Impacts of international financial crisis on Hunan’s import of mechanical and el

Impacts of international financial crisis on Hunan’s import of mechanical and electrical equipment

 

The financial crisis that was triggered by the subprime mortgage crisis in the United States has spread to the whole world, making the global economy plunge into plight. As a crucial component of the world economy, China has inevitably been hit hard in the course. We recently investigated and surveyed import situations in the province’s cities and some key electromechanical product manufacturers in order to evaluate and understand the impacts of the financial crisis on the mechanical and electrical equipment sector in the province and make preparations in advance.

On the basis of the survey result and Customs statistics, we conclude the financial crisis has left adverse impact on mechanical and electrical equipment import in the province, although resulting in limited overall loss so far.

I.      Machinery and electrical equipment import in Hunan

In the first 10 months of 2008, Hunan imported 1.399 billion U.S. dollars mechanical and electrical equipment, up 33.89% year on year, a fairly high growth rate. As shown in various sides, Hunan was not yet suffering from heavy slump in import of mechanical and electrical equipment, indicating the global financial crisis had left limited impact on the province’s mechanical and electrical equipment import. As monthly import values suggested, the province imported 140.59 million U.S. dollars in October, up 33.19% year on year. The import values and growth rates were obviously higher than the previous two months. As regards varieties of imported mechanical and electrical equipment, the province increased imports of major categories, except for 42.53% drop in metal product import values. Among them, mechanical equipment import was valued at 629 million U.S. dollars, up 54.38%. It was followed by means of transport, electric appliances and electronic products, which observed considerable growth. In the perspective of bulk product import, key principal machines and supporting components, and mechanical equipment for enterprise production and technological reform remained normal growth in import volumes. For example, vehicle chassis import grew 30% and component import surged 132%. In terms of importers, only one of the top 10 mechanical and electrical equipment importers in the province, which accounted for 70% of total import values, saw an 18% drop. The others maintained at least 20% growth in import. Concerning trade mode, the province imported 1.02136 billion U.S. dollars machinery and electrical equipment via the general trade mode, up 26%, and 143.39 million U.S. dollars via the processing trade mode, up 80.52%.

Considering all these elements and actual situations of Hunan, we conclude the current financial crisis has not yet left serious impacts on the province’s import of mechanical and electrical equipment.

II.      Why global financial crisis leaves limited impacts on Hunan’s import of mechanical and electrical equipment

According to our survey, Hunan is not seriously affected by the current financial crisis in importing mechanical and electrical equipment, largely because of the following factors:

1.      Retarded impacts of the financial crisis. The current financial crisis, originating in the United States, developing in European developed countries and spreading worldwide, takes time to exert its impacts to wider regions. Besides, the financial crisis remains in the early stage. Hunan is an economically less developed province in the central part of China, the largest and most rapid developing country. As a result, it takes longer time to demonstrate side effects of the financial crisis.

2.      Cushion effects of import structure. In the first 10 months of 2008, Hunan imported 73% mechanical and electrical equipment via the general trade mode, valuing 1.021 billion U.S. dollars. Import via the processing trade mode accounted for a bit more than 10%. Because of the unique features of plentiful import and export under the processing trade mode, Hunan which has small proportions of import via the processing trade is naturally less hit by the financial crisis in importing machinery and electrical equipment. In fact, processing trade businesses suffer the heaviest in the financial crisis, particularly those with the United States and Europe as the main target markets.

3.      A group of technological reform projects and newly established projects stimulate greater import of manufacturing equipment. In recent years, the provincial party committee and provincial government have vigorously promoted emerging industrialization process. A group of new technological reform projects will be implemented this year. Take Hara XEMC Windpower Co. Ltd as an example. Its two megawatts wind power generating facilities project keeps the company to rapidly increase spare parts and equipment import this year. In the first 10 months, it imported nearly 20 million U. S. dollars worth products, up 289% over the previous year.