We have heard recently from our partner factories in China that their demand from export customers is down. It seems there is truth in some of the negative press lately. The downturn is resulting in excess inventories and plans for extended Chinese New Year shutdowns.
What does this mean for importers? First, it means prices will be more negotiable than early this year. Commodity price declines are also contributing to this. Labor costs are still up, but the exchange rate has stabilized.
Second, it means production schedules in early 2009 will be harder to manage. Also, low-end factories will likely get pushed out of the market as the slower economy helps cull the weak. Finally, it means US companies will need to be more diligent about checking quality from their Chinese factories as some will be tempted to cut corners to survive. It's more important than ever to have a strong relationship with your partner factories and work with them through these difficult times.
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