CHINA FEELS THE DOWNTURN IN TRADE
At long last there is some real evidence China is feeling some cold from this recession. Up until I found this news item, everything I have read paints a rosy picture of what is going on in China. Their stimulus plan is outstanding while in America, media cannot find enough bad news to tell us why the Obama administration is failing in all it tackles.
America has all but exited the shipping business with only a handful of remaining small steamship lines left operating because they are protected by the Jones Act. In the seventies the Japanese moved in big time, followed by the Taiwanese and Koreans. Even city-state Singapore has built up larger fleet of merchant vessels than America. Over the past twenty years China naturally has become a major player also. The two major lines, Cosco and China Shipping are in the global top ten. Well, to be absolutely correct that was the case in 2008. It might not be so for 2009. According to Paris-based AXS-Alphaliner, the Bible for the shipping industry both lines’ profitability appears to be falling faster than their rivals as they come under pressure to fill their fleets with cargo at dirt cheap rates.
Cosco’s revenues in the first quarter dropped 63.8% from the same period last year which turned a near $billion profit into a ½$billion loss. China Shipping was not much better with a 55.8% drop in revenue and a similar loss. Both companies’ volumes are down 30%. None of the other top ten carriers, who have experienced virtually the same drop in tonnages have reported such huge declines in revenue and bottom line results. In these times we all have to sell a dollar for ninety cents, but to go down to fifty cents means, only in Communist China could government-owned enterprises get away with it and survive.
China sells its junk the same way as it operates its shipping companies. And what I cannot understand is this; put Wal-Mart to one side and have a look at two American companies who are huge players in China and probably will both go into Chapter 11 before the end of the year, General Motors and Motorola. Both have a huge presence in the Chinese local market but the truth is just like Cosco and China Shipping they have to sell a Buck for fifty pennies in order to compete. Unfortunately they don’t have the Chinese government check book at the ready to subsidize their losses. One thing for certain when they do go belly up in China, Motorola will lose all its technology to some former Chinese joint venture company and SAIC, G.M.’s partner, will swoop in and do the same with them. That is when China starts to really win!
I have always maintained that China’s growth has brought the world down to the lowest common denominator. When people like the Chinese are treated almost as badly as animals, it is hard for a value system as we know it to become part of their culture. That is why I have difficulty coming to grips with why do we think it is okay and suck up to do business with China, when their leadership is actively waging war, the first phase being an economic one, against us?
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