Chinese cuisine

Why China’s supply chains are collapsing

welcome to Foreign police‘s China Brief.

Highlights of the week: A storm of problems in China causes global supply chain disruptions, President Xi Jinping is unlikely to attend the COP26 Climate Conference in Glasgow, and the government introduced another round of COVID-19 restrictions due to delta variant cases.

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Supply chain disruptions aren’t going anywhere soon

Global supply chains are blocked amid booming consumer demand – and is expected to remain so over the holidays – and many of the bottlenecks are in China. Smaller businesses have reported lead delays of up to nine months on orders from China, while larger ones are struggling to keep shelves stocked in the United States.

One of the reasons for the slowdown is the surprising resilience of US consumption and Chinese production after the onset of the coronavirus pandemic. The ensuing US recession was relatively short, and the richest Americans are now spend madly. China’s manufacturing sector has also recovered faster than expected from its crisis period early last year. But the shipping companies already had cut their hours, causing disruption that continues to spill over into the overburdened global system.

A shortage of shipping containers, which are essential to modern supply chains, contribute to disruption. Containers normally circulate around the world, but many are now stranded in North America: for every 100 containers who get there, only 40 are sent back to Asia or Europe. Excess containers accumulate Los Angeles and other US ports as Chinese suppliers fight for them. It will be months before container manufacturers in China step up to meet demand.

Another factor is China’s fear of reintroducing the coronavirus. COVID-19 rules, such as recent blockages in Vietnam, have disrupted shipping around the world. But the problem is particularly acute in China, where most Travelling abroad remains banned, including a lot of one-way trip. (Chinese authorities have been relatively flexible in accepting valid reasons for travel.) Ports are particularly sensitive places, with regular closures for mass testing in the event of infected staff.

In August, the port of Ningbo, the third largest in the world, was firm on a single case of COVID-19, after the port of Yantian, the fourth in the world,to close in May and June due to 150 cases. Chinese restrictions are among the broadest crew change crisis that left ship crews stranded around the world, with at least 1,000 merchant seamen completely abandoned, thanks to a poorly regulated and exploitative industry.

Moreover, the Chinese industry struggled in 2021, despite its surprisingly strong recovery last year. Recent electricity shortages are part of the problem, but more and more labor shortage may present a more permanent problem. COVID-19 restrictions have made travel more difficult for many migrant workers who once moved regularly in search of work, especially those who lack it correct identification. But China is also facing a demographic crisis, as its working-age population keep shrinking after its peak in 2011.

In the long term, the demographic challenge should lead supply chain diversification away from China, both for economic reasons and because it will give more weight to existing concerns on security and political vulnerabilities. In the short term, don’t bet on getting what you want for the holidays.

No Xi in Glasgow. In the run-up to the United Nations Climate Change Conference (COP26) in Glasgow, Scotland, it seems very unlikely that Chinese President Xi Jinping will be there. That’s not to say Beijing doesn’t take the conference seriously – Xi hasn’t left the country since the pandemic began, either out of fear of infection or fear that his absence would present an opportunity for his people. rivals at home. A video appearance of Xi, alongside others support requests for the COP26 agenda, is likely.

However, ongoing power shortages have complicated China’s existing climate plans. He still has not submitted his emission reduction targets, potentially hampered by the increases in coal production and consumption forced over the past two weeks to deal with the energy crisis.

China is the world biggest carbon emitter, largely from the activities of state-owned industries. Despite the persistent illusions US climate negotiators, Beijing’s climate policy is unlikely to be affected by what Washington is doing. The determinants are rather domestic: the political weight of public enterprises and the need to balance the needs of a developing economy with the desire not to see the coast sink – in the constraints of a system that is often just as unable to think long term like the United States.

Delta variant surges strengthen COVID-19 rules. a epidemic cases of the delta variant in China, mostly linked to travel during the holidays earlier this month, sparked another round of travel regulations. The numbers – just 160 cases in this outbreak – would be insignificant in many other countries. But China is still doing its best to stick to its “zero COVID” strategy amid fears the delta variant could undermine its domestically produced vaccines; this latest outbreak means lockdowns, mass testing and more restrictions to protect Beijing’s rulers.

