Slowdown in Shenzhen mirrors national gloom
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Shenzhen, which has blazed the path of economic reform on the mainland for more than 30 years, has reported rare plunges in enterprise profits and trade in the latest sign that the country's economy is slowing amid global uncertainty.
The city's statistics bureau said on Monday that the profits of major industrial enterprises fell 3 per cent year on year in the first two months of this year, the Yangcheng Evening News reported yesterday. Their sales fell by 5.4 per cent.
The city, which used to account for an eighth of China's international trade, saw exports plunge by 6 per cent and imports grow by just 0.3 per cent. The figures follow poor industrial profit figures for the country announced by the National Bureau of Statistics earlier this week.
Across the nation, major industrial enterprises profits plunged 5.2 per cent in January and February, the first slide since the third quarter of 2009.
In his government work report early this month, Premier Wen Jiabao warned that China faced many difficulties and challenges at home and abroad.
'There is downward pressure on growth, while inflation remains high,' he said. 'The road to a global economic recovery is arduous. The global financial crisis is still evolving, and it is hard to resolve sovereign debt crises in some countries in the short term. Unemployment remains high in major developed economies.'
Chai Kwong-wah, president of the Hong Kong Small and Medium Enterprises General Association, said a survey had found that more than 40 per cent of its members planned to close their factories in Shenzhen and the rest of the Pearl River Delta.
'I started to run a toy factory in Shenzhen in the 1990s,' Chai said. 'But I've never seen such inflation before. I have to say that this year will be the toughest one for all factories, especially in the export-production industry. We see little hope. No government measures can save us.'
Chai said that even though the euro-zone debt crisis was easing and manufacturers were not short of overseas orders, skyrocketing rentals and labour costs meant they would suffer immediate losses of 10 per cent to 20 per cent on taking up orders.
Guo Wanda, of the Shenzhen Development Research Centre, a government think tank, said the latest figures were a 'bad signal'.
'I'm shocked by the data. It could be reasonable and acceptable to see a slide in exports because of the economic uncertainty overseas, but it's so surprising to see a drop in industrial growth.'
Economist Ding Li said the whole Pearl River Delta region had seen a similar slowdown in recent months and he expected the Yangtze River Delta region and other manufacturing centres would soon see similar problems because the country still relied on exports and government investment to drive growth.
'Shenzhen, Guangzhou, Dongguan and the whole province has seen slowdown this year,' Ding said. 'That's because Guangdong failed to find new methods to boost growth when its traditional export-driven economy was hit hard by the global economic crisis. Beijing and regional governments have invested heavily to boost the economy since 2008, but the authorities can't afford it any more because they're facing huge debts now.'