March 15,2011

Japan Quake Causes Production Disruption to Chinese Manufacturers

By Lu Ting,Hong Kong

Zhejiang, a major trade hub in China, suggested delays in shipments to/from Japan. It has many assembly lines of Japanese companies, such as Toshiba and Panasonic. The companies said their production is affected as some upstream components are out of order due either to damage in Japan plants or transportation delays in Japan.

In our note yesterday we said growth of China's exports to Japan could accelerate this year from last year's 23.6%. In the short term, we could see more exports of food, garments and other consumer staples to Japan. In the medium, Chinese companies could get deeply involved in Japan's post-quake rebuilding. In the near term, Chinese imports from Japan could fall and some production in China could be affected. The overall impact of the Japan's quake on the Chinese economy could be rather small. The uncertainty from Japan's earthquake could postpone some of China's monetary tightening actions such as RRR and rate hikes on the margin. The explosion of a nuclear power reactor in Japan could make policymakers in China more cautious in its big push for nuclear power stations, but we think the overall pace of the nuclear plan is unlikely be significantly impacted

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