China's Impact on U.S. Retail
Retailers must keep a close watch on international trade
February 3, 2010 By Peter BerghammerFor CE retailers and manufacturers, this poses a long-term impact on their supply chain and profitability. Although current economic warnings emanating from the UK and Germany are cause for deep concern, the Chinese economic stimulus and tax incentive packages seem to be the necessary drivers to move the world economy forward.
Many analysts, though, are cautious on that point and divided on its meaning. The caution stems from memories of Japan's economic miracle in the late 1970s and early 1980s, and the fact that it is mired in economic stagnation today. Based on China's newly revised 2008 GDP calculations - factoring in a realistic growth rate of 8 percent - it appears that China could soon overtake Japan as the world's second largest exporter. Furthermore, Beijing forecasted last December that it is poised to overtake Germany (the world's largest exporter) to claim that spot as well. Strong initiatives to decrease energy consumption by 20 percent this year and incentives to increase factory efficiencies could help to increase its export levels at substantially lower costs.
While a one- or two-year encapsulation of numbers can predict long-term trends, analysts are quick to point out that that Germany's and Japan's numbers have been hobbled by turmoil in the banking sector - which China has, for the most part, avoided - and overall weakened demand throughout the global economy. This scenario, some analysts believe, has made the strength of China's economic momentum appear more impressive than it really is. But, on the other side of the coin, there are analysts who note that a projected annual growth rate for China at 8.8 percent is nearly 4 times faster than U.S. economic growth and far above the UN projected worldwide average of 2.4 percent.
Although the initial picture emerging from the Chinese indicates that the outlook for China to lead a global recovery is good, there are key issues that have emerged among trading partners that could impact a broader recovery. Primary concerns include the Yuan's value, trade protectionism, slumping demand worldwide and the U.S. savings rates.
The darker side of global trade, particularly for the CE industry, includes shifting consumer attitudes and their tolerance for debt. It's important to note that consumer-spending adjustments create disruptive ripples throughout the world economy. While China has enjoyed a domestic boom, based on such items as household appliances, many consumers in countries such as the U.S. have become more cautious and conservative in their buying habits.
