Red Sea Shipping Attacks Batter China Exporters as Costs Mount

Houthi attacks in one of the world's busiest shipping routes have exposed the vulnerability of China's export-reliant economy to supply snarls and external demand shocks, as reported by Samuel Shen, Casey Hall, and Ellen Zhang for Reuters during the World Economic Forum (WEF).

At stake for China now is the danger that other firms will follow suit and reassess their de-risking strategy, potentially choosing to shift production closer to home, an approach known as "near-shoring." I Photo: Red Sea Gateway Terminal (RSGT) Facebook

Some companies, such as US-based BDI Furniture, have stated that they are relying more on factories in places such as Turkey and Vietnam to mitigate the impact of the disruptions.

This adds to recent moves by Western countries to reduce dependence on China amid geopolitical tensions.

At stake for China now is the danger that other firms will follow suit and reassess their de-risking strategy, potentially choosing to shift production closer to home, an approach known as "near-shoring."

"If it's permanent, and it could be permanent, then the whole mechanism will be readjusted," said Marco Castelli, founder of IC Trade, which exports Chinese-made mechanical components to Europe.

"Some companies may also consider moving more production to India, which is one week closer to Europe. Companies need to reevaluate everything."

Further Red Sea disruptions would pile pressure on a struggling Chinese economy already contending with a property crisis, weak consumer demand, a shrinking population, and sluggish global growth, as reported by Colleen Howe and Joe Cash for Reuters.

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