The culprit was cereulide, a heat-stable toxin produced by Bacillus cereus bacteria. It had been found in arachidonic acid-rich oil (known as ARA) a specialised fatty acid added to infant formula to support brain and retina development.

The contaminated ARA came from a single supplier in Wuhan, China, and had wormed its way into the production lines of not just Nestlé, but Danone, Lactalis and Swiss outfit Hochdorf as well.  Between them, these companies supply infant formula to virtually every major consumer market on earth.

The fallout has been severe. French authorities are investigating the deaths of two babies reported to have consumed affected Nestlé formula. A Belgian infant was hospitalised with vomiting and diarrhoea. Singapore confirmed a likely cereulide case, and Brazil reported two sick babies.

Consumer rights groups, food safety charities, and parents across dozens of countries have torn into the industry. FoodWatch, the Netherlands-based watchdog, slammed Nestlé for what it called a “serious breakdown” in transparency. 

But beyond the immediate health concerns, the ARA crisis raises fundamental questions for procurement professionals: how did a single Chinese supplier manage to bring the entire global infant formula industry to its knees? And, given this monumental disaster, should companies even be sourcing these critical nutritional ingredients from China?

Invisible Dependency

To answer that, you need to understand just how deeply China is embedded in the global food supply chain.

China isn’t just a major supplier of nutritional ingredients; it’s the dominant one, accounting for 70-80% of global production capacity for many essential vitamins and minerals.

And to be clear: for the most part, this system works. Chinese manufacturers have built incredibly safe, high-tech production lines that supply the bulk of the world’s nutritional additives without incident. If you’ve eaten anything processed today — breakfast cereal, fortified milk, even that vitamin supplement — there’s a very good chance you’ve got a piece of this supply chain sitting in your stomach right now!

As of 2024, China accounts for between 70 and 80% of global production capacity for ascorbic acid, the synthetic form of vitamin C. For the United States, the dependency is near-total: roughly 90% of the vitamin C consumed in the country is sourced from Chinese producers, almost all of it manufactured in a handful of dedicated chemical parks.

The concentration extends across the full spectrum of industrial nutrition. Chinese manufacturers supply an estimated 73% of global feed-grade vitamin A, 94% of vitamin B2, and the bulk of the essential amino acids used in commercial flavourings.

According to the American Feed Industry Association, the U.S. imports an average of 78% of its vitamins directly from China. For certain vitamins like biotin, that figure reaches 100%.

This dependency could become a political flashpoint. In December, a bipartisan crew of sixteen Congress members wrote to President Trump urging him to get domestic vitamin manufacturing sorted, calling the China dependency a straight-up national security threat.

In many ways, China’s dominance in nutritional ingredients mirrors the rare earth story. For decades, Beijing backed these industries with heavy subsidies, allowing Chinese manufacturers to undercut foreign competitors on price. Over time, foreign producers closed down, and China accumulated all the technical expertise. Now that know-how is extremely difficult (and expensive) for other countries to replicate.

Processing Dominance

Beyond chemistry, China also converts much of the raw biomass sourced worldwide into intermediate goods for re-export.

The tomato industry is a case in point. In 2024, China processed a record 11 million tonnes of fresh tomatoes into paste, consolidating its position as the world’s largest exporter. Virtually none of this output is consumed domestically. Instead, it is shipped in bulk drums to Italy, Africa and the Middle East, where it is reconstituted, repackaged and (here’s the kicker) sometimes sold as locally branded sauce.

A similar pattern holds in seafood. Around 75% of fish imported by China, including Russian Alaskan pollock and Norwegian cod, is processed and re-exported rather than consumed domestically. In tilapia alone, China commands roughly 30% of global supply.

In each case, the value China captures isn’t in the raw commodity but in the processing step — the conversion of bulk agricultural inputs into standardized, export-ready intermediates.

This concentration creates efficiency, but it also creates risk.

Four Risks Buyers Overlook

The ARA contamination crisis has exposed serious gaps in how some Western companies check ingredients from China. Quality testing is the obvious issue. But there are also specific risks when sourcing nutrition ingredients that procurement teams routinely underestimate:

Facility contamination risk gets routinely overlooked. Some Chinese manufacturers make nutritional supplements in the same facilities where they produce pharmaceuticals, pesticides or industrial chemicals. Not surprisingly, this dramatically raises the chance of contamination. Buyers need to be asking: “What else does this factory make?”

Safety certificates create false comfort. Standards like ISO 9001 or FDA approval are just snapshots in time. A certificate doesn’t tell you what happens at 3 a.m. when a factory manager accepts a questionable batch to hit a deadline. That’s why both good relationships and surprise inspections are essential.

Another big risk is depending on a single source. The entire infant formula industry sourced ARA from what appears to be just a handful of producers, with one company — Cabio Biotech in Wuhan — dominating the market. When that single supplier failed, the fallout spread across the entire industry.

The crisis also exposed a regulatory blind spot. Until contamination forced action, there was no EU safety limit for cereulide in infant formula. As one University of Veterinary Medicine Vienna researcher put it: “Nobody knows what this ‘low’ concentration actually means, because the limit has not been defined yet.”

European regulators are developing guidelines expected early this month, but safety rules are still catching up to global supply chains. Don’t assume regulatory approval means comprehensive risk coverage.

The Kinyu View

The infant formula crisis shouldn’t prompt companies to stop sourcing ingredients from China. That’s neither realistic nor particularly useful advice. These same risks (facility contamination, single-source dependency, regulatory gaps) exist regardless of where you source.

