Red Sea crisis sees China’s brisk business in Africa waver under high shipping costs amid Houthi attacks
- Houthi militants have launched attacks in the Red Sea shipping lanes around Yemen, which lies along the waterway opposite East Africa
- China has particular exposure to Africa, with investments reaching rising by 4.4 per cent to US$1.8 billion in the first half of 2023
Avoiding attacks in the Red Sea has raised the cost of business for Chinese firms in East Africa, which borders the embattled waterway, and shaken the production of companies that cannot afford the more costly alternative transport options, analysts said.
Chinese traders are gingerly eyeing the use of circuitous air, land and sea routes for safety, hiring risk-tolerant so-called feeder shipping lines or producing less until the attacks by Houthi militants stop.
“Chinese companies with a substantial presence in African markets are facing heightened uncertainties and complexities as they navigate these disruptions, prompting a re-evaluation of their shipping strategies and contingency plans to mitigate the impact on their operations,” said Gary Lau, chairman of the Hong Kong Association of Freight Forwarding and Logistics.
China has particular exposure to Africa as its fifth-largest source of foreign direct investment stock in 2021, United Nations Conference on Trade and Development data showed.