Job cuts, factory closures, unpaid export shipments — stalling worldwide demand for products made-in-China is driving home a new economic reality for businesses that until recently were struggling to keep up with soaring exports.
By ELAINE KURTENBACH, AP Business Writer
China’s economy is still growing at an enviable rate: It expanded 9 percent in the quarter through September. But that was the slowest in 5 years and down from 11.9 percent last year. Forecasts for next year range as low as 7.5 percent.
“The Golden Years have shuddered to a dramatic halt and much tougher times are upon us,” Stephen Green, economist at Standard Chartered Bank in Shanghai says, pointing to slowing exports and investment.
The suddenness and severity of the chill from the global slowdown prompted leaders to announce late Sunday a $586 billion economic stimulus package aimed at boosting growth in China‘s own markets.
“This broad-based fiscal stimulus program will emerge as the government’s front line of defense against an excessive economic slowdown,” Jing Ulrich, J.P. Morgan & Co.’s chairwoman for China, said in a note to clients.
But it’s unclear whether the package will be enough to salvage exporters left high and dry by overseas customers who are either canceling or abandoning orders as they face what might be one of the bleakest Christmas shopping seasons in decades.
For apparel maker Yiwu Bangjie, the first sign of trouble came with the failure of a longtime American customer to pick up and pay for its latest shipment of seamless underwear, says Tao Jianwei, the company’s general manager.
“After the shipment arrived at the U.S. port, when we notified our customer to take delivery and finish paying, their reply was that they had no money to pay for the goods,” said Tao, whose company is based in eastern China’s Zhejiang province.
Yiwu Bangjie is one of the luckier casualties of the slowdown. Tao, who would not identify his U.S. customer, said he expects to get 90 percent of the $100,000 due back through export credit insurance.
“We’re lucky to have that insurance,” he said. “Everyone knows the global economy is headed for recession, so it’s best to be cautious.”
Others have suffered far more.
Thousands of factories have closed, especially those in labor-intensive industries such as toys and shoes. Official statistics on bankruptcies and factory closures are sketchy. However, the economic planning agency reports that 67,000 small- and medium-sized companies closed down in the first half of the year.