The impact of the latest US interest rate hikes is now being reflected in global trade, as exporters said container shipping rates are down 70 per cent compared to the year above, indicating weaker consumer demand and weaker global economic prospects amid a variety of global uncertainties. .
“The cost of transportation to the US West Coast has been reduced by more than 70 percent. Previously, we had to struggle to search for as many containers as possible,” an exporter from Yiwu, eastern China’s Zhejiang province, who is engaged in the leather business, told the Global Times on Sunday.
According to the China Securities Journal, Shanghai’s export containerized cargo index fell to 2,072.04 points on Friday, down 10.4 percent week-on-week and about 60 percent lower than at the beginning of the year.
The cost of a 40-foot equivalent unit container from Shanghai to the West Coast of North America has dropped to $2,684, down nearly 70 percent from the beginning of the year. For a 20-foot container from Shanghai to Europe, the cost has fallen to $3,163, down 60 percent from the beginning of the year, according to the report.
The Yiwu exporter said orders from Europe and the US are down by more than 50 percent so far and the declining momentum may carry over into next year. “The Zhejiang provincial government is fully aware of the situation and has been implementing more measures, including arranging charter flights for overseas businessmen, to help us secure more orders,” the exporter said.
Several other exporters told the Global Times that freight rates started to fall in July as the market was hit by reduced demand in the European and US markets due to skyrocketing inflation. The latest US rate increases sent shock waves through more countries globally. Much-reduced port congestion is also reducing freight rates, exporters said.
The US Federal Reserve on Wednesday raised the fed funds rate by 75 basis points for the third straight time this year, in a desperate and reckless battle against runaway inflation.
The most aggressive rate-hike cycle since 1981, compounded by the Fed’s signal for more rate hikes in the coming months, is stoking fears of unbearable repercussions facing Washington.
Rising interest rates will deepen recession risks in the US and the stagnant economy will hit demand, resulting in a loss of trade momentum, further dragging down the global economy. It’s the inevitable knock-on effect after the US central bank aggressively raised interest rates, Bai Ming, deputy director of the international market research institute at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times. on Sunday.
The world needs to brace for falling prices of raw materials and finished goods, Bai said, warning that export-oriented emerging market economies will be more vulnerable to headwinds from a severe global recession.
“For China, we have to ‘enhance the technology content’ in our products and make them staples, rather than easily replaced ones,” Bai said.
Wang Jinghua, CEO of Babyshow, a Yiwu-based company that makes baby products for Europe and the US, told the Global Times that he expects a shake-up of the industry between now and the end of next year, although the situation is expected. to improve in 2024.
“Now we are more cautious about making new investments,” Wang said.
Global growth is forecast to remain subdued in the second half of 2022, before slowing further in 2023 to an annual growth rate of just 2.2 percent, the Organization for Economic Co-operation and Development said on Monday. OECD), and noted that “a key factor slowing global growth is the general tightening of monetary policy, driven by the higher-than-expected overshoot of inflation targets.”
However, the OECD raised China’s economic growth outlook to 4.7 percent next year from 3.2 percent this year, indicating confidence in the world’s second-largest economy.
Source: Global Times & Hellenic Shipping News