This blog posting was inspired by the cold Beijing winter and a recent conversation with my roommate. After having lunch together, my roommate, a native of Shenyang in China’s northeast, described what she and her family ate during the winters of her childhood. Fresh fruit and vegetables were scarce to nonexistent; large quantities of Chinese cabbage and pears were bought in late autumn and had to last all winter. The pears were frozen, which caused them to turn black. The cabbage was either dried or put in jars to make “sour cabbage”. Meat was a luxury.

Having only two food choices available for one-fourth of the year sounded terrible to me. “So what did you eat in winter?” she asked. Well, I ate the same things as in the summertime – except maybe more cups of hot chocolate. Although winter likewise halted regional agricultural production, bananas, broccoli, seafood – you name it – managed to find their way to grocery stores in the American Midwest – where I grew up.

How could our childhood experiences in the 80s and early 90s have been so different? At least part of the disparity may be due to differences in the availability of transportation within China and the US.

As anyone involved in sourcing knows, although goods may be available in one location, the challenge remains of connecting them with their prospective end users, often many kilometres away. The greater the ease of connecting point A to point B, the cheaper the cost, hence, the more feasible trade becomes. This process requires infrastructure.

China has done a lot to improve its infrastructure since the 1980s. When imports arrive from overseas, they usually do so by boat. Not only does China now host some of the world’s busiest ports, but it has also has increased the length of its navigable inland waterways from 101,000 kilometres in 1985 to over 110,000 in 2008. From these inlets, the goods must then traverse land to reach their destinations. To this end, China has upped its railway length to 80,000 kilometres, as of 2008, from 55,000 in 1985. Even more substantial is the increase in highway availability, now at around four million kilometres, an increase of almost 300% from only 20 years prior.

The result of these advances in infrastructure: more goods are able to make it across the Chinese mainland to the people that need them. The amount of freight traffic within China, measured in ton-kilometres, has increased more than three times its 1987 value. Just as the wintertime shelves of the grocery stores in my hometown are filled with goods from the warmer southern US states, Mexico, and South America, similarly those in Shenyang can now be more readily stocked with products from southern China, the Philippines, or elsewhere.

Source: China Statistical Yearbook; US Bureau of Transportation Statistics: US Census Bureau; Beijing Axis Analysis

The increase in transportation channels has reduced the contribution of shipping costs to goods’ retail prices, lessened the impact of food expenditures on one’s budget, and has enhanced the well being of Chinese consumers. This is evident when comparing the Engel’s coefficients – the percent of the typical household’s income spent on food, used as a general measure of a country’s standard of living – between China and the US. This statistic suggests that my roommate’s family may have spent about 55% of their household income on food in the 80s. The affect of both rising incomes and greater transportation availability since then have reduced this to less than 40%.

Source: China Statistical Yearbook; US Census Bureau; Beijing Axis Analysis

It is interesting to consider how much more this is likely to improve in the future. I think for the Chinese New Year I will indulge in a little variety and buy my roommate both oranges and pears – fresh green ones– to celebrate the holiday and the progress made by China.

The following table shows the latest China Containerised Freight Index (CCFI), released on 20 November. The CCFI was registered as 985.6, increasing by 0.56% from 13 November. Of all the shipping lines, the index for the EUROPE SERVICE was 1585.97, which was the highest, 0.56% higher than last week. The lowest was 513.93 for the HONGKONG SERVICE, and this dropped by 2% from 13 November. The WEST EAST AFRICA SERVICE indicated the strongest growth, at 2.67%, while the growth of the MEDITERRANEAN SERVICE was 0.27%, the lowest growth rate.

The drop in the SOUTH AFRICA/SOUTH AMERICA SERVICE was particularly severe, decreasing by 2.26%. The W/C AMERICA SERVICE fell by the smallest rate, namely 0.67%. And the indexes of other shipping lines like HONGKONG SERVICE and AUSTRALIA/NEW ZEALAND SERVICE also declined, dropping by 2% and 1%, respectively.


Source: Shanghai Shipping Exchange