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Sunday, March 27, 2011

Tied Together Globally: Natural Events and Their Impact on Us | DOING BUSINESS IN CHINA

Dan PaulsonDoing Business In China with Dan Paulson

The earthquake and tsunami in Japan demonstrate how globally connected we are. In business, this presents risks and opportunities.

Our world is constantly changing and much of that is beyond our control. That became very apparent this March when a large earthquake followed shortly by a massive tsunami hit the coast of Japan. To our friends and colleagues, our hearts go out to you, and we wish only the best.

Besides the physical damage created and the tremendous number of lives lost, there is also an economic ripple that impacts virtually every country. Japan is a major supplier of semiconductors and automobiles. Early predictions are to expect cost increases and production delays at least for the short term. The bigger impacts may be felt in Japan’s economy for years to come.

Recently, China surpassed Japan to be the second largest economy in the world. The current situation presents both challenges for China and possible opportunities. One of the greatest challenges that China will face is importing. Japan is China’s largest import partner with 13% of products coming from there. The short-term impact is already being felt, as needed components are not shipping. The parts shortage will slow down China’s industrial engine that it has built so much of its economic growth on. While this is expected to be only an immediate problem, the long-term affects could strengthen China’s position as an economic superpower. Japan, which already had its own economic woes is not helped by the latest turn of events and while they will recover, one has to ask to what level.

For other countries, they too will experience short-term problems with the interruption to the supply chain. However, this may also be an opportunity for other countries to increase their import power to China. As a developing nation, China still has many needs to fill. With the current situation, China may choose to seek components from elsewhere in the world and some companies may want to take advantage of this.

Our role as a nation is to help Japan get back on its feet as quickly as possible because the biggest challenge globalization presents is the impact of one economy on another. Yet we also need to look at ways we can strengthen our business growth. Emerging companies could reap the greatest benefit from this. It just depends on what you are willing to do.

For more information, please visit Dan's TNNWC Bio.

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