Plus, China’s position in the nutrition supply chain isn’t going anywhere. The infrastructure is already built, the technical expertise is concentrated there, and the economics still make sense for most buyers.

The real lesson for procurement teams is simpler: learn to source from China intelligently.

That means moving beyond compliance checkboxes. It means genuinely understanding your multi-tier supplier networks. Not just your direct vendor, but their suppliers too. It means maintaining geographic redundancy where you can afford it. And most importantly, it means building supplier relationships where a factory manager facing a quality decision at 3 a.m. picks up the phone to escalate the problem rather than quietly accepting a questionable batch to hit a deadline.

The post Can We Trust China’s Food Supply Chain? appeared first on Kinyu.

The yuan has gained roughly 5% against the dollar over the past year, trading at around 7.00 per U.S. dollar in early January 2026, its first sustained appreciation since 2021.

A weaker dollar, equity inflows and firmer daily fixings from the People’s Bank of China have all contributed to the rise. And many economists expect the trend to continue. Goldman Sachs reckons the currency remains 25% undervalued.

For international buyers paying in dollars, this climb makes Chinese goods marginally pricier than when the rate sat comfortably above 7.10. Yet the picture is murkier than a simple currency chart suggests.

Against the euro, the yuan has actually fallen roughly 7% over the same period. So is the yuan strengthening, or is the dollar just weak? A sliding dollar should raise procurement costs everywhere, making China look relatively better.

But the dollar hasn’t weakened everywhere. It fell 9.5% against a basket of major currencies last year, yet it gained 3% against the Vietnamese dong and 5% against the Indian rupee. This means, in dollar terms, competitors in India and Vietnam just got cheaper compared to their Chinese counterparts.

Economists, however, see little reason for concern among buyers sourcing from China. ​The IMF argued last month that low Chinese inflation had driven real exchange rate depreciation in recent years, leaving the yuan particularly cheap. Goldman’s Teresa Alves wrote in December that even a 25% appreciation would keep Chinese manufacturers “comfortably in inexpensive territory” relative to Vietnam or India.

China’s manufacturing base will almost certainly remain competitive even if the yuan strengthens. The currency has too far to climb before it erodes the country’s structural advantages: the logistics networks, the supplier ecosystems, the sheer density of industrial capability. And few buyers choose China on price alone; they source from China because it is fast, reliable and deeply integrated into global supply chains. A slightly stronger yuan won’t change that.

What This Actually Means for Buyers

So, what’s the issue with a rising yuan then? The bigger problem is that squeezed Chinese manufacturers face yet another margin hit at precisely the wrong moment.

Chinese exporters are facing a remarkably hostile environment. U.S. trade relations have calmed for now, but the tariff threat hasn’t gone away. Domestic competition is intensifying as too many factories chase too few orders, forcing manufacturers into brutal price wars. A sweeping VAT overhaul has closed the rebate loopholes some suppliers depended on to stay profitable. And recent policy shifts have made social insurance contributions effectively non-negotiable, adding 30-40% to labour costs in some provinces.

Further currency appreciation would compound these pressures.

So, for buyers sourcing from China, the biggest concern should be continuity. A rising yuan could hurt suppliers operating on thin margins. This means the factory that delivered reliably for a decade might quietly close its doors. The production line that hit every deadline might suddenly have “capacity issues” because your supplier is prioritising customers who pay faster or order larger volumes. All this further underscores the need for frequent supplier audits to mitigate the risk of an unexpected factory closure. ​

While a stronger yuan may look modest on paper, for factories already running on fumes, it could prove one burden too many.

The Kinyu View: China’s manufacturing base will almost certainly remain competitive even if the yuan strengthens this year. The currency has too far to climb before it erodes the country’s structural advantages. But for buyers, the risk is not competitiveness; it is continuity. Suppliers operating on thin margins may not survive another cost shock. This is a year to watch your Chinese partners closely.

The post Should Buyers Be Worried About a Rising Yuan? appeared first on Kinyu.

We last checked in on hyper-competition known as “involution” (nei juan) in August. Since then the situation has not improved.

“Manufacturers are still cutting prices to shift excess supply,” Zavier Wong, a market analyst, told CNBC, noting that the strategy is hurting bottom lines across the region.

At a recent supply chain roundtable hosted by the British Chamber of Commerce in South China, industry representatives warned that involution is actively eroding what they called China’s manufacturing “depth.” This refers to the dense, highly specialised network of small-scale factories that has long been among China’s competitive advantages.

As one executive put it, the current “race to the bottom” is forcing the most specialized (but financially vulnerable) players out of the market.

So, does the data support this? And what does it mean for those of us buying in China?

Involution in the Numbers

If you look for this crisis in formal bankruptcy filings, you might miss it. In China, insolvency is a notoriously complex legal process, making it a lagging indicator. Despite this, credit insurer Allianz Trade forecasts a 6% rise in business insolvencies in China for 2025.

Loss-making enterprise counts and profit declines offer a sharper real-time view.

As of October 2025, China had over 143,000 industrial enterprises formally classified as “loss-making.” While this fluctuates monthly, it represents a massive cohort of “zombie” or distressed companies kept alive despite negative cash flows.

Profit Plunge: Industrial profits fell 5.5% year on year in October, the steepest decline in five months. This follows a severe 9.1% plunge in May, confirming that the “price wars” are directly eroding the bottom line.

Despite the financial bleeding, the conveyor belts haven’t slowed. Industrial output actually grew 4.8% in November, highlighting the massive disconnect between production volume and actual value.

