Chinese factories reopen but there is no longer any demand

US, WASHINGTON (ORDO NEWS) — Slowing spread of the coronavirus pandemic in China has allowed domestic businesses to reopen but they are now facing the problem of declining demand from their foreign customers, which could translate into millions of jobs cut.

In the eastern city of Wenzhou, Shi Xiaomin, owner of a factory that exported thousands of suits and blazers to South Korea, the Netherlands and the United States before the health crisis, believed he was relieved when his business reopened last month after a long shutdown linked to the December epidemic in central China.

But his joy was short-lived. Over the past week, requests to cancel orders or postpone delivery from European and American customers have poured in, with the virus now wreaking havoc in the rest of the world, which is affecting the economies of China’s trading partners.

“The unprecedented halt in economic activity in Europe, the United States and a growing number of emerging markets will certainly cause a severe contraction in Chinese exports, probably in the range of 20% to 45% annually in the second quarter, “said Thomas Gatley, an analyst at Gavekal Dragonomics.

Shi Xiaomin said that his fabric supplier in Italy, hard hit by the crisis, suspended his operations on Sunday, thus depriving him of raw materials, while his stock will only be able to hold until the end of April.

The businessman believes that he now has no choice but to slow down his production and that he could even suspend it if the situation does not improve.

He has already asked the fifty employees, still confined to Hubei province, the cradle of the epidemic, to find another job.

“We know this year is bad and next year will be better, but the question is how many factories can survive until next year?” He asked.

A vendor at a mirror factory in Yiwu, Zhejiang Province, said American customers had canceled orders for more than $ 500,000 just on Saturday.

“I think the company will start to lay off soon,” he added.

“MORE ORDERS BEYOND APRIL”

At the start of the new coronavirus epidemic, economists expected a recovery in the Chinese “V-shaped” economy along the lines of what had been observed for SARS in 2003. Since then, they have lowered their forecasts to new levels since the end of the Cultural Revolution in 1976.

“The last overseas orders we have received are for April,” said Zhu Hongping, president of Hangzhou Hongli Food, a supplier of pre-cooked foods, which exports to restaurants in Japan, South Korea, Australia. and in New Zealand.

Normally, at this time of year, the order book spans until June or July, he noted, adding that he may have to suspend production in three months.

Chinese exporters are also exposed to the constant evolution of restrictive measures in countries where the pandemic is raging.

Yi-Cheng Sung, manager of a factory that produces makeup brushes and accessories in Shenzhen, for example, fears that he will not be able to export if the borders are closed.

The urban unemployment rate in China reached 6.2% in February, up one percentage point from the end of 2019, which is a record since the statistics bureau started to publish data in 2018 in the matter.

Dan Wang, an analyst at the Economist Intelligence Unit (EIU), estimates that the unemployment rate could increase by another five percentage points this year, or 22 million more unemployed, while more than five million people have already lost their employment between January and February.

According to Dan Wang, some 103 million workers could also suffer a drop in wages from 30% to 50%.

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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.