitiveness. To
would otherwise have gone to the US, pushed prices establish an independent and complete industrial
down slightly). The IRM price index is expected to system after the epidemic, China must not only
fall by 6.1% in 2020, as the coronavirus pandemic pay attention to traditional manufacturing, but
hurts industrial activity and rise by 6.8% in 2021, also master some core technologies, without which
as depleted stocks and a moderate rise in demand China's development will be under the restraint
push up base metal prices. The base metals sub- of foreign industrial chains. Manufacturing is the
index is now estimated to have fallen by 10.3% year foundation of a country's national economy and
on year in 2019, as economic headwinds created by without it many so-called high-end industries cannot
trade tensions weighed on activity in the industrial be developed at all. Excessive real estate investment
sector. Although some markets tightened, others, and development in China in the past few years
such as steel, were still plagued by oversupply. have led to the flow of bank capital, labor and
Production capacity-bolstered by a surge in other resources to the property sector, driving up
investment during a decade-long boom in prices manufacturing costs. If the country no longer blindly
in the 2000s-still exceeded demand. Metal prices promotes real estate development, it will save large
sagged in early 2019, as the US and China entered amounts of labor, capital and other resources for
into a full-blown trade war. With the exception of the development of other sectors (Cao).
nickel, it is estimated that prices did not recover
to their early-2018 highs over the remainder of Iron and Steel
2019, as the trade war continued to weigh on
business sentiment, particularly in the transport, Stimulatory measures in China and other
manufacturing and construction sectors. However, countries played a pivotal role in reviving economic
policy-led decisions to rein in the supply of some activity and, with that, demand for commodities. The
industrial materials and metals in China, together sustained rally in iron ore prices comes after the price
with continued demand from key emerging sectors of the steel-making ingredient tanked to a trough of
- including electric vehicles - helped to keep a floor US$80 a ton in March 2020. The strong gains came
under base metal prices in 2019. 2021 prices are after Beijing pumped hundreds of billions of dollars
expected to return to growth, as falling stockpiles of fiscal stimulus into its economy to help it bounce
and investments in infrastructure raise demand for back from the coronavirus pandemic. Much of this
industrial metals (Research and Marketing).
346
