UPDATED: If You Are Manufacturing In Beijing, Tianjin, or Shanghai. PAY ATTENTION

Wednesday, April 2, 2008 1:28

well, it really didn’t take any time at all before the next juicy rumor came to my attention, and here it is:

China’s mandate by the government to cease all manufacturing efforts near the large cities of Beijing, Tianjin, and even Shanghai due to serious pollution problems they are facing. Shut down will occur between July 17th though September 20, 2008.

Now, before everyone freaks out, this is still very much speculation and I have been unable to confirm the scope of the shut down.

I have spoken to two sources up north, and found out the following:

1) Coal and raw material exploitation industries are expected to see shut downs (again, not sure of scope).

2) High energy users and heavy polluters are going to be first.

UPDATE: I have put a few different people, from a few different organizations on the case, and here is what I have heard:

1) From a news media source

This is a program that has been talked about internally, but has yet to received full State Council support. At this point, it is only a contingency plan.

The affected areas, are not limited to the three cities above, but are from Shanghai north along the coastal area. The idea being that the winds move from south to north.

I should note that I have not spoken to anyone in Shanghai yet, so I am not sure if the impact really will hit here, but I would not be surprised.

So, that is what I “know”, to the best of my knowledge

and here is what my gut tells me.

1) There is a very high risk that large scale shutdowns will occur in the above time frame. The olympics is kicking off on August 8, and this would provide a month before (to clear out the air) and a month after (tourists will flow to Shanghai afterwards) of clean air

2) The industries most likely to get the knock on the door are those that are dirty, belching black smoke, sucking up a lot of water, and require a lot of energy to accomplish all that. So, if you are a clean enterprise running off the grid and procession your water (like Plantronics in Suzhou), I wouldn’t worry. But anyone else should do a rapid self assessment of where they fall on the green scale and then work out the risk.

and here is what I am telling you to do:

1) Assess your risk – use a napkin approach first – to figure out if you are first in line, or last

2) Get your GR person on the phone and figure out if you will be affected

3) Pull in your production people and “what if” this. If you were shut down, what would be the impact, and what can you do?

4) Book your containers now

and here is my out

Take this for what it is worth, I have not seen a formal government announcement and I have no formal confirmation of the facts. However, this is something I have been expecting for a long time, and I am not surprised to hear that this could potentially be on the horizon. If nothing else, spend 30 minutes with your team to figure out a plan should it be true.

If you do that, they you will be in an advantageous position, just like when I notified everyone about the VAT Rebate… 2 weeks before WSJ or anyone else.

and here is what I need from you

If you in your efforts to assess your risk find out that this is true.. or that this is crap… please post a comment or send me an email. 2 months of down time will be very expensive for a lot of people, so I want to make sure we know the real facts.

I will update as often as possible

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14 Responses to “UPDATED: If You Are Manufacturing In Beijing, Tianjin, or Shanghai. PAY ATTENTION”

  1. charlie says:

    April 2nd, 2008 at 2:17 am

    Rich: there are no new “serious pollution problems” in BJ, TJ, or SH. There are the same old pollution problems that may, in fact, be getting marginally better, but not fast enough to ensure blue skies for the Olympics. They are going to have to shut industries down in the vicinity of BJ and what better way to do that then through one of the periodic “green whirlwinds” or “strike hard” campaigns initiated by SEPA (now Ministry of Environmental Protection). This campaign will just be a little more extensive than usual. That way it doesn’t look like a simple scramble for Olympic credibility, but rather part of a newly empowered environmental ministry’s enforcement efforts. I don’t have any information that this is how it will proceed, but it’s what I’d do if I was in charge.

  2. Rich says:

    April 2nd, 2008 at 5:17 am

    Charlie,

    I think the “serious Pollution problem” is that endurance athletes are talking about giving the games a miss rather than passing out from the current (even reduced levels)… and to make sure that all the pictures have blue skies in the background.

    At this point, I suspect there is some truth to it, and if I were in a heavy pollution, high energy, water sucking industry, I would start making plans for a couple extra weeks of vacation.

