International Law

More Reports of Chinese Factories Shutting Their Doors

As we've noted in the past, sporadic reports of factory closings in China seem to be tied to a downturn in orders from Western nations, as summed up in this USA Today article.

More than half of all China's toy exporters ? 3,631 firms ? shut their doors the first half of the year, the official Xinhua news agency reported. "Many toy factories have gone bankrupt this year," says Luo Yunzhang, founder of toy exporter Guangzhou Sixiren Toy, which makes playground equipment for Ohio-based Little Tikes, among other products.

"We saw exports start to dip in May, when the government began restricting businessmen's visits ahead of the (August) Olympic Games. ? Now the global crisis is causing problems. When people are in difficulties, they spend less on things like toys," Luo says. Luo predicts that Sixiren's export revenue will drop by half this year, to $500,000.

China's textile industry is also enduring a deep slump. Textile exports have been tumbling since March. More than 10,000 small textile manufacturers went out of business the first half of this year alone, the government says. "The global crisis is seriously affecting the local textile industry," says Yu Xin of the China Chemical Fibers and Textile Consultancy in