China Shutters Factories, Stops Construction Ahead of Games

Earlier this morning All Roads had the RSS scoop that China has begun to curtail manufacturing and construction ahead of the Olympics (in an approach significantly more far reaching than many previously thought). In the story, Richard Brubaker quotes IHT noting that "Five provinces and municipalities surrounding Beijing will also be shuttering factories, although their plans were not released. They are: the city of Tianjin; Hebei, Shanxi and Shandong provinces and the huge Inner Mongolia region." And perhaps this is just the beginning. Richard opines that "if pollution levels do not improve, a wider net will be cast than is currently being announced" and that a continued "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."

What's my net take here? If you're sourcing from China -- especially if you have limited operations teams on the ground to monitor the situation -- you should take a much more hands-on approach to insure continuity of supply. If you don't, you may very well find yourself waiting a few extra months for that container you needed last week. But perhaps on the bright side of things, perhaps this small to moderate near-term reduction in Chinese production capacity will slacken demand for raw materials in the coming months on a global basis, driving prices down to levels we've not seen for sometime.

- Jason Busch

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