    R

  3. charlie says:

    April 2nd, 2008 at 5:02 pm

    Rich: I agree with you about seriousness of the problem, and I think your information is probably correct. My only point is that rather than shutting the industries down in the name of a quick Olympic fix, they will shut them down as part of a wider environmental compliance enforcement campaign. That would enhance the government’s “green” credentials, and would also get them off the hook for having to pay compensation for lost production.

  4. Rich says:

    April 2nd, 2008 at 5:20 pm

    Charlie,

    Sorry. Yes, I would agree that this gives them a window to accomplish some other objectives.

    On a separate, yet related note, is there any budget/ plan for retraining people from old industry to green industries? I put a post on Crossroads related to this, but I suspect that the closures of plastic bag factories, coal mines, etc will bring a new stress that needs to be addressed.

    R

  5. charlie says:

    April 3rd, 2008 at 2:31 am

    Rich: I’m not aware of any formal retraining plans or budget, but it’s a good idea.

  6. SwizStick says:

    April 3rd, 2008 at 4:56 pm

    Hi Rich,

    I just linked to your post and added some comments from our side as to how all of this might affect things from a Logistics perspective. I hate to turn this into a shameless plug for 3plwire.com, but head on over there for the full post. In short, we suspect there will be cargo volume fluctuations between Qingdao, Xingang, and possibly Dalian ports. The trucking situation before, during, and after could be a problem due to planned traffic/pollution measures, etc. Our advice, like yours, is to reach out to your partners in China to assess the possible impact and plan accordingly.

    Beijing Olympics Impact: China to ease or shut down manufacturing

  7. Rich says:

    April 3rd, 2008 at 9:07 pm

    SwizStick… or should I call you ShamelessPlugStick?

    Thanks for taking me seriously and providing the nice plug on your site.

    I will agree that there will be fluctuations, however take a read through my update. If the document going through state council is for everything north of Shanghai… trucking could be impacted there as well… theoretically.

    Also, I should add another thing for manufacturers to consider. Consider moving from northern to southern suppliers if possible. It does not appear that Xiamen, Shantou, Shenzhen, etc will be affected either way… so perhaps shifting (where possible) is something to look at.

    R

  8. Josh in the UK says:

    April 4th, 2008 at 2:47 am

    We expect a shut down to take place and do have suppliers based near BJ, we have appropriate measures and terms set with other suppliers in case a shut down occurs…

  9. SwizStick (aka ShamelessPlugStick) says:

    April 4th, 2008 at 11:39 am

    Hi Rich,

    Heh, thanks for the support and perhaps I will indeed change my name! This is a great post and discussion and we’ll certainly add our 2 cents worth as we receive more information as well. Agreed that Shanghai could be affected but in my outreach to some of the logistics providers there they don’t seem too concerned……yet.

    Your advice is good regarding southern suppliers: everything I have received so far says that Southern China should not be affected.

  10. The Apple Core mobile edition says:

    April 8th, 2008 at 9:57 am

    […] to a post in Richard Brubaker’s All Roads Lead to China blog, the Chinese government has a plan to shut down manufacturing efforts in Beijing, Tianjin, and […]

  11. Mark Graban says:

    May 2nd, 2008 at 9:06 am

    One major automaker is sending out a survey about China suppliers, asking:

    “Did you and/or your Tier 2-N supplier receive governmental notification requiring a temporary slow/shut down of operations now or in the future? If yes, specify the period, reason and countermeasure.”

    Sounds like they are trying to answer this question too.

  12. Rich says:

    May 2nd, 2008 at 9:20 am

    Mark,

    Thanks for stopping in with your report. I am guessing you are not going to tell us who…

    What is interesting though (in my mind at least) is that they must have heard about this from a few different sources before they sent this out.

    R

  13. Mark Graban says:

    May 3rd, 2008 at 8:00 am

    No, I can’t say, but I bet they are all doing the same thing, asking the same questions right now.

  14. Rich says:

    May 3rd, 2008 at 9:31 am

    Mark

    Darn – I thought you were going to spill!

    Anyway, will be running another What if soon, and perhaps they will let me know if they are interested in coming.

    Have a good weekend
    R