Hard Times Ahead For Chinese Industry

by Edward Niedermeyer

Published: April 7th, 2008

It's a testament to the roaring Chinese economy that A-listed automakers in the Middle Kingdom increased output and sales by about 22 percent but still didn't meet analysts expectations (damn those demanding analysts!). But Manufacturing Business Technology reports that profits didn't rise in concert with sales and production. This sets up the industry for a tough time as commodity prices are expected to rise substantially over the next several years. Runaway steel prices will cost Chinese firms an extra $1.5b this year, and low profit rates mean these costs will likely be handed down to consumers. Against a backdrop of rising inflation for everything from food to fuel, this development will probably hurt sales in China's value-oriented market. All this bad news likely spells industry reshuffling in the offing, as low utilization of production capacity in the automotive sector should fuel a flurry of mergers and acquisitions to allow companies to stay competitive during the projected two-to-three year lull.

Edward Niedermeyer

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4 comments

Bunter1 on Apr 07, 2008

Like any emerging industry their will be a few winners and a lot of blood.

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Dastanley on Apr 07, 2008

That means that here in the USA we can expect more hazardous, faulty, and poisonous crap from China. As they get more desperate to move their goods to the US and other export markets, they will be pressured to cut more corners and cheat on product safety and compliance regulations.

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ZoomZoom on Apr 08, 2008
dastanley : That means that here in the USA we can expect more hazardous, faulty, and poisonous crap from China. Yum, yum, I can hardly wait! Seriously, there are cases of local people mysteriously wasting away and dying, only to find out later that they died of something like ethylene glycol poisoning, just from eating their food or taking their medicine. After this and all of the poisoned dogs, cats, and leaded toys, I wonder why we import anything from China. Their garbage is probably safer...well, as long as it's stored in Yucca Mountain! I think there should have been a 5 year moratorium placed on their products until it can be demonstrated that they meet minimum safety requirements. But what do we do instead? We plan to send our best athletes over there! Up that ante!

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Joeaverage on Apr 08, 2008

I frankly don't understand why we do so much business with China when we are at odds with them on so many topics. Anybody know of a good "Made-in-the-USA" list is for my shopping? Don't get me wrong, I'm not one of those UAW banner carrying folks - just think stuff made here and Europe safer. We have quit buying toys at any of the big box retailers and switched to a Mom&Pop store that sells American and European toys.

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