China Container Freight Index Plunges for Five Consecutive Months Due to Weak Exports

Ports are stacked with empty containers and factories go bankrupt due to reduced foreign trade orders

COSCO Shipping container ship 'Xin Lian Yun Gang' in the harbor of Hamburg, Germany, on Oct. 26, 2022. Axel Heimken/AFP via Getty Images

The China Container Freight Index (CCFI) reportedly continued to fall in January after plummeting in the previous four months, indicating an overall decline in international freight rates at Chinese ports, a gloomy export trade, and a crisis in which Chinese foreign trade companies are facing business headwinds or even bankruptcy due to reduced orders.

On Feb. 13, the Container Port released the CCFI for January, reading a year-over-year plummet of 11.2 percent in the composite index, among which the index for European routes fell by 16.7 percent, and the Western U.S. and Eastern U.S. routes dropped by 7.8 percent and 9.8 percent, respectively.

This is the fifth consecutive month-over-month decline since the CCFI slumped on all routes last September, followed by the successive month (October 2022) seeing a 24.8 percent year-over-year plunge in the composite freight index, the largest drop in the five months.

The CCFI is a complex indicator of sea freight rates from Chinese container ports to 12 shipping routes across the globe, roughly reflecting China’s export status.

Heaped Idle Containers

China’s Ministry of Transport released port data in January showing that the growth rate of cargo through-put in Chinese ports slid 1.9 percent last December, year over year.

But the reality is worse than the official figures, with many Chinese ports already stacking up an increasing number of empty containers.

As early as last December, the number of empty containers numbers in Nansha Port, in the southern city of Guangzhou, dramatically rose, exceeding 90 percent of the dock stockpile, a record high since March 2020, during the early stages of the COVID-19 outbreak in China.

Then in early January, southern Shenzhen city’s Yantian Port saw empty containers heaped six to seven stories high—something not seen in the 29 years since the port began operations, according to a Jan. 4th report from state media China National Shipping.

Major adversities in foreign trade currently are manifested in the weakening external demand and reduced orders, compared with last year’s interrupted supply chain and inability to fulfill contracts. “This is an important change,” said Li Xingqian, director general of the foreign trade department at the Ministry of Commerce, at a press conference held by the State Council on Feb. 2.

Export Outlook

According to a manufacturing Purchasing Managers’ Index (PMI) for January published by the U.S. Bureau of Labor Statistics (BLS), the new export orders index rebounded to 46.1, slightly higher than 44.2 last December.

But it is lower than the 46.7 last November, said Li Songyun, an economist who has been long concerned about the Chinese economy, adding that “it is still below the 50—the threshold value that separates contraction from expansion—which means that new export orders are moving to a period of contraction.”

Regarding China’s export trend, Li told The Epoch Times on Feb. 17 that “although overall exports have been growing rapidly over the past two years, the growth rate began to decline month by month after peaking in July last year and turning negative in October, and the decline has been worsening.”

A recent report by the Chinese Academy of Social Sciences’ Institute of Economics predicts that the country’s export growth will turn negative this year, reported official media The Paper on Feb. 4.

Li believes the decline in exports will remain the same this year, noting that China’s exports fell by 9.9 percent year over year in dollar terms in December last year.

Chinese workers in the Foxconn factory in Shenzhen, in southern China's Guangdong province, on May 27, 2010. STR/AFP/GettyImages

Manufacturing Line Out-Migration

China is losing its status as the world’s factory, which is one of the factors leading to sluggish exports, and also a fact that the Chinese Communist Party (CCP) tends to avoid mentioning, according to Li.

In the past year or two, the supply chain of manufacturing is moving outbound, and the move is accelerating now, said Li.

The manufacturing exodus can be blamed on the CCP’s tough anti-epidemic measures and power outages that disrupted the industry supply chain, as well as intensified U.S.-China confrontation and increased geopolitical risk in the Taiwan Strait.

The most striking example, in Li’s view, is the withdrawal of the Apple supply chain, represented by Taiwan’s Foxconn, the largest iPhone assembler in the world. “In fact, a large share of mainland China’s export orders come from Taiwanese companies, and their pullout will certainly have a great impact on China’s exports.”

Orders Reduction

Since 2022, a significant number of Chinese foreign trade companies are already on the way to withstand pressures from a steep drop in orders.

Quanzhou, located on the southeast coast of Fujian Province, is one of China’s top 100 cities for foreign trade. The local equipment manufacturers association said it held a mobilization meeting in August 2022 aiming to “overseas order grabbing” and has organized delegations to attend overseas exhibitions for orders last September, November, and this January.

Chinese official financial media Yicai reported on Jan. 27 that sectors such as fitness equipment, outdoor products, and masks in Quanzhou, Xiamen, and Zhangzhou—all cities in Fujian Province—suffered heavy losses due to a wave of delayed shipments and abandoned orders in the first half of 2022 that caused an excessive raw material inputs imbalance and inventory backlogs.

Enterprises Bankruptcy

The continued decline in China’s exports, and for many privately owned foreign trade enterprises, could be a major hurdle that will determine whether they can survive or not.

Zhaofeng Knitting Garment Co., Ltd., for example, is one victim. It recently went bankrupt after more than 20 years in the foreign trade business. On Feb. 8, a video of workers demanding their wages outside the company was circulating online, painting a bleak picture of the export trade that led to Chinese enterprise’s bankruptcy.

One of the famed woolen enterprises with scale and strength in South China, Zhaofeng Knitting Garment was established in 2002 in coastal Dongguan city’s Dalang town, which is notable for its woolen products. The company owns a plant area of 15,000 square meters (about 16,1458 feet square) and over 300 employees.