Perfect storm of trade war, higher costs threatens survival of China’s small export businesses
US tariffs combined with rising costs and taxes are putting tens of thousands of exporters, and the jobs they provide, at risk
The impact of the US trade tariffs, higher domestic costs for labour, energy and rents, as well as the risk of higher business taxes next year is threatening the survival of tens of thousands of small Chinese export-oriented businesses.
And Beijing, for whom social stability is a key policy goal, is waking up to the possibility that millions of jobs could be at risk if it does not act. In southern Guangdong province, the heart of China’s export manufacturing industry, small businesses account for about half of all employment.
A growing number of small Chinese firms are in the process of deciding whether to close up shop or move to another country with lower costs that is not part of the trade war.
Small businesses in Guangdong are already seeing a sharp drop in orders, even as costs are rising to unbearable levels.
Given the growing threat to its industrial base, the Guangdong provincial government announced on Monday a series of measures to bring down business costs, including reducing corporate taxes, social taxes and land costs. Last week, it also amended a set of rules regulating foreign investment, in which it emphasised supporting automotive and plane manufacturing by wholly foreign-owned companies.
James Zhang, 45, runs a company making and selling electrical cables to domestic and foreign clients in the southeast coastal economic hub of Shenzhen. He said orders had declined sharply since the trade war started in July and he expected a further 30 per cent decline next year.