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 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 already begun closing weeks
before the Lunar New Year break in late January.
In some cases anemic orders from key markets such as the United
States and Europe were blamed.
Others were being forced to curtail production because of a labor
shortage, a symptom of shifting demographics, that has afflicted
manufacturers for several years and many say is getting worse.
"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
in Changping, southern China.
Factories in the sprawling Pearl River Delta, in southern Guangdong
province, and the eastern Yangtze River Delta industrial hinterland
near Shanghai — which churn out well over half of China's exports — were noticeably quieter this week than during previous visits by
Reuters.
In the south, many smaller plants had closed, with a stream of
migrant workers crowding train and bus stations as they headed home
to inland provinces in an annual exodus for up to six weeks of
unpaid leave, far longer than in previous years.
BALANCING ACT
With analysts expecting China 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 favor of higher domestic consumption.
In December, policymakers unveiled the boldest economic and social
reforms in nearly three decades to pursue that goal.
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 percent while shifting the economy away
from lower-end manufacturing.
Official export numbers showed mild growth in December.
But economists have long queried the numbers as skewed and
misleading, partly given the widespread overstating of export orders
as a means to bring more currency into China for speculation on the
appreciating yuan.
"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 percent but I believe much of
that was inflated."
China's export growth slowed to 4.3 percent in December from a year
earlier. Shipments to the United States and Europe slowed from
double digits in November to just 3.9 percent and 3 percent in
December respectively, official data showed.
COMPLAINING BOSSES
At the Heng Fa Plastic products factory in the Pearl River Delta
city of Dongguan, just a handful of workers were manning molding
machines making frames for flat screen televisions.
Owner Huang Peijiang said orders for the Christmas holiday season
had been down 30 percent compared with 2012.
"For every 100 factory owners here, I'd say 80 are struggling," he
said with a shake of his head. "To be honest, when I get together
with other bosses we complain so much that the leaves fall off the
trees."
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In the Yangtze River Delta town of Kunshan, those still working in
some major plants, including a Foxconn <2317.TW> facility that
assembles an array of Apple products <AAPL.O>, said they had worked
less overtime than last year.
"This year was pretty bleak for Foxconn," said Du Xiaoying,
Manager of Hongda Labor Dispatch Co Ltd, one of a dozen or so tiny
employment agencies across the street from the Foxconn factory.
"They did not offer much overtime."
The giant factory would not close for Lunar New Year holiday until
January 25, though, 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, not just in Kunshan.
"Speaking in terms of the whole of last year, we hired more than the
previous year, and our revenue was also higher."
Tentative signs of recovery in the United States and Europe have not
yet translated into a sustained upsurge in consumer demand and
confidence, meaning orders to Chinese factories may remain smaller
and patchier.
Interviews with half a dozen factory bosses and suppliers suggested
that certain sectors, including construction materials and low-end,
labor 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
whose members run thousands of China factories.
LABOR BOTTLENECK
One increasingly severe long-term challenge for Chinese
manufacturing has been its shifting labor market demographics as
more, better paid jobs inland mean fewer younger people migrating to
coastal industrial hubs in search of factory work.
In the Pearl and Yangtze River Deltas, some expect the labor market
to tighten even more after the Lunar New Year, representing a
potential bottleneck for factories with fresh orders but not enough
workers to cope.
"Orders aren't the biggest problem. The biggest difficulty is
workers," said He Songping, a maker of plastic Christmas trees in
Yiwu. "Wages have been rising by 20-30 percent a year, while the
number of workers is shrinking."
Ben Schwall, President of Systems Technology Group, which exports
lighting fixtures and works with around 25 factories in China,
estimates since the start of January 80 percent of them have had
problems with workers leaving early for Lunar New Year.
"They're saying: 'You know what? I can come back here any time, and
I know you're going to re-hire me," he said. "'And if you don't the
guy across the street's going to hire me, and that's if I even
choose to come back'."
(Additional reporting by Jane Lee and
Anita Li in Yiwu and Clare Jim in Taipei; editing by Alex
Richardson)
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