China's Economy Begins to Feel Impact of Crisis

The trade fair ground in Shanghai is a good place to find out more about the mood in the business community, both in China and internationally: Cranes, forklift trucks, as well as port and airport facilities - the logistics industry is an integral part of the Chinese boom, and the CeMAT trade fair in Shanghai a major platform for new trends in the industry.

The impact of the financial crisis can be felt here, says Udo Looser from ABM, a German producer: "We've been here at the fair for the last three years, and this year it's much smaller. You do have many visitors, but they just come to have a look - and you immediately realize it's not going to get you anywhere!"

And Liu Dong, Head of China operations for another German company, NBB, who produce remote controls, adds: "It's at least 50 per cent less than last year. We used to have at least 40 visitors a day at our stall, but this year there are hardly ten or twenty."

Wave of closures

A few stalls away Kan Weimin from Anhui province is waiting for customers next to his forklift trucks. His company is new, he says, and has noticed orders have gone down by about a third. "It's obvious," he says. "Many companies in the coastal region are closing down. It's been going on since May, particularly in Zhejiang province. In ship building, paper production and other export industries companies are winding up."

Liu Dong from the German NBB company, too, is worried about the latest trends: "Our products are hundred per cent made in Germany. Our sales went up by 50 per cent earlier this year, but in the last two months we've seen a massive slump. We've hardly had any orders at all!" For Liu, the consequence is clear: Cut the costs! He won't visit prospective customers in China any more, unless he is convinced they are likely to buy.

Healthy crisis?

Wang Guisheng from Global Friend, a producer of forklift trucks from Hangzhou, has already lost 40 per cent of his business due to the crisis. But he looks at it differently: "The financial crisis is not necessarily a bad thing. In the last few years, too much has been invested in our industry, creating overcapacities. The market became chaotic and the quality of products unreliable. Now, a completely new situation is emerging. And it's the bad producers that are going to disappear. For the future, this is a healthy development, and for our company as well."

Wang Guisheng and many other exhibitors in Shanghai are optimistic that political measures will eventually take effect. They are just wondering when that might happen: „If this crisis continues for another two, three years, more than half of the producers will be dead. I think even six months would be enough. Personally, I hope it won't last for more than a year. At present, it's mainly companies that deal with the US which are suffering. Those with close relations to oil producing and Muslim countries are faring better. So we're shifting our focus over there."

Listening to these industry representatives, it seems the global financial crisis has already got a tight grip on the real economy in China and other parts of Asia, with devastating consequences in the time to come.