• Sat
  • Apr 19, 2014
  • Updated: 11:56am
BusinessChina Business

China's factory towns fall quiet

Many smaller factories in China's manufacturing heartland are closing early for the Lunar New Year, beset by weak orders and spiralling costs

PUBLISHED : Saturday, 18 January, 2014, 1:29am
UPDATED : Saturday, 18 January, 2014, 5:33am

Scores of factories in the manufacturing heartlands of the mainland have closed earlier than usual for the Lunar New Year owing to weak orders and rising costs, workers and owners say, suggesting a rocky outlook for a key sector of the economy.

While official trade data remains mildly positive, visits to five factory towns in coastal industrial hubs found that in some areas perhaps a third of manufacturers had begun closing weeks before the holiday starting late this month.

In some cases anaemic orders from key markets such as the United States and Europe were blamed. Others factories were being forced to curtail production because of the chronic labour shortage of recent years.

"Lots of people have left already. I would say around a third of the workers," said Ren Lipeng, a factory worker riding a rusty bicycle along a dusty avenue where many shops and restaurants were shuttered.

Factories in the Pearl River Delta and the eastern Yangtze River Delta were noticeably quieter this week.

In the south, many smaller plants had closed, with a stream of migrant workers crowding train and bus stations as they headed home in an annual exodus for up to six weeks of unpaid leave, far longer than in previous years.

With analysts expecting the mainland to soon announce its slowest annual economic growth rate for more than a decade, Beijing has stepped up efforts to wean the economy off its heavy reliance on investment and exports in favour of higher domestic consumption.

Lots of people have left already. I would say around a third of the workers
REN LIPENG, FACTORY WORKER

Trade, however, remains a hugely important economic engine as China attempts the difficult balancing act of maintaining its official target rate of growth at 7.5 per cent while shifting the economy away from lower-end manufacturing. Official export numbers showed mild growth in December.

"Business has been quite sluggish still in terms of exports, manufacturing, and most orders have been delivered," said Kevin Lai, economist at Daiwa Capital Markets in Hong Kong.

"I would be very careful reading the headline numbers because in November it was very strong at 12.7 per cent but I believe much of that was inflated."

China's export growth slowed to 4.3 per cent in December from a year earlier. Shipments to the US and Europe slowed from double digits in November to just 3.9 per cent and 3 per cent in December respectively, official data showed.

At the Heng Fa Plastic products factory in Dongguan just a handful of workers were manning moulding machines making frames for flat screen televisions.

Owner Huang Peijiang said orders for the Christmas holiday season had been down 30 per cent compared with 2012.

"For every 100 factory owners here, I'd say 80 are struggling," he said, with a shake of his head.

In the Yangtze River Delta town of Kunshan, those still working in some major plants, including a Foxconn facility that assembles Apple products, said they had worked less overtime than last year.

"This year was pretty bleak for Foxconn," said Du Xiaoying, manager of Hongda Labour Dispatch, one of a dozen employment agencies across the street from the Foxconn factory. "They did not offer much overtime."

The giant factory would not close for the holiday until January 25, Du and other nearby employers said.

"Around Chinese New Year we hire less, but more during July-August to prepare for the high season," said Foxconn Group spokesman Louis Woo, referring to the firm's hiring at its various production facilities.

"Speaking in terms of the whole of last year, we hired more than the previous year, and our revenue was also higher."

Interviews with half a dozen factory bosses and suppliers suggested that certain sectors, including construction materials and low-end, labour intensive industries such as toys and textiles, seem to be struggling more.

"Besides high-end electronics, the situation is bad. Toys are bad, clothing too in terms of orders," said Danny Lau, the honorary chairman of Hong Kong's Small and Medium Enterprises Association.

Ben Schwall, president of Systems Technology Group, which exports lighting fixtures and works with around 25 factories on the mainland, estimates since the start of January that 80 per cent of them have had problems with workers leaving early for Lunar New Year.

"They're saying: I can come back here any time, and I know you're going to re-hire me," he said.

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