• China Announced the shutdown of all polluting factories for 9 weeks within a 200 kilometer radius of Beijing to clear the smog.

• The shutdown begins July 17th until Sept 20th. It covers Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia and Shandong provinces. (This may start as early as June 1 and remain shut down until Sept 30th)

• The polluting factories will be categorized into four different levels, Chinese Government could expand the radius if the air quality does not improve sufficiently prior to the Olympics. Also there could be a shut down of material transportation, and even power plants to clear the air.

• There could be a bottleneck at the 2 main ports – Beijing and Tianjin.

• Beijing citizens are asked to drive only every other day to improve the air quality.

Beijing Olympics Concerns

Beijing Olympics Concerns

• China to close 10% of Petrol Stations and retrofit remaining stations – closures to take place at end of May.

• As early as the end of May – Factories may be closing within the 200 km radius of Beijing – example of types of factories:– Metal/Steel– Paper– Coke (turning coal into coke – then used for heat energy in the

steel-making process)– Glass– Chemical– Cement– Film – Fertilizer– Coal burning power plants

Beijing Olympics Concerns

• Beijing local government may implement temporary traffic restrictions during the Olympics– This could affect the cargo trucks in North

China as they may not be able to use the Beijing Gateway.

– Cars may be ordered off the road – currently can only operate every other day.

• Airfreight will be limited in the Beijing area and rerouted to other airports.

Areas of Concern

Beijing from One Day to the Next

• March 13, 2008

March 12, 2008

April 13, 2008

April 1, 2008

April 8, 2008

Beijing Olympics Concerns

Shortage of containers• Not only are the Olympics a possible

issue, but at the same time we are having a huge surge in exports – due to the decline of the US $. – This could mean that there may be a shortage

of containers. Today it is so difficult to get a container for export that importers are starting to hold onto their containers to use for export and a shortage may occur.

Beijing Olympics Concerns

• Air Quality – Based on a Atomospheric Environment report

on average 35% - 60% of the ozone can be attributed to sources outside Beijing.

• Neighboring Hebei and Shandong Provincers and the Tianjin Municipality all exert significant influence on Beijings air quality.

• Wind will also play a factor – whether it is a lack of wind or wind from neighboring provinces sending pollution into Beijing.

Beijing Air Pollution Index (API)

• 1 = API 0-50 = excellent • 2 = API 51-100 = good • 3A = API 101-150 = slightly polluted• 3B = API 151-200 = light polluted • 4A = API 201-250 = moderate polluted • 4B = API 251-300 = moderate-heavy

polluted• On 4/7 – 4/9 the API for Beijing was 93On 4/7 – 4/9 the API for Beijing was 93

Hong Kong API indexAPI

Air Pollution

Level Health Implications

• 0 - 25 Low Not expected.

• 26 - 50 Medium Not expected for the general population.

• 51 - 100 High Acute health effects are not expected but chronic effects may be observed if one is persistently exposed to such levels.

• 100 - 200 Very HighPeople with existing heart or respiratory illnesses may notice mild aggravation of their health conditions. Generally healthy individuals may

also notice some discomfort.

• 201 - 500 Severe People with existing heart or respiratory illnesses may experience significant aggravation of their symptoms. There may also be widespread symptoms in the healthy population (e.g. eye irritation, wheezing, coughing, phlegm and sore throats.

Beijing Olympics Concerns

• What should we do?– Assess risk

• Are raw materials made in factories in the vicinity of Beijing?• Is the factory in the Beijing area or within 200 km?• Consider shipping early from Tianjin• Ensure Suppliers understand our cancellation policy – in

case those products get caught in China or unable to ship on-time.

• PPD suppliers – where do they source? Where do they ship?

– Ensure suppliers have product available in the US early.– Will they be impacted by a possible shortage of containers?

• Are all of the POS cut?

Beijing Olympics Concerns

• Summary• Possible raw material shortage in North China

beginning June 1 • Factories around the Beijing area could be shutting

down as early as June 1 – not to reopen until end of Sept.

• Traffic in Beijing and surrounding areas will be congested and possible ban of vehicles on the road.

• Congestion at Northern China Ports as early as June if shippers plan for the issues.

Beijing Olympics Concerns

• Summary– For Collect Pos –

• If the merchandise is ready – need to ship early.