Unemployed worker Wang Wenming was angry at his boss for shutting down a massive Chinese factory this week that made toys for Mattel Inc., Hasbro Inc. and other American companies.
By Associated Press Writer William Foreman
But the assembly line worker was also furious at the United States.
“This financial crisis in America is going to kill us. It’s already taking food out of our mouths,” the 42-year-old laborer said Friday as he stood outside the shuttered Smart Union Group (Holdings) Ltd. factory in the southern city of Dongguan.
The company, which has struggled as global growth has slowed in recent months, employed 7,000 people in mainland China and Hong Kong. It wasn’t immediately clear how many have lost their jobs.
Economic upheaval in the U.S. is already changing and shrinking China‘s vast manufacturing hub in the southern province of Guangdong, long regarded as the world’s factory floor. However, factory closures won’t just be a China problem — shoppers will feel the effect in malls and stores in the U.S. and Europe.
“When these companies go bust, the outcome is higher prices,” said Andy Xie, an independent economist in Shanghai. “Labor costs have gone up 70 to 100 percent in the last three or four years. But these guys have not been able to raise their prices because Toys “R” Us, Home Depot and Wal-Mart are saying no price increase. How is that possible?”
Construction workers passing high rise commercial buildings in Beijing. China’s economic growth has slowed to 9 percent in the third quarter as global financial woes started taking a toll on the country’s staggering development the government has said.(AFP/File/Teh Eng Koon)
For years, there were too many factories competing to win bids from foreign buyers demanding prices that were often unrealistically low. The winners were American and European consumers, who enjoyed rock-bottom prices.
But many factories were scrimping on materials and stiffing their suppliers just to survive, Xie said. The financial crisis will be the final culling factor that forces many wobbly factories to go belly up and end an unsustainable situation, he added.
Already, China’s toy industry is hurting. The official Xinhua News Agency reported this week that 3,631 toy exporters — 52.7 percent of the industry’s enterprises — went out of business in 2008. The causes: higher production costs, wage increases for workers and the rising value of the yuan, the report said.
Nor is Christmas likely to make much difference. Big toy giants generally put in their Christmas orders months in advance so toys can be shipped to them in time.
Even before the financial crisis, China’s exports were dropping because of the slowdown in America and Europe. For the first time in three years, the growth rate for Chinese exports in the first quarter of 2008 declined, according to customs figures.
Chan Cheung-yau, chairman of toy and games subcommittee under the Chinese Manufacturers’ Association of Hong Kong, agreed that the outlook was gloomy for toy makers. He predicted that thousands more factories would close in China next year.
“The tightening credit market has made it more difficult for manufacturers to raise funds,” he said. “It has created a huge cash flow problem.”