– Here’s to the official opening of the new Shanghai International Cruise Terminal on the North Bund – one of the more interesting new pieces of architecture in Shanghai (think of a giant bug on insect-like legs). Plenty of pressure on the cruise industry at the moment, though. America, which accounts for the vast bulk of the cruise business both in terms of ships and passengers, is a major victim of the recession and so the operators are praying that Asia, and in particular the new market of China, can take up some of the slack. Companies will be redeploying ships out here, but it’s far from clear that significantly large numbers of Chinese want to take cruises, and when they do, the margins are massively lower than on the formerly high-spending Americans.
– Shipping – containers this time rather than passengers – is one of the more reliable indicators of the state of the global economy. And the news from China is inescapable and not good. Shanghai Port has revised its growth in container traffic down. Less widely reported were the numbers from Yantian, which reported its first ever negative growth rate in container throughput. Why is Yantian so important? Two reasons: it’s effectively China’s only privately operated port; and it is heavily reliant on trans-Pacific routes – i.e. as goes America, so goes Yantian.
– Of course, signs of slowdown are everywhere – from ad rates to power usage. One problem that has resurfaced with a vengeance is bad debt, as you might expect. Everyone wants to delay paying, at best, and get out of it totally if at all possible. Everyone else wants to be paid as fast as possible. The last time I saw bad debt levels running this high was back in 1997 when China was taking a hit from the wider Asian financial crisis and growth was around 8.8%. The same old problems always apply when it comes to bad debt – the courts rule in your favor but enforcement is another matter entirely. Debtors hide their assets, move from province to province, shut and then reincorporate. With legal fees and no payment of costs in China they hope you’ll eventually go away – often they’re right. But as one friend told me: With not much business to chase, we haven’t got much else to do but carry on chasing the debts.
– A raft of new laws on patents, trademarks and counterfeiting is due on the statute books next year. But will anyone pay any attention? A stroll around any major Chinese city is enough to convince any but the blind (and even they can hear chants of "Rolex, Rolex") that the last few months have seen a massive resurgence in fakes and pirated goods. As small retailers close, dodgy DVD emporiums are sprouting again like mushrooms; Ferrari branded fake watches are everywhere. We shouldn’t be surprised at this – export orders are down, many low-end factories are scrabbling for orders to stay in business. Little surprise that more than a few are turning again to churning out the fakes for the local market and, we can expect, as consumers around the world watch their pennies, the fake handbag markets of Europe and North America too.
– Last month I pondered which economic levers China would pull to stimulate the economy. With the announcement of the US$586 billion stimulus package in November, we now have a better idea. From the point of view of stimulating consumption, the overhaul of the VAT system should be most helpful. As long as consumer sentiment remains reasonably high all should be OK – though a slowdown in consumer spending is inevitable. But if sentiment stays strong, and the government accelerates its plans to promote consumer finance, that would be great. We all know that credit cards are the devil’s money but even a small uptick in credit would help keep the numbers up going into 2009.