After the Suez Canal congestion in March and the re-emergence of the COVID pandemic, the international supply chain disruptions have come as a huge disadvantage for the Chinese companies who were wanting to go global.
China, which had always had an advantage overseas due to access to cheap manufacturing at home, is now in deep waters due to trade tensions and pandemic disruptions, which is withholding many goods from being shipped out of the country.
As per experts, the cost of shipping containers has climbed five-fold from about $3,000 to as much as $15,000 each, while it takes about a week longer for them to get to Europe. Companies have had to rebook shifts and delay shifts because of the non-availability of ships.
While the foreign demands for the Made in China products stand on solid grounds and attract companies to further expand overseas, the shipping delays mark the latest challenge that the Chinese companies face in trying to reach international markets.
Apart from this, many Chinese businesses have also come face-to-face with challenges from a crackdown on fake reviews by Amazon.
Some sellers’ behaviour has been deemed in violation of Amazon’s ‘Seller Code of Conduct and other terms, causing restrictions on their operations.
Furthermore, in another obstacle, the Chinese merchants are also likely to face higher costs from the EU’s implementation of a new tax policy for goods exported into the region.
“The political, economic, compliance, logistical and personnel challenges that Chinese businesses face when going abroad have significantly increased,” reported the People’s Daily, the Chinese Communist Party’s official newspaper.
It said, in recent years, inadequate identification of risks and prevention has become an important problem for Chinese businesses’ ability to ‘go out’.
As a way out of these logistical challenges faced by the Chinese businesses, we are likely to see more and more companies localizing in the international market.
Chinese businesses have already been building or renting warehouse space near customers in Europe, intending to make operations more efficient.
As per the figures from China’s Ministry of Commerce, Chinese companies have built about 100 new warehouses overseas in the first half of this year, after an increase of 800 last year.
Chinese companies are looking for more acquisitions and construction of factories in different countries to expand to the international market and overcome the international supply chain hurdles.