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SHANGHAI, China (AP) - Job
cuts, factory closures, unpaid export shipments
- stalling worldwide demand for products
made-in-China is driving home a new economic
reality for businesses that until recently were
struggling to keep up with soaring exports.
China's economy is still growing at an enviable
rate: It expanded 9 percent in the quarter
ending Sept. 30.
But that was the slowest in 5 years and down
from 11.9 percent last year.
Forecasts for next year range as low as 7.5
percent.
"The Golden Years have shuddered to a dramatic
halt and much tougher times are upon us,''
Stephen Green, economist at Standard Chartered
Bank in Shanghai says, pointing to slowing
exports and investment.
The suddenness and severity of the chill from
the global slowdown prompted leaders to announce
late Sunday a $586 billion economic stimulus
package aimed at boosting growth in China's own
markets.
"This broad-based fiscal stimulus program will
emerge as the government's front line of defense
against an excessive economic slowdown,'' Jing
Ulrich, J.P. Morgan & Co.'s chairwoman for
China, said in a note to clients.
But it's unclear whether the package will be
enough to salvage exporters left high and dry by
overseas customers who are either canceling or
abandoning orders as they face what might be one
of the bleakest Christmas shopping seasons in
decades.
For apparel maker Yiwu Bangjie, the first sign
of trouble came with the failure of a longtime
American customer to pick up and pay for its
latest shipment of seamless underwear, says Tao
Jianwei, the company's general manager.
"After the shipment arrived at the U.S. port,
when we notified our customer to take delivery
and finish paying, their reply was that they had
no money to pay for the goods,'' said Tao, whose
company is based in eastern China's Zhejiang
province.
Yiwu Bangjie is one of the luckier casualties of
the slowdown. Tao, who would not identify his
U.S. customer, said he expects to get 90 percent
of the $100,000 due back through export credit
insurance.
"We're lucky to have that insurance,'' he said.
"Everyone knows the global economy is headed for
recession, so it's best to be cautious.''
Others have suffered far more.
Thousands of factories have closed, especially
those in labor-intensive industries such as toys
and shoes.
Official statistics on bankruptcies and factory
closures are sketchy.
However, the economic planning agency reports
that 67,000 small- and medium-sized companies
closed down in the first half of the year.
In the months since, conditions have
deteriorated, with nearly daily reports of
factory closings and layoffs.
Among the most recent, BEP International
Holdings, a home appliance maker that employed
about 1,700 people, according to its Web site,
suddenly stopped operations Oct. 20 in the
southern city of Shenzhen.
"It is difficult for the company to obtain bank
financing and other sources of financing,'' the
company said in an announcement to the Hong Kong
Stock Exchange.
As growing numbers of companies close or slash
production due to sinking sales, that in turn
affects shippers who bring in raw materials and
export finished goods.
The Baltic Dry Index, which measures drybulk
shipping rates on 40 routes across the world and
is a key indicator of demand, has declined more
than 11-fold, to 891 in early November from
11,793 points in May.
"The reality we have to face is that the
slowdown of the global economy is hitting us
hard,'' said Ken Wong, manager of a
Shanghai-based shipping agency whose profit has
shrunk 30 percent this year.
Since many overseas customers are now unable or
unwilling to pay as promised, factories have to
be doubly cautious about whom they do business
with, said Chen Tong, general manager of Fuzhou
Xinrong Trading Co., a maker of carved wooden
boxes.
"If the order exceeds 100,000 yuan ($14,600),
we're going to be checking a company's
background and market,'' she said recently,
surrounded by boxes decorated with images of
Santa Claus, Christian saints and the Virgin
Mary at her booth at a trade fair in Guangzhou.
"You've got to do that now to be safe.''
China's Ministry of Commerce estimates that
cash-strapped U.S. businesses alone owe Chinese
exporters $100 billion on unpaid orders.
The problem, which first cropped up in
construction related areas, has spread to
consumer products, clothing, shoes and
appliances, it says.
As the world's appetite for China's products
wanes, the effects are reverberating through the
economy - and beyond its borders.
Increasingly, Chinese orders for iron ore, scrap
metal and other commodities are being abandoned
as buyers find themselves unable to get letters
of credit or other financing to pay for the
shipments, which end up sitting on the docks of
Chinese ports.
Meanwhile, the losses are trickling down to
white collar workers who are cutting back on
spending as they fret over job security, and to
migrant workers, who have begun heading back to
rural areas as factories and construction
projects shut down.
To boost growth, Beijing has slashed interest
rates three times in two months in addition to
the hundreds of billions of dollars it has
promised in tax breaks, credit guarantees, new
construction projects and other measures.
Still, the abrupt slowdown, just weeks after
Beijing staged a triumphant Olympic Games, has
left many Chinese wondering if their country's
economic "miracle'' was perhaps more a mirage.
"The good times seem to be over,'' said Pan
Henfei, a tall, robust man in his 30s who
gathers paper and bottles for recycling in
Shanghai, China's bustling financial capital.
As offices cut back on newspaper subscriptions
and supplies, there's less for him to scavenge.
And, he complains, the price he gets for paper
has dropped 40 percent to 1 yuan a kilogram
(about U.S. 6 cents a pound).
"I'm just a poor migrant trying to make it in
the big city so that my child might be able to
get out of the village,'' said Pan, the paper
recycler.
"Now some of my friends from the countryside are
thinking of giving up this work and going back
home. At least we can still do some farming.'' |
