During the past three years that have been marked by stagnant growth in the U.S. and the sovereign debt crisis in the Eurozone, China has been the proverbial engine of the global economy. Despite a sustained dip in demand from developed markets in the West, China has continued to chug forward by harnessing growing domestic demand and by venturing into heretofore untapped emerging markets.

Alas, China’s economy is not invincible.

As we enter the early part of 2012, there appear to be signs of slowing growth. In an anecdotal yet telling piece of evidence, the newly vibrant wine market in China seems to have hit a snag. The three big wine auctions that have taken place so far this year in Hong Kong—the world’s largest wine market—yielded barely more than half the revenues generated during the same auctions in 2011.

Why is this relevant? Surprisingly, the Chinese wine market over the past few years has performed in lockstep with the Chinese property market. In fact, the market for fine wine in China can be looked at as a real-time barometer of excess liquidity in China; as the wine market goes, so too does the market for property and investment in infrastructure. In turn, as investment flees the real estate sector, the overall economy will inevitably follow a similar trajectory.

The most recent economic data show that the coming slowdown is already underway. According to Chinese government figures, GDP growth in the last quarter of 2011 was 8.9 percent, which marked the slowest growth in ten quarters. Further risk factors include continued difficulties in the export sectors, rising domestic wages, the turbulence of the global markets and the Chinese government’s continued efforts to corral property prices. For example, slowdowns in the real estate sector will ripple through the whole economy and could result in a 1 to 2 per cent decline in China’s growth rate.

Weak export markets, a weak property sector and rising domestic wages all give rise to difficult operating environments for Chinese manufacturers. Ironically, these trying conditions bode well for our clients who buy from Chinese factories since they can leverage the situation to get better terms from their vendors. The risk, however, is that these factories may not be able to deliver on the terms promised.

How then do you mitigate risk and benefit from this challenging environment? Clients who use a customized Direct Import Program run through ICS TRUST are better able to navigate through these difficult issues. The benefits of ICS TRUST’s thirty years of experience in China are available to our clients. By having our staff deal with their factories on a daily basis and monitor for potential problems, we reduce our clients’ operational risks of doing business in China while providing them the opportunity of benefiting from the current environment.