A report by Reuters (Hong Kong) Analyst Susan Fenton highlights the threat that bankruptcies among China’s small and medium-sized manufacturers pose to global supply chains. Chinese export manufacturers have been hit particularly hard by the global drop in demand, with a large numbers of them facing bankruptcy. A large scale collapse among China’s small and medium-sized supply base would create a domino effect within global supply chains. Wholesalers, intermediaries and transport providers in Asia, Europe and North America would all suffer from the collapse of Chinese manufacturers.
According to a press statement on Friday by China’s Central Bank Governor Zhou Xiaochuan, China is already seeing signs of economic recovery thanks to the government’s stimulus measures. A range of Chinese government officials similarly expressed their optimism regarding a swift recovery of the Chinese economy. International observers remained suspicious of the official optimism, pointing to still falling exports and imports in February. The major fear among international analysts is that Chinese officials are becoming too complacent that their current stimulus policies are enough to handle the economic crisis.
With the private sector contributing more than half of China’s annual economic growth, top Chinese officials and bankers called for increased loans to the country’s small and medium-sized enterprises (SMEs). As many Chinese SMEs are suffering severely from the global drop in demand, officials stressed their importance to China’s overall economic performance. They fear that the government’s economic stimulus package will predominantly benefit larger enterprises. The increasing role of private lending in China is seen among experts as one way to provide the country’s SMEs with the necessary support.
Zhang Ping, Director of China’s National Development and Reform Commission, presented a readjusted economic stimulus package at a press conference on Friday. The initial investment total of RMB 4 trillion remains the same but the new plan includes infrastructure investment cuts of RMB 300 billion and energy conservation and sustainability investment cuts of RMB 140 billion. Additional investments are planned for the technology sector (RMB 210 billion), rural public works projects (RMB 120 billion) and social welfare programs (RMB 110 billion).
Jia Youling, China’s highest ranking veterinarian at the Ministry of Agriculture, expressed his concerns about animal diseases in China. According to him, China faces ‘grave’ risks of bird flu and foot-and-mouth disease this year. China, the world’s biggest meat and poultry producer, is not optimally prepared for potential outbreaks as new virus strains emerge and no vaccines are commercially available yet.
