Financial Crisis Hits China Bike Industry

BEIJING, China - The question whether the global financial crisis will affect the Chinese economy is no longer doubted. The question is more on how and to what extend the Chinese bicycle industry will suffer.

As the factory of the world, the Chinese can already see a sharp decline in demand for consumer products from abroad while the local market is more and more demanding higher quality products.

Bike industry affected

Next to all that, anonymous sources in China indicate that the Chinese central government is reorganizing the local industry. Following the environmental commotion caused by the Olympics the Chinese government stands at the basis of closing down polluting companies simply by denying them credit. Numerous suppliers of the bike industry (like painting facilities) have been affected by this measure.

On top of that bike industry is no longer considered as a priority industry by the central government and with that it has become more and more difficult for bike companies to get access to financial resources. As a result, Chinese bike companies are insisting on advanced payments by its foreign customers.

It is not only the bicycle industry that is confronted with economic set-backs. Last Saturday Premier Wen Jiabao said, “We must be aware that this year would be the worst in recent times for our economic development. The global downturn will continue to pressure the Chinese economy, which already faces a number of problems.

The (global economic) situation is worsening, and the negative impact of the volatile international market on the Chinese economy would become more obvious as the days go by.” China’s economy expanded by 11.9% in 2007, but the growth rate slowed to 9% in the third quarter of this year, prompting many experts to suggest that the government take prompt steps to bolster economic growth.

Expand domestic consumption

Last week, Liu Tienan, China’s Vice Minister of the National Development and Reform Commission, called for more government efforts to expand domestic consumption amid the global economic uncertainty while the fundamentals of China’s economy are sound. He also stated that China should step up efforts in industrial restructuring, innovation and changing its development mode.

Clear indications of less confidence in consumer spending are reported drop in value of contracts signed at the China Import and Export Fair in Guangzhou during the last two weeks. The overall volume has gone done by one third. It is reported that especially volumes in toys, furniture, hardware, tools, machinery, vehicles and spare parts declined.