The solar industry has become the poster child for involution’s destructive potential. More than 50 solar companies along the supply chain filed for bankruptcy in 2025 alone, with a third of China’s 121 listed solar producers now operating in the red. Last year, for example, major producers not only cut wages, but also laid off nearly a third of their workforce.

Should Overseas Buyers be Concerned?

The answer depends on your priority: price or resilience.

In the short term, this is a buyer’s dream. Many companies sourcing in China are currently benefiting from unusually low prices as Chinese firms with excess capacity aggressively court foreign markets. If your procurement strategy is purely cost-focused and short-term, this is a buyer’s market.

However, those lower prices come with two hidden costs.

• The most immediate implication for overseas companies is a sharp increase in “quality fade,” which we wrote about last summer. Put simply, the involution pressure forces factories to swap high-grade components for “good enough” alternatives to maintain a 1% margin.
• Supplier fragility is another issue. Your primary supplier might be one bad quarter away from a total collapse. Yet, even if a primary supplier remains stable, the collapse of their raw material providers causes a domino effect. This forces manufacturers to find immediate alternatives, typically at the expense of traceability and consistency.

Structural Persistence

Don’t expect relief anytime soon. As economist Michael Pettis has observed, the Chinese system remains “geared toward supporting production capacity to meet GDP growth targets.” Local governments are still judged by output and employment metrics. This creates an environment where they continue to prop up “zombie” manufacturers to preserve jobs, even when those factories are destroying value.

Despite these pressures, China’s manufacturing ecosystem remains significantly deeper than that of its closest competitors. It still possesses a massive, unparalleled array of suppliers and will continue to be a primary destination for foreign buyers.

However, it is worth keeping one reality in mind: in an involuted market, if the price seems too good to be true, you may well be subsidizing your supplier’s slow-motion collapse.

The post Is China’s Price War Thinning Out Its Supply Chain Depth? appeared first on Kinyu.

The Very Serious People in the consulting world call these “black swan events,” a term meant to imply they are rare and unpredictable deviations from the norm. But they happen all the time. According to the World Economic Forum, supply chain disruptions jumped 38% in 2024, driven by extreme weather, geopolitical tensions and cyberattacks.

Large corporations fight back with “war rooms” and sophisticated forecasting models to simulate global risks. But if you are running a small- or mid-sized importing business, that kind of infrastructure is simply fantasy. You don’t have the bandwidth, and you certainly don’t have the budget to play “global chess” with a team of full-time analysts.

Unsurprisingly, a 2022 McKinsey survey found that 45% of companies either have no visibility into their upstream supply chain or can see only as far as first-tier suppliers.

So, what is the alternative? We think it’s better for smaller companies to stop playing amateur meteorologist and focus on agility instead.

I know, “agility” sounds like abstract nonsense, but it actually translates into a few very real, very concrete practices that any business can start using today.

1. Secure Access to Credit Before You Need It

It’s a basic tenet of business that cash flow problems kill companies faster than supply chain problems do. When a crisis hits, you need working capital (liquidity) to place rush orders, pay for expedited shipping, or simply survive a period of reduced revenue.

The time to secure a credit line is when the sun is shining, not when the storm breaks. Establish relationships with your bank and set up credit facilities now.

As the old saying goes: “You can only get a loan when it looks like you don’t need one.” Once you show signs of financial strain, your options dwindle. When the next disruption arrives, you want to be holding the cash, not begging for it.

2. Invest in Supplier Relationships

Your suppliers remember how you treated them when you had leverage. If you squeezed them on price and slow-paid invoices, do not expect them to prioritise you when capacity tightens.

Research published during COVID-19 confirmed that collaborative action between manufacturers and suppliers positively affects all stages of resilience: preparation, response and recovery. Presumably, this is because closer partnerships allow firms to share the burden of risk rather than just dumping it on each other!

When disruption hits, these relationships pay dividends. Suppliers extend payment terms. They prioritize your orders. They give you honest information about delays instead of telling you what you want to hear.

Actually, this is one of the main benefits of hiring somebody through The China Desk. Having permanent, on-the-ground representation allows you to build solid, long-term relationships with your suppliers that you just can’t get over email.

3. Simplify Your Product Line

Every extra SKU you carry is just another way for things to go wrong. Each customization creates a dependency on a specific supplier, specific tooling or specific materials. When a supply chain crisis eventually hits, all that complexity quickly turns into fragility.

Major corporations have already learned this lesson. Nestlé launched “Project Tasty” in 2021 to trim down its portfolio complexity and increase the availability of its high-performing SKUs amid pandemic-era supply chain issues.

It’s worth asking yourself: do you really need every single one of those variations? Consolidating your product line lets you work with fewer vendors, place larger orders and build deeper relationships with the suppliers you keep. It can also mean reduced logistics costs across warehousing, transportation and inventory holding.

Plus, life just gets easier when you have less to manage!

The Resilience Mindset

At the end of the day, you can’t manage a business by staring at a crystal ball.

We think the best way to make sure you’re resilient as an SME sourcing in China is to be positioned to adapt: cash in the bank, boots on the ground at The China Desk to keep suppliers loyal, and a product line simple enough to pivot without a nervous breakdown.

We can’t predict what will happen next, but we can build the buffer to survive it.

The post Three Tips to Weather the Next Supply Chain Crisis appeared first on Kinyu.

However, while falling prices may look like a win for buyers abroad, they also signal mounting quality risks.

The two main drivers of falling prices are overcapacity from years of heavy investment and market crowding as factories shut out of the U.S. pivot to smaller destinations, undercutting competitors to win their clients. In July, exports to the U.S. dropped 21.7% from a year earlier, while shipments to Australia, the EU and ASEAN all climbed.

