Natalie Keshing, Editor-in-Chief, Nats.news
China’s Factories Reopen, Only to Fire Workers as Virus Shreds Global Trade
As China attempts to continue to fool the world, business is not as usual in most of its supply chain factories. China is telling the world especially in Wuhan, factories have jumped the behemoth hurdle of facing and recovering from COVID-19, now bringing most nations to their knees with hospitals overwhelmed with the sick and dying. ~ Natalie
IN BEIJING—Shi Xiaomin, who used to export suits and blazers by the thousands to South Korea, the Netherlands and the United States, thought he was luckier than many other Chinese factory owners.
When Shi’s factory in the eastern city of Wenzhou reopened last month after an extended shutdown due to the coronavirus outbreak, the local government sent a bus to a nearby province to ferry back more than 20 of his stranded workers. Staff with cars volunteered to fetch colleagues.
I can picture Shi’s optimism on his face while dusting off machines and blowing on others. Maybe doing a little dance thanking the heavens above. He would get to his orders on the computer later. His thoughts going back to the world before COVID-19. Maybe calling his wife to splurge a little and prepare their favorite dish for a late dinner. His wife sensing the exuberant joy in his voice, allowing herself to go back to what life used to be like before COVID-19. Playing with their youngest granddaughters delighted with their excitement for all that is true and good in their lives. At some time, in each of our lives, we will experience Shi’s optimism and hope and we will look forward to a day and a life without COVID-19. COVID-19 is threatening all of our lives as we hunker down in our isolated worlds but not worlds apart, praying and hoping to make it until a vaccine is available to combat the novel coronavirus.
Shi’s optimism was short-lived.
In the past week, requests to cancel orders or delay shipments from Shi’s European and U.S. clients have flooded in.
Early in the outbreak, China imposed tough travel restrictions and factory suspensions to curb the spread of the virus, squeezing labor supplies and sending exporters scrambling to fulfill orders.
When COVID-19 broke wide open unto a city of 11 million innocent people in Wuhan many were noticing and feeling the desperation of a city not running normal on a normal given day. All the truth and panic was kept hidden from the world. Dr Li Wenliang, an ophthalmologist had already sensed that something was more than wrong by mid December watching all these sick people rush to hospital emergency rooms to save their lives.
So now, the reverse is happening. Overseas orders are being scrapped as the pandemic ravages the economies of China’s trading partners.
Realistically when all this is over with and life returns back to normal, world leaders should run from China for their failure to save themselves and the world.
Thomas Gatley, senior analyst at research firm Gavekal Dragonomics said, “The unprecedented shutdown of normal economic activity across Europe, the U.S. and a growing number of emerging markets is certain to cause a dramatic contraction in Chinese exports, probably in the range of a 20-45 percent year-on-year drop in the second quarter.”
Shi said his fabric supplier in hard-hit Italy suspended operations on March 22, meaning no fresh raw materials in May. His stockpile of fabric will last until the end of April. But not even that will guarantee Shi’s retailers in another country won’t be in the same boat rowing in place.
Shi said he would slow production and might suspend all output soon if business does not improve.
He also told the 50-odd workers who have yet to return from Hubei Province, the epicenter of the outbreak in China, to find jobs elsewhere.
“We know this year is bad and next year would be better, but the question is how many factories can make it to next year?” Shi asked.
Economists had initially anticipated a V-shaped recovery for China’s economy, similar to that seen after the SARS epidemic in 2003. But analysts have since slashed their forecasts to levels not seen since the Cultural Revolution ended in 1976.
China’s net exports accounted for 11 percent of economic growth last year.
“The last overseas orders we received were for April,” said Zhu Hongping, chairman of Hangzhou Hongli Food, a supplier of precooked food to restaurants in Japan, South Korea, Australia and New Zealand.
Normally, at this time of the year, orders can stretch to June and July, Zhu said, adding he may have to suspend production in three months.
Even when they do have orders, exporters are worried about constantly changing restrictions countries have adopted to curb the spread of the virus.
“Even if we finish the products, we don’t know if the countries we are shipping to will be locked down,” said Yi-Cheng Sung, who helps manage a factory that produces makeup brushes and accessories in Shenzhen.
On Tuesday, state-owned Securities Times reported that Good Will Watch Case Manufacturing, a supplier to the U.S. watch brand Fossil, would put its more than 600 workers on leave for at least three months.
China’s manufacturing sector, accounting for about 40 percent of gross domestic product and over 20 percent of jobs, was already suffering from the U.S.-China trade war.
More big layoffs would be a concern for the ruling Communist Party and its focus on social cohesion and economic stability, particularly in a year when Beijing aims to double GDP and disposable incomes from a decade ago.
China’s urban jobless rate hit 6.2 percent in February, up one percentage point from the end of 2019, and a record since the statistics bureau started publishing the data in early 2018.
Dan Wang, an analyst with the Economist Intelligence Unit (EIU), said the jobless rate could go up by another 5 percentage points this year, which corresponds to an additional 22 million in urban unemployment, on top of an estimated 5 million jobs lost in January-February.
Another 103 million workers could be affected by salary cuts of 30 percent to 50 percent, Wang said.
A 23-year-old salesman at a mirror factory in Yiwu in Zhejiang province said U.S. clients canceled over $500,000 of orders on Saturday alone.
Some of the factory’s more than 1,000 workers have since been suspended while others are given more days off per week, the salesman said, declining to be named.
“I think the company will start to lay off people soon,” he said
Everyone is worried for themselves and their family’s lives. Everyone is worried about their lost jobs, lost wages, their livelihood, their ability to sustain and ride out this virus until a vaccine can be made available and make us stronger than the virus collectively.