China started the year by passing another economic milestone – in January it overtook Germany to become the world’s largest exporter. The next landmark development will be when the Chinese economy surpasses Japan’s to become the world’s second biggest, which is anticipated to occur later this year.
The continuous growth of the Chinese economy throughout the downturn is the result of government-stimulated domestic demand, and more recently, a revival of global demand for exports – they were up 21% year-on-year in January.
The increase in demand for Chinese exports came at such a fast clip that it’s causing logistical problems, according to the New York Times: “Some factory executives in the Pearl River Delta region near Hong Kong have begun complaining of shortages of empty steel containers in which to ship their goods,” says the newspaper. (For more on shortages in the Pearl River Delta, see WiC50, Talking Point).
The exporters might have better luck finding spare containers 1,000 miles north. According to the Economic Observer, empty containers are stacking up like Lego in the Port of Shanghai. One insider told the newspaper that the port held at least 20 million empty containers in 2009.
But if the demand for Chinese exports has recovered, surely the number of empty containers would be decreasing as they were put on outward bound ships?
And more generally, if exports are roaring back, why did one source at Shanghai Yangshan Port tell the Economic Observer, the recent port conditions are “not good”?
One possible explanation for the empty containers is that in early 2009, the Port of Shanghai started allowing shipping companies to store their empty containers free of charge. The idea was that, as global demand for Chinese exports picked up, the stockpile of empty containers would make the port more attractive to shipping companies.
But perhaps the container surplus is not the real issue, but rather a symptom of a larger problem – China has more ports than it needs.
For evidence of overcapacity, you need look no further than the coastal province of Jiangsu, which has dozens of ports. Two of them are only five kilometres away from each other. And since Shanghai is nestled in the southeast corner of the province, many of Jiangsu’s ports are competing with the one in Shanghai, the world’s busiest by cargo tonnage since 2005.
Coastal cities see having a port as a key driver of economic development, so many built docks for container ships. Before the economic downturn, when exports were growing rapidly, overcapacity was not so apparent. Now it is more clear, and since many economists believe that export growth will not return to pre-crisis levels, it could be a problem for some time to come.
Another factor that disguises the seriousness of the problem is that ports often exaggerate how busy they are by boosting their reported throughput statistics. And that’s why empty container data is so important – one can bypass the numbers and get a sense of how busy the ports really are by counting those big empty boxes.
As we all try to assess how real this export recovery is, that’s a statistic worth tracking…
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