A furniture company in the southern city of Foshan told Reuters it “barely breaks even” after suppliers that once sold to the U.S. shifted into its main market of Australia.

These factors help push China’s factory utilization rate down to 74% in the second quarter, well below the roughly 80% level many economists view as healthy. On the ground, this means many factory lines are sitting idle with too much inventory to move.

To shift these goods, factories cut prices further. And they’ve been doing this for about two years. China’s producer prices fell more than expected in July, the 34th month in a row.

Beijing has noticed. The central authorities last month proposed amendments to a decades-old pricing law to curb what they call “disorderly low-price competition.” The draft would make it harder for companies to sell things too cheap just to push out rivals, stop shady pricing tricks, and increase fines for breaking the rules.

Quality Issues

Low prices can look like a win for buyers, but they can mask lurking quality risks. Cheaper quotes can mean cheaper parts — and not always the parts you agreed to.

Anker recently recalled more than 1 million power banks after reports of overheating and fires. The U.S. Consumer Product Safety Commission logged 19 fire and explosion reports, two minor burn injuries, and 11 property damage cases. The problem was traced to an upstream supplier swapping materials without permission to save money. Several other power bank brands followed with recalls.

Cut corners like these are easy to miss. A factory may clear all quality inspections, while one of their suppliers (or even a supplier’s supplier) could be quietly swapping in cheaper parts, loosening specs, or skipping quality checks to save a few bucks. Products may look flawless initially, but later bring a wave of returns or, in the worst case, a front‑page recall.

Regular testing against past performance benchmarks is the best way to spot problems early, and it is always wise to add a margin above the legal threshold to allow for manufacturing tolerances. Companies without in-house capability should hire a test engineer to design a targeted inspection plan.

Supply chains also require deeper scrutiny, including checks on sub‑suppliers’ materials, processes and any changes they make.

Hiring Opportunities

Yet, price wars don’t just cheapen materials — they cheapen labor. Employment has remained broadly stable on paper,but there are widespread reports of factories shortening shifts and putting workers on unpaid leave — what economists politely call “underemployment.”

Underemployment is hard to measure and is not tracked in official data. However, it leaves traces: weak consumer spending and deflation in the consumer sector as households cut back because they have less money. Both are already pressing on China’s economy. The country’s consumer prices were flat in July from a year earlier.

It also swells the ranks of job seekers, even if they are not captured in the unemployment rate. That is hardly surprising: when an employer cuts wages, the first instinct is to look elsewhere.

“The number of active candidates in the market has doubled compared with last year,” said Cece Tang, head of recruitment firm Hays’ Guangzhou office. “This year, more than 40% say they do not feel very secure in their current job … They are actively in the market, looking for better opportunities.”

Anecdotally, many candidates interviewed by Kinyu in recent months said they began searching after their companies cut back or folded. Most say the one thing they want most is stability.

“More people are looking for permanent roles because they want an employer with a long-term plan in China,” Tang said. “They want salaries that comply with regulations, and they want the company to pay social insurance.”

This means companies may find that now is a rare chance to attract sought‑after specialists in test, supplier quality, reliability and cost engineering, thanks to a more competitive hiring environment. Better pay and greater stability can be strong incentives in a softer job market.

Strangely, China’s price war spiral is doing two things at once: making reliability expertise more essential, and more available.

Actionable Advice for Overseas Buyers

• Step up incoming testing. Compare every batch with previous runs and field returns to spot problems early. Pull bigger samples on risky parts like batteries, chargers, chips, metals and adhesives while the price war drags on.
• Check the suppliers behind your supplier. Audit tier 2 and tier 3 makers of key parts. Make sure specs, paperwork and traceability all match — and catch any quiet swaps before they hit your line.
• Put boots on the ground. If you do not have a quality engineer or QC team in China, hire one. They can spot trouble faster, confirm fixes and enforce change control rules that often slip when price cutting is this fierce.

The post China Price War Heightens Need for Upstream Supply Chain Testing appeared first on Kinyu.

The country’s CO2 emissions fell 1.6% in the first quarter of 2025 compared to the previous year, according to Carbon Brief.

While that’s only a small dip, it’s a historic moment for the world’s largest polluter — especially because the peak came five years ahead of schedule. And it’s great news for companies looking for greener supply chains.

The timing also came as the latest trouble in the Middle East has had many companies anxious about how much their Chinese suppliers still rely on imported fossil fuels from the region. It’s no wonder, then, that there is reported interest in reviving a pipeline that would bring Russian natural gas to China.

So, is China’s growing use of clean energy really making supply chains greener and less vulnerable to external energy shocks? 

The truth is: it depends on location.

Clean Energy Growth

The main reason for China’s emissions drop is a surge in clean energy. China’s national average clean power share (the proportion of electricity generated from low-carbon sources such as hydro, wind, solar, nuclear and bioenergy) reached 38% in 2024.

It’s tough to capture just how massive China’s clean energy push has become. The country invested $940 billion in clean energy last year (about the size of Saudi Arabia’s entire economy). As a result, China installed more wind turbines and solar panels last year than in the rest of the world combined, according to the New York Times.

China is currently installing about 100 solar panels every second, leading to a 60% surge in solar power generation capacity this year. Wind power generation capacity, meanwhile, is up 23% percent year on year, according to the latest National Energy Administration figures.

With more than 500 gigawatts of new wind and solar projects expected to start running this year, the share of clean energy is set to grow.

