23pc of industrial firms losing money

Almost a quarter of Guangdong's industrial companies are suffering losses - more evidence that the mainland's traditional export hubs are gradually losing their competitive edge in these tough economic times.

Businesses in the province, a major manufacturing base for products ranging from furniture and electronics to garments, are plagued by falling export demand, rising labour costs and more competition from the inland provinces.

Total profits at Guangdong's larger industrial companies slumped 19.2 per cent in the first five months from a year earlier, Xinhua reported - far more than the 2.4 per cent dip in profits at industrial firms nationwide with at least 20 million yuan (HK$24.3 million) in annual revenue. About 22.8 per cent of the province's industrial firms lost money in the period, and the combined losses were double those made by such companies a year earlier, Xinhua said, citing a report from the province's National Development and Reform Commission. Firms lacked confidence about a recovery in demand, while the local job market was also under pressure, the economic planning agency said.

Furniture companies, which employ seven million people in the province, 'basically don't make money', because of sluggish demand and rising costs, Xu Xiu, deputy secretary general of the Guangdong Furniture Chamber of Commerce, said.

'I'm not optimistic. The industry's outlook may deteriorate further, as demand is cooling across the country,' he said.

About 10 per cent of furniture makers in the province have been forced out of business, he said. Weakening demand from Europe and the United States and exchange rate fluctuations have added to the pain, as about 30 per cent of the companies ship their goods overseas.