Beijing Olympics Impact: China to ease or shut down manufacturing

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Updated: (Bumped up to Featured) It’s now being mentioned in the International Herald Tribune and The New York Times. Big hat tip to All Roads Lead to China who provided the update along with these comments:

Where I would also like for everyone to focus is that between now and the games, there are several events that I feel increase the risks of much larger closings:

1) If pollution levels do not improve, a wider net will be cast than is currently being announced

2) A continue drought condition in the north may reduce water reserves further, and thus water rationing may go into place before the games… and this will impact manufacturers relying on large quantities of water

3) it was only 2 months ago that the south lost power. If any problems with the grid, or its ability to supply the games, large energy consuming facilities may be asked to shut down.

As the Opening Day for the Beijing 2008 Summer Olympics comes ever closer, the Chinese government is increasing steps to improve the pollution and environment just before, during, and after the games. We’ve already seen communications from 3PLs / Logistics Providers in China warning of possible congestion and other issues affecting the ports and local transportation, not to mention manufacturing. As usual, our friends at All Roads Lead to China have some good advice for those of us that source from China:

and here is what my gut tells me.

1) There is a very high risk that large scale shutdowns will occur in the above time frame. The olympics is kicking off on August 8, and this would provide a month before (to clear out the air) and a month after (tourists will flow to Shanghai afterwards) of clean air

2) The industries most likely to get the knock on the door are those that are dirty, belching black smoke, sucking up a lot of water, and require a lot of energy to accomplish all that. So, if you are a clean enterprise running off the grid and procession your water (like Plantronics in Suzhou), I wouldn’t worry. But anyone else should do a rapid self assessment of where they fall on the green scale and then work out the risk.

and here is what I am telling you to do:

1) Assess your risk – use a napkin approach first – to figure out if you are first in line, or last

2) Get your GR person on the phone and figure out if you will be affected

3) Pull in your production people and “what if” this. If you were shut down, what would be the impact, and what can you do?

4) Book your containers now

As Rich says, take it for what it’s worth and keep in mind that nothing “official” has come out of the central government yet. However, rumors of this nature have been circulating for quite some time now and we certainly kept it in mind during some of our planning sessions last year.

Based on the information I have seen from some of the logistics service providers out there, the ports that could be impacted volume wise are primarily Xingang and Qingdao. It’s not clear on whether the volume impact will affect the ports negatively or not since it’s assumed that some of the heavy industry export volume will decrease just before and during the games if factories are forced to ease production or cease operations entirely. However, it’s reasonable to expect that the share of volume between these two ports and other North China ports such as Dalian could fluctuate during this period.

The traffic control measures being planned – odd/even license plate numbers allowed on different days, cargo and large vehicle traffic being reduced – will restrict the movement of cargo to and from factories and the ports. This could result in heavy congestion before the measures are officially implemented as factories rush to get orders out before traffic is restricted. The same could happen once the measures are lifted after the close of the Olympics. The bigger problem is that supposedly vehicle emissions will be checked and examined with non-compliant vehicles being forced off the roads for the duration, but I haven’t seen anything concrete on this, if any of our readers have anything substantial regarding this please let us know. I’ve also heard that Beijing plans to shut down a number of fueling stations in outlying areas. Fuel is already a big problem for the trucking industry in China thanks to price controls, reducing the supply of fueling stations in and around Beijing will only worsen the problem.

With long lead times and early ordering processes at many large retailers and importers, it may be difficult to change anything they have planned at this point. But it would be prudent to reach out to your critical suppliers, buying/sourcing agents, logistics providers, and any other parties you do business with in China to assess the possible risk to your supply chain. Where possible, try to bring in key product early and ensure enough inventory to take you well through the Olympic Games. Work with your logistics partners to plan and book shipments early and secure space. Last, but not least, if all else fails see if you can’t source the same item from a domestic distributor or a similar product from another country.

As we receive further updates regarding this situation we’ll update accordingly.

About The Author: Co-Contributor

  • rock April 29, 2008, 8:39 pm

    I don’t believe what you said will happen, as my experience in China for over 15 years, only the major street in big cities, no matter Olympic or not, when important event comes, they always let half of the cars ( by odd/ even number) run in the streets, while transportation trucks were never allowed to run on these streets, there are certain route that let transportation trucks go through. As to “shutdown manufacturing”, are you trying to scare people? let me tell you, those that consumes huge energy and water — such as paper mills, chemical factories, and so on were give certain time limit to improve, this is required for the overall improvement of the environment there, not just for the Olympic.
    For power shortage season –hot summer time, what they did was ask the manufacturing companies to switch their weekend days to weekdays to avoid the peak time for electric consumption — it never effect their allover amount of power sully. Do you know how many foreign companies there, if like what you said happens, “shutdown manufacturing”, “cut power and water supply”, then what would happen to these foreign companies? you should ask them first, let them tell you what the really is.
    Recently, I’ve talked with several manufacturing company CEOs about the possible impact on manufacturing from Olympic, they expressed very little concern, what they said were, if something happen – electric, water shortage during Olympic – though the possibility is little, — will only around Beijing, but if you look at the new terminal 3 in Beijing Airport, and the efforts they did, if you go there talk with the business people, the government official, it’s hard to believe what you are talking about here. let’s wait for another 2~3 weeks and see.

  • SwizStick April 30, 2008, 11:05 pm

    You don’t have to believe anything I said, or knowledgeable people within the trade industry like All Roads Lead to China, or all of my logistics contacts in China, or the container lines I use, or the International Herald Tribune and the New York Times. Perhaps you are better informed than all of those sources. We’ve all got our opinions and are free to express them . We’re not trying to “scare” anyone – just tell the facts as we see them and hopefully provide people with some useful information so they can make some informed decisions. And certainly manufacturers that don’t fall within the government’s target don’t have to worry about a thing. We certainly aren’t calling for panic, only that major importers who source from Tianjin/Xingang/Northern China should assess the possible risk any impact Olympic planning MIGHT have on their supply chain if ports/terminals/roads are affected and plan accordingly. I would think that to be the prudent, and smart, thing to do. Hopefully everything will be fine and run smoothly – that’s what everyone wants. But it’s better to plan smartly for a possible disruption than ignore it and expect nothing to go wrong.

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