Regional Disparities

Yet, progress isn’t the same everywhere.

Zoom in and you’ll see that most of China’s big clean energy gains are happening up north, according to Dialogue Earth.

From 2020 to 2024, northern provinces like Liaoning, Heilongjiang and Jilin boosted their clean power share from 20% to 31%, thanks to a surge in wind, solar and nuclear projects.

In the south, things look different. The clean energy share there only edged up from 43% to 45%. Guangdong (China’s top manufacturing powerhouse and Kinyu’s home) even saw its clean energy mix drop by 2.1 percentage points. So, while some regions are racing ahead, others are barely moving.

These regional differences also help explain some of the apparent contradictions in China’s energy transition. For example, China’s construction of new coal-power plants “reached a 10-year high” in 2024. 

Meanwhile, only three northeastern provinces saw fossil fuel use decline. Elsewhere, it increased. The south’s fossil fuel generation grew 28% compared with 12% in the north.

So, what’s behind the difference? Lauri Myllyvirta at Dialogue Earth points to market incentives for flexible coal plant operation and improved regional grid cooperation up north, making it easier to add renewables.

Southern China, meanwhile, has also long had a higher share of clean energy because of major hydropower resources, potentially making it less proactive.

Imports

A similar pattern plays out with energy imports. Western and northern provinces like Shanxi, Inner Mongolia and Xinjiang rely on abundant local coal and energy resources, while eastern and southern coastal regions such as Guangdong, Jiangsu and Zhejiang depend more on energy imports to meet their high consumption.

So while imported oil accounts for about 19% of China’s overall energy use (and China remains the world’s largest oil importer), this reliance is not the same everywhere. In fact, China’s western and northern regions are largely self-sufficient.

Will the Gap Close?

Having said all this, regional disparities are likely to shrink over the next few years as new clean energy projects come online and interprovincial power networks expand. Guangdong (the worst-performing province in terms of clean energy growth) is now leading the country in solar panel installations.

China will also double its nuclear power capacity by 2040, making it by far the world’s largest nuclear power generator, according to the South China Morning Post.

China’s clean energy industries, for their part, will likely double in value by 2035, adding 15 trillion yuan ($2.1 trillion) to the economy, according to the Centre for Research on Energy and Clean Air.

For now, if you are concerned about the clean energy mix in your China supply chain, the key question is: Where are your suppliers located? The answer could make all the difference.

The post Where Does China Get Its Energy? appeared first on Kinyu.

Right now, most supply chain forecast experts would say we’re firmly in the “impossible” camp. U.S. tariffs change from 145% one day to a 90-day pause the next. No one knows what’s next.

So, how do you plan for times like these? How can you make your forecasts actually strengthen your supply chain? We think the answer is more communication with your suppliers. 

But before we dive deeper, let’s go over a quick forecasting primer to make sure everyone’s on the same page.

The China Forecasting Ideal

When we talk about forecasting in relation to a China sourcing operation, we’re talking about two concepts. These are “supply chain forecasting” — predicting flows of goods and materials — and “demand forecasting,” which focuses on how likely customers are to buy what you sell.

There are many complex methodologies and arguments about which is the best way to forecast, but the goal is straightforward: know what you’ll need, when you’ll need it and how to get it there.

Put simply, if your forecasts were absolutely perfect, you’d never have too much stock and never too little. This is the ideal scenario. It’s also clearly impossible. Still, aiming for this target helps us get closer, even when the world throws curveballs.

The Issue with Traditional Forecasting

Traditionally, you make a forecast by looking backwards and spotting trends.

In toys, for example, most U.S. sales happen in the last three months of the year. So, you can make a pretty confident prediction (or demand forecast) that the same will happen each year.

As a result, toy sellers tend to follow a set plan: source more toys in spring and summer, ship in fall and sell big in winter. This insight allows you to make a prediction about your supply chain (yes, a supply chain forecast).

For example, getting a container ship loaded with your product out of China in the busy spring and summer months demands more pre-planning and coordination than in winter, when shipping lanes are quieter.

Aside from the occasional economic downturn or rare black swan event, this yearly cycle has basically repeated for decades. As such, toy suppliers in China and buyers elsewhere haven’t needed to talk much about forecasts — everyone knows the routine.

But now, with tariffs and trade rules changing fast, even steady industries are left guessing about the state of play next week. The old playbook doesn’t always work when the rules can change overnight. What will the tariff level be next week? Are we looking at a recession? Are American consumers buying two dolls or 30 dolls this Christmas? Nobody knows.

Focus on What You Can Control

When things are unpredictable, it helps to focus on what you can actually control.

Make two lists: 

What You Can’t Control:

• Government policies: Tariffs, new trade laws, export bans 
• Economic shocks: Recessions, inflation, currency swings
• Unexpected events: Factory shutdowns, disasters, pandemics

What You Can Control:

• Data quality: Keep sales, inventory, and supplier info up to date
• Contingency plans: Prep for “what ifs” and keep some extra stock
• Supplier relationships: Share forecasts with suppliers and do it often

Keeping these lists helps you focus your time and resources where they will actually make a difference. And it stops you from wasting energy worrying about things you can’t change.

For example, many buyers and suppliers at our April Supply Chain Roundtable — right after “liberation day” — agreed that the best approach was to keep calm and carry on rather than make rushed decisions. With a 90-day pause on tariffs now in place, that steady approach proved wiser than reacting in panic. Knowing what’s in your control is the first step to making smart, confident decisions.

Scenario Planning

The number of scenarios you need to prepare for will depend on your industry and where you work.

