Do All Roads Still Lead to China?

With apologies to my friend Richard Brubaker, I'm feeling less and less like all global sourcing roads lead to China. The more global trade data I see from folks like Panjiva, the more it appears that developing markets like China are bearing the brunt of the downturn from an export perspective. If you think capital is scarce in the West for struggling companies, try China or other developing markets where the liquidity crisis is hitting just as hard (e.g., Central and Eastern Europe). I suspect that as more and more companies get burned from global supplier bankruptcies (which they might not even know about until after their orders fail to arrive), many will take an even more critical eye to sourcing from developing markets like China unless they either have the size and scale to effectively manage such an operation or unless they have good reason to be there other than just trying to take advantage of lower costs (i.e., selling into the local market). So perhaps the better question to ask is whether or not the roads are starting to lead away from China -- both literally but also as a symbol for global sourcing -- rather than leading in. With export volumes down 20% or more from 2008 levels already even before we've found a market bottom, perhaps the question is rhetorical.

Jason Busch

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