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The Tianjin fallout

The husk of a car parked in the Tianjin explosion area The husk of a car parked in the Tianjin explosion area Voice of America (Chinese)
14 Aug
2015
Geographical looks at the forthcoming impacts the devastation could have on the rest of the country, after an enormous explosion destroyed a large portion of the port of Tianjin

The human loss from the Tianjin blast continues to rise as the region begins the slow recovery process after Wednesday night’s explosion. As a lynchpin in the northern Chinese industry and a main port to Beijing, the economic fallout from the event could implicate millions more. Preceded by other economic difficulties, the loss of its third largest port, which services as many as 400 other international ports, may have far-reaching repercussions for China as a whole. 

‘A crisis would be too strong a word but certainly it’s going to be a big shock,’ says Judith Tyson, expert on global economic development at the Overseas Development Institute. ‘The Chinese economy is already slowing very sharply and it’s another blow to its drive to increase exports. Before this happened, it has had lots of financial problems, the real estate market collapsed, the stock market has been very volatile and its currency has been devalued. The explosion is another problem that it needs to overcome in terms of trying to do that and reignite growth in the economy.’

DISAPPOINTING IMPROVEMENTS

Economic plans are decided every five years in China. In 2011, one of the main priorities was the improvement of the environment, air and water of the country. This could be achieved by upgrading industrial processes and with a new focus on health and safety measures.  

‘Because of the economic problems it is facing,’ says Tyson. ‘It has kind of put these priorities on the backburner and the impression is that it wants to de-emphasise them and get back to basic growth without worrying too much about the quality. The execution of the 2011 plan has been disappointing.’

The next five-year economic plan is due in March 2016. ‘It'll be interesting to see if China looks at these health safety and environmental issues in more detail,’ says Tyson.

Regardless of the government’s reaction, the blast is expected to take a toll on the entire country. At the beginning of the year, China hoped for a seven per cent annual increase in GDP, however, with all its difficulties, analysts predicted a drop to 6.7 per cent. The explosion will probably push it under 6.5 per cent. While it doesn't sound like much, for the world’s second largest economy, a drop of 0.5 represents a huge amount amount of money. 

‘There has already been so much bad news, and this is another piece to go alongside all the other pressures,’ says Tyson. ‘It just looks like the headwinds are getting stronger and stronger against reigniting that growth.’

HIGH-TECH ECONOMY

Much of the port’s use is dedicated to the electronics industry. Raw components are imported to Tianjin where they are assembled and manufactured into technology exported to the US and Europe. ‘It’s a process that has proved to be a big success in southern China and is trying to be replicated in the north,’ says Tyson.

High-tech industries employ thousands of graduates from the city’s many universities to manufacture the goods, jobs which are dependent on the manufactured products leaving the port. Binhai New Area, the source of the explosion had been the Fair Trade Zone where much of this assembly work is focused. As well as the devastation to infrastructure, there are reports of toxic chemicals that could take weeks to remove.

THE NEW SILK ROAD

The explosion is also likely to impact export industries. With the collapse of the real estate market in 2014, there has been a surplus of steel. To stimulate the economy, China has been driving to create a ‘Maritime Silk Road’ for its overproduction of steel. For two years it has been exporting the surplus to developing countries along this ‘road’, from Indonesia, Thailand, Bangladesh and through to India and Africa. Tianjin is the centre of this operation, a project that could now be paralysed by the event.

‘Without the capacity to bring new goods in and finished goods out, that’s not only a problem for China, but the rest of Asia as well,’ says Tyson.

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