For instance, our toy seller should gameplan for different levels of tariffs and consumer sentiment, while a smart home device seller might also consider looming tech restrictions on Chinese imports in addition to tariffs.

The general rule of thumb is to plan for three to five different scenarios for any sales and operations planning. The exact number for your business depends on how many variables could affect your particular product.

Sharing Forecasts with Suppliers

One thing always holds true: sharing your forecasts with your suppliers is essential. Clear, regular communication is the best way to handle the unknown and keep your forecasts useful.

Sharing forecasts with Chinese suppliers is still pretty rare. It’s not the norm — industry reports say it, and we’ve seen it firsthand. Usually, it’s the Chinese supplier chasing the buyer for a forecast, not the other way around. And when things get uncertain, buyers are even less likely to share. Who wants to stick their neck out if they’re not sure their own numbers are solid?

There are plenty of reasons for this. Procurement folks often worry that sharing a supply chain forecast could backfire — maybe it’ll create expectations, or maybe sensitive info will leak.

But when buyers hold back, it actually ramps up risk for both sides. Suppliers are left guessing, which can lead to delays, higher costs or missed opportunities.

Sharing helps your suppliers because it gives them time to plan production, buy materials, and manage their own schedules. When suppliers can prepare, they’re less likely to run into delays or shortages — which means you get better prices, more reliable deliveries, and fewer surprises.

How to Share Supply Chain Forecasts

We’d advise against sending a PPT and hoping for the best. Instead, make sure your supplier gets it, understands it, and acts on it. If you don’t know this, your effort is wasted.

There are two main ways to ensure your forecasts are truly effective.

1. Build a real relationship yourself. Visit China, speak the language, or use suppliers who speak good English. You’re going to want to have discussions with them. Can they act upon the forecast? Does it align with what they’re seeing on the ground? Feedback is essential!
2. Have someone on the ground. A demand planner in China can build trust, spot trouble early, and turn feedback into action. That way, your forecasts don’t just sit in an inbox — they get used.

In Short

You can’t control tariffs, shocks, or disasters. But you can control how you share forecasts with your suppliers. Communication and regular supplier engagement are the glue that binds together all other forecasting efforts. The companies that do this well are the ones that keep moving, no matter what happens next.

Remember:

• Work Share Early, Share Often: Don’t wait until you have perfect numbers. Even a rough forecast helps your supplier plan production and manage materials.
• Talk It Through: Don’t just send a file and hope for the best. Set up a call or meeting to walk through your forecast, answer questions, and make sure your supplier understands what you need.
• Build Real Relationships: Visit your suppliers in person when possible, or have a trusted partner on the ground. Face-to-face contact builds trust and keeps communication open.
• Follow Up: After you share a supply chain forecast, check in regularly. Ask how your supplier is using the information and whether they see any potential issues. 

The post Want More Effective China Supply Chain Forecasts? Start Sharing appeared first on Kinyu.

With China’s exports to the U.S. plunging by more than a third in May, the steepest drop in years, many Chinese suppliers are facing real financial strain. In turbulent times like these, even your most reliable, long-term partners may be under pressure to cut corners, change ownership, or make sudden decisions that could impact your business.

That’s why, now more than ever, it’s worth taking a closer look at what’s really happening inside your supply chain. Even if you think you know your suppliers inside out, a fresh review can save you from nasty surprises.

A Cautionary Tale

Here’s a cautionary tale for anyone sourcing from China. A company had what looked like a solid, long-term relationship with a factory. They’d worked together for years, trusted the owner, and felt confident everything was under control.

But when trouble struck, the real problem surfaced: the factory owner wasn’t actually the legal representative of the company. His daughter was. In China, the legal representative is the person with the power to sign contracts, make key decisions, and — crucially — shut the business down.

When the owner ran into problems, his daughter stepped in, closed the factory, and locked up all the equipment. Suddenly, contracts were void, production stopped, and the company faced a long, expensive legal battle just to get their own machinery back.

The critical mistake? No one checked who the legal representative was on the official business license.

This kind of error happens all the time. China’s business systems are different, and when you’re busy running a company, it’s easy to overlook legal details like this.

Due diligence can easily slip, especially when you think you have a trustworthy partner.

But in China, skipping these checks can have serious consequences. Here are three quick-fire tips you can use right now to check your supply chain.

Tip 01: Check Who’s Really in Charge

Don’t assume your main contact is the boss or has the legal power to act for the company. In China, the “legal representative” is the person with the authority to sign contracts, make key decisions, and, if things go wrong, even shut the company down. If you don’t know who this is, you’re exposed to serious risk.

How to do it:

First, ask for the business license. Every legitimate Chinese company must have an official business license. The legal representative’s name (法定代表人) will be listed on it, usually on the third row down on the right side.

Second, cross-check with official records. Don’t just take a scan at face value. Use the National Enterprise Credit Information Publicity System (NECIPS) — China’s official government database — to verify the legal representative, registration number, business scope, and company status. The system is public, but it’s in Chinese, so you may need help from a local partner or a verification service.

Confirm the Chinese name. Company registration is done in Mandarin, and the official Chinese name is what matters legally. Make sure the name on the license matches what’s in the NECIPS database.

Check for red flags. If the company refuses to provide a business license, or if the details don’t match up in NECIPS, walk away. This is a major warning sign.

Tip 02: Are Your Contracts Clear? 

Speaking of contracts: Make sure all contracts are up to date. Old agreements may not reflect current business realities or changes in Chinese law, so regular reviews and updates are necessary. This includes updating terms for payment schedules, delivery timelines, quality standards and compliance requirements.