Hong Kong has also adopted more and more strict measures, despite a very low number of cases. Even for long-term residents, returning to Hong Kong from overseas is extremely difficult, not only because of the required quarantine period, but also because flights are frequently canceled. This is yet another factor pushing businesses out of the besieged city.

Chinese youth are looking for official jobs. A recording 2 million applicants registered for Chinese civil service exams next month, the first step in a conventional career as a government official. (There are other routes for well-connected people.) This is an increase from 1.5 million applicants last year, which was already a record, illustrating the growing tendency of young Chinese people to seek jobs. officials rather than private sector jobs.

Under Xi, China followed a consistent model from “the state moves forward, the private sector retreats” – a slogan originally coined to describe the advances of state-owned enterprises that is now ideologically pushed from the top. It is not surprising that a cynical generation of young people seek the comfort and stability of government positions. It also suggests that despite a decade of anti-corruption campaigns, the official and unofficial benefits public jobs remain substantial.

The United States expels China Telecom. In a long-awaited move, the U.S. Federal Communications Commission (FCC) unanimously agreed to revoke the state corporation’s license. China Telecom to operate in the United States, citing security risks. The Biden administration hasn’t shown the same level of enthusiasm as its predecessor to picking new Chinese tech targets, but it hasn’t backed down either.

As the FCC vote and other reports show, anti-Chinese Communist Party (CCP) action remains one of the very few areas of strong bipartisan agreement in Washington.

Property tax pilots. China plans limited pilot property tax programs over the next five years, but that doesn’t seem like a sign of strength on the part of the government when it comes to bursting the housing bubble. Instead, it’s a weak, diffuse movement that pushes the box back once again. China has conducted land tax pilot projects to more than a decade. To repeat the process rather than using the previous programs as models to introduce a national tax is disappointing, especially in the face of a growing real estate crisis.

But China’s upper middle classes, the backbone of the CCP’s support, are deeply into real estate investments – and anything that threatens their prosperity also threatens the party.

Alibaba down $ 344 billion. The Chinese government’s regulatory war on online giant Alibaba started this time last year after its charismatic founder, Jack Ma, criticized regulators. Since then, Ma has practically disappeared from public life, Alibaba’s financial arm has seen its IPO stalled, and the tech sector has become the target of an ideological and regulatory frenzy. Shareholder value fell, to the tune of $ 344 billion.

The Alibaba affair reminds us that Beijing can wipe out almost all companies based in China, or which have substantial transactions in China, as it pleases. The recent arguments of a few Western investors that the storm is complete and will not affect other sectors wrong.

People walk with umbrellas in bad weather in Ningbo, China on July 25.HECTOR RETAMAL / AFP via Getty Images

Ningbo, Zhejiang: 4.4 million inhabitants in the metropolitan area

You can’t escape the smell of Ningbo. Near the coast, it’s the scent of the sea, and elsewhere it’s the city’s famous affinity for stinky food. Ningbo’s cuisine is built around preserving and fermenting in brine and a consequent pride in pungent smells, especially the so-called three stinks wax squash, amaranth stems and taro. The tradition is old: Ningbo’s first settlers were fishermen and beach fishermen who left mounds of seashells behind 8,000 years ago.

Ningbo has been an international port for over 1000 years, accommodation a small but important Arabic and Persian business community and see visitors from across South and Southeast Asia. The Portuguese reached the city in 1522; like others, they alternated between trade and raids. Rich families, flush with the profits of trade, clustered around the city’s Moon Lake, an artificial reservoir that still survives as a tourist attraction.

Today, Ningbo is the second largest port in China and the third largest in the world. The port district and its warehouses stretch for kilometers, including one of the longest sea bridges, which connects the city to Shanghai. Like other ports, land reclamation is a big problem in Ningbo. The same goes for the effort to preserve the wetland ecosystem which made its unique cuisine possible.

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