A Chinese business owner complained that he had to shut down his factory due to a lack of orders and strict Covid lockdowns, but the ultimate reason is that he sees no hope in the future.
According to Financial Times, manufacturers in southern China are struggling to survive due to a lack of orders. In October, orders in many factories decreased by 50% on the back of full inventories in the United States and Europe. Many Chinese factory managers have been forced to lay off workers, cut wages, and even close factories.
Jimmy is the manager of a factory in Guangdong Province. He told the Times that he had paid off the employees and sold his machines after closing his factory doors for the last time in October. Now he is chasing down the money he is still owed.
He explained: “The decline in orders and the constant lockdowns were all reasons why I wanted to close the factory.”
He added: “But most of all, it felt like there was no hope. There was no sign of a rebound.”
Christian Gassner is a business owner whose factories make furniture in Guangdong. He said that the last two months were supposed to be busy, but they were the worst so far.
He said: “Nobody dares to buy anything, nobody dares buy a sofa, nobody [in Europe] has money left.”
He added: “Everybody is crying about the same thing. Orders are dropping 30-50% in certain industries. Many people are closing their factories.”
Usually, October is a hectic period for Chinese factories, but the world’s waning appetite for Chinese products has led to a sharp decline in manufacturing activity this year.
This is another misfortune for Chinese authorities dealing with a series of setbacks, including a real estate crisis, repeated Covid lockdowns, and weak consumer sentiment.
It also deepens the already gloomy outlook for the world’s second-largest economy. China reported economic growth of just 3.9% in the third quarter, well below a 5.5% annual target.
Alan Scanlan is a Hong Kong business executive who works in sourcing out of southern China. He said that after buyers overstocked for 2022, the slowdown was the inevitable consequence of the end of the e-commerce boom.
For example, Nike said in September that its inventories in North America surged 65% at the end of the third quarter from a year earlier.
Last week, Chinese government data showed that the country’s exports fell 0.3% in October, representing a contraction for the first time since the early stages of the Covid-19 pandemic.
According to economists, China’s exports contracted due to the decline in orders and random lockdowns under the government’s zero-Covid policy.
In October, statistics data also showed that China’s manufacturing purchasing managers’ index slipped from 50.1 to 49.2.
Gary Ng, an economist at Natixis in Hong Kong, said it is quite problematic for China because its domestic demand is affected by lockdowns while external demand becomes weaker.
An official in Dongguan City, Guangdong Province, said that local governments had to pay for Covid tests, making it challenging to maintain subsidies to their manufacturers.
The official said: “What are we supposed to do? Let the factories and local economy go dead and waste all income from citizens on the endless PCR tests?”
The economic downturn has been taking a toll on the local job market.
A Guangdong worker named Chen revealed that orders at his company, which supplies global supermarkets, had dropped 40% since April compared with a year earlier. His income also fell from 80,000 yuan last year to 50,000 yuan (or $6,900) this year as his hours dried up.
According to Financial Times, U.S.-China tensions and rising wages in China have also accelerated the shift of manufacturers out of China.