Contracts must be signed or stamped by the legal representative of the company, not just your day-to-day contact. Only the legal representative has the authority to bind the company legally, so their signature or company chop is critical for enforceability.

Tip 03: When Did You Last Visit?

Okay, this may not be a quick fix, especially if it means taking a long-haul flight, but nothing beats boots on the ground. Regular on-site visits — whether by your own team or a trusted third-party inspection service — are essential to truly understand what’s happening at your supplier’s factory.

On-site visits allow you to spot red flags that emails, phone calls, or video conferences can’t reveal. You can verify production capacity, quality control processes, working conditions, and compliance with your standards.

These visits also help you detect changes in management, ownership, or operational practices that might not be communicated otherwise.

If you can’t send your own staff regularly, hire reputable third-party inspection firms that specialize in China supply chains. They can provide detailed reports, photos, and even live video walkthroughs.

In-person visits also build stronger relationships with suppliers, showing that you are serious about quality and compliance. This can encourage better cooperation and transparency.

In Short: China Supply Chain Risk Management

• Verify Who’s in Charge: Always check the business license and confirm the legal representative.
• Keep Contracts Updated: Review contracts regularly and ensure they’re signed by the legal rep.
• Get Eyes on the Ground: Visit factories in person or use a trusted local inspection service.

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“Most exporters and importers between the U.S. and China don’t have too much choice but to wait,” said Steven Jou, project manager at Charles Kendall Freight. “All people, including myself, have faith that positive negotiations will take place very soon.” 

The roundtable, organized by the British Chamber of Commerce in South China’s Supply Chain Working Group, was hosted at Shenzhen’s Yantian Port as markets reeled from last week’s tariff announcements. It brought together business leaders from the U.K. and China, along with government representatives from the British consulate in Guangzhou.

Kinyu CEO Benjamin King, who chairs the working group, said, “We’d been planning this for months, but it couldn’t have come at a better time. It gave everyone a chance to compare notes on surviving this trade crisis.” 

Last week, markets plunged after Trump announced global tariffs. They partially recovered when the administration backpedaled, limiting steep duties to China only. The global economy may have dodged a bullet, but U.S.-China ties are in free fall. 

As Columbia University professor Adam Tooze put it: “We have been asking for some time what is Trump’s China policy. Here we have our answer” – a “radical decoupling from China.” 

But if this is decoupling – and with tariffs now at 145%, it surely is – many participants at the roundtable said all they could do was cling to hopes for better news. 

“There’s no effective way to cope with these tariffs,” said one company representative who handles Chinese imports into the U.S. “I’m frankly quite sad.”

The traditional strategy of routing exports to the U.S. through third countries is also becoming increasingly difficult, participants reported, just as we predicted it would last year.  

The European Pivot 

With prospects in the U.S. looking bleak, Chinese manufacturers at the roundtable said they plan to shift exports to other markets. 

“If it’s a choice between an EU customer or a U.S. customer, we pick the EU,” said a Chinese exporter. “We’ve been doing that for a while.” 

Jou agrees this shift is likely to accelerate but won’t happen overnight. 

“In theory, suspending business with the U.S., China’s largest trading partner, will increase trade with other countries,” Jou said. “But that will not come too soon. We’ll have to watch for a while.” 

Yet, the prospect of a second “China shock” is already alarming some in Europe. For instance, British retailers called for government action on Monday to stop Chinese companies inundating the U.K. with products. 

The European Commission is also monitoring import levels and says its ready to intervene if it detects a surge from China, according to DW reporting last week. 

However, the last thing European businesses operating in China want right now is more trade tensions. 

Thankfully, both Brussels and London appear deeply reluctant to copy Trump’s sledgehammer approach with their own tariffs. After all, nobody wants a fight with Beijing amid collapsing transatlantic relations. 

If any retaliation occurs in response to a surge in exports, it will likely be more targeted — and less likely to provoke Zhongnanhai — think minimum prices on Chinese EVs rather than sweeping tariffs. The U.K. could also drop the tax exemption on imports under 135 pounds ($178), according to CNBC. 

The overall trajectory points to closer ties with China. The EU’s determination to maintain strong relations is clear, with leaders set to travel to Beijing in July instead of hosting the summit in Brussels as planned. 

Spanish Agriculture Minister Luis Planas also bluntly told Reuters last week that Spain will pursue closer trade ties with China “in the interests of its citizens and the EU,” dismissing U.S. warnings from U.S. Treasury Secretary Scott Bessent that such moves would be tantamount to “cutting your own throat.” 

Supply Chain Disruptions 

But that doesn’t mean companies won’t face challenges when sourcing from China. 

China’s manufacturing sector is about to take a serious beating, with U.S.-bound shipments projected to nosedive by a staggering 80% over the next two years, according to Capital Economics. The consequences are already hitting European buyers. 

One thing to look out for will be Chinese suppliers raising prices to offset lost U.S. sales.

Some outlets are already reporting that this is happening. One U.K. swimwear brand told The Independent that its China sourcing costs have nearly doubled, with the assumption being that this was due to Chinese suppliers trying to recoup their American losses. 

Victor Shih of UC San Diego also warns the tariffs could trigger a “wave of bankruptcies” across China. With the country’s property market struggling and local government finances under pressure, Beijing has limited capacity to bail out struggling manufacturers. 

Therefore, some European firms will likely lose key Chinese suppliers. This will cause a world of headaches.

It might be worth giving your suppliers a quick ring to check how much they’ve been selling to Uncle Sam and having a Plan B ready if they go belly-up. 

