The conflict, which occurred on one of the world’s busiest shipping routes, shows the vulnerability of China’s export-dependent economy to supply disruptions and external demand shocks.
Meanwhile, the disruption comes when the company faces logistical challenges ahead of the Chinese New Year celebrations next month. Ahead of the celebration, around 300 million migrant workers took leave and almost all factories in China closed. This creates chaos in the previous few weeks for delivery of goods.
Meanwhile, the Bamboo Curtain country is currently struggling with its country’s economy in the face of a property crisis, weak consumer demand, population decline and sluggish global growth.
Prime Minister Li Qiang, in his speech at the World Economic Forum in Davos on Tuesday (16/1/2024) also emphasized the need to maintain a stable and smooth global supply chain, without referring specifically to the Red Sea.
New Pressure for Chinese Exporters. Some companies, for example US-based BDI Furniture, are now relying more on factories in countries such as Turkey and Vietnam to mitigate the impact of these disruptions.
Meanwhile, recent steps have been taken by Western countries to reduce dependence on China amidst tense geopolitics. This then poses a threat to China that other companies will follow suit, possibly choosing to shift production closer to home, an approach known as “near-shoring”.
