Snow effects business in China

Copyright (c) 2008 Tim Lyons

There were over 300 million people on the move this Chinese New Year - more than the population of western Europe.

Right in the middle of Chinese New Year 2008 comes one of the worst snow storms in living memory. Both the human and economic impact cannot be underestimated. There have been a number of industries affected by the storms - manufacturing, agriculture and automaking amongst them. In fact, the Ministry of Civil Affairs announced on Wednesday that the overall impact to the economy was in the order of US$2Billion.

The eastern seaboard rarely sees snowstorms of this magnitude and for this reason, airports, train stations, bus stations and assorted other transport infrastructure has struggled to cope. Large automakers like Toyota, General Motors, Citroen and Volkswagon who locate in areas along the eastern coast such as Shanghai, Guangzhou and Wuhan have been directly affected. Most automakers take a just-in-time approach to inventory and consequently there is a substantial issue regarding access to suppliers. This has meant a number of them have had to temporarily close. Guangzhou, in the southern province of Guangdong, has been one of the worst affected. It is home to many of the major Japanese automakers. Sleet and rain, rather than snow, are the order of the day in this normally warm part of China. The largest Japanese automaker in China, Honda, suspended work in its Guangzhou plant as well as closing its plant in Wuhan, Hubei, due to problems caused by the snow.

Chen Xiwen, deputy director of the Communist Party's financial affairs team announced pubclicly that the effect on fresh produce supplies in some parts of the country has been a disaster. Inflation is going to come under additional pressure given the imminent price rises for agricultural products that the weather will bring.

Black outs are becoming more commonplace due to the increased power consumption occurring in some of the bigger cities throughout China. Even the stock market was feeling the effect of the cold weather. The Shanghai Index dropped more than 7% on Monday, moved lower by the concerns investors had over the way particular stocks would be affected by the poor weather. Transport and power stocks were particularly badly affected.


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Tim Lyons is Executive Director of Manage China. Manage China is a company that helps foreign firms who are interested in doing business in China. http://www.managechina.com