Finding Opportunity in Crisis 

Despite the challenges, Jou sees some positive developments emerging from the crisis. 

“This was the largest roundtable I’ve ever attended by the British Chamber of Commerce in South China,” he noted. “It’s a good sign of growing interest in supply chain issues.” 

Jou believes the disruption is creating new connections across the industry. “People are seeking more opportunities and business partners in this abnormal situation. That makes our job more valuable in bringing everyone together.” 

“Unfortunately, we did not have all the answers to the world’s supply chain problems, but all the attendees were relieved to know that they were not facing this challenge alone,” King said. 

The post What the US-China Trade War Means for European and UK Firms appeared first on Kinyu.

The U.S. raised tariffs on Chinese imports to 20% on March 4. In response, China imposed additional tariffs of up to 15% on U.S. agricultural products on Monday.

Adding to the uncertainty is the fact that, as with Canada and Mexico, it’s unclear what China could even concede to get Trump to back down.

What does the U.S. actually want? Beyond the usual demands about fentanyl, insiders claim the Trump administration is pushing for some serious “structural changes” in the Chinese economy. Good luck with that.

“If they really think they can force these changes this time, then they are not being well advised,” wrote China expert Bill Bishop in his Sinocism newsletter. “They also need to be careful about overestimating how much leverage they have.”

China’s Stance

Beijing, for its part, is also not backing down. Foreign Ministry Spokesperson Lin Jian declared, “If war is what the U.S. wants … we’re ready to fight till the end.” Strong words – and perhaps not entirely bluster.

China is now more prepared to handle U.S. tariffs than it was when the first trade war began in 2018.

The country has massively diversified its trade partners since then, partly due to those initial tariffs. By 2024, for the first time ever, more than 50% of China’s total foreign trade was with its Belt and Road Initiative (BRI) partners, while trade with other free trade partners jumped to 34%.

Meanwhile, America’s slice of China’s trade pie has shrunk significantly – from 15.7% in 2018 to just 10.9% now. 

Both sides are feeling mighty, which means we’re not likely to see a quick resolution.

But let’s be clear: this escalating trade war is already stinging many American companies and their Chinese suppliers.

Chinese factory gate prices have been on a descent for a while now. The Producer Price Index (PPI) has been sliding consistently since October 2022, and in February, it dropped another 2.2% compared to last year,according to the official numbers.

Worse still, some American firms are now squeezing their Chinese suppliers for lower prices. Walmart, for instance, has reportedly been pressing its suppliers to slash prices by up to 10% per tariff round. This essentially means that suppliers will absorb the full cost of Trump’s duties. Understandably, this hasn’t won over much goodwill; Bloomberg noted strong pushback from suppliers facing these demands.

Meanwhile, plenty of American companies are hightailing it out of China.

The American Chamber of Commerce in China reported last January that 30% of its members were either planning their exit or already moving.

New Partnerships

With U.S. firms pressuring for price cuts and others abandoning ship for more alluring options in Thailand, Chinese suppliers are keen to latch onto new partners — increasingly from the EU and the U.K.

“A lot of factories currently supplying the U.S. may lose that business, and with factory prices already low, this could create opportunities for U.K. and EU companies to form new partnerships with Chinese suppliers,” said Mark Clayton, chairman of the British Chamber of Commerce South China.

A prominent industry insider, speaking anonymously, revealed that certain Chinese factories – once tough to work with because of their U.S. focus – are now “rolling out the red carpet” for British and European clients.

But it’s not just about the dollars and cents. An easing of China-Europe tensions is also playing a big role in making these new partnerships more feasible. 

As Trump cranks up the pressure, he’s pushing Europe and China into each other’s arms, according to Katja Bego over at Chatham House.

The more tariffs Trump imposes, the more crucial Europe becomes as an export market for China. At the same time, EU officials say engaging with China will allow Europe to counterbalance its reliance on the U.S.

Diplomatic Shifts

Brussels is already easing off the throttle, with European Commission President Ursula von der Leyen now advocating for agreements that could boost trade and investment ties with China.

The U.K. is following suit. In January, Chancellor Rachel Reeves restarted economic talks after a six-year break, securing 600 million pounds in new deals.

Chinese officials have welcomed these overtures. Foreign Minister Wang Yi told reporters last Friday that “China remains confident in Europe and believes Europe can be our trustworthy partner” in what might be the diplomatic equivalent of “we’ve been waiting for you to call.”

China’s envoy to the EU, Lu Shaye, who previously served as ambassador to France and was known for his assertive “wolf warrior” approach, recently said he was “appalled” by Trump’s treatment of Europe.

On the Ground Impact

The impact of these diplomatic shifts is already being felt on the ground in both Europe and the U.K.

“There have been significant increases in diplomatic visits over the past couple of months, which has been brilliant for both British businesses in China and Chinese businesses investing in the U.K.,” said Clayton. “We’ve seen more engagement in the past few months than we’ve seen in the past six years.”

Meanwhile, in Europe, over 300 Chinese companies descended upon the Mobile World Congress last week, making up more than 30% of exhibitors — a notable increase from previous years.

Future Prospects

There’s always a risk that Europe might be pressured into adopting a more aggressive China policy with the U.S. However, for now, that’s not the case.

Currently, it’s a good time for companies with supply chains in China to reconnect with local suppliers and explore potential deals. With prices already low and diplomatic relations between China and the EU/U.K. warming up, it’s a buyer’s market.

Our advice? Get back on the ground, reconnect with your suppliers, and see firsthand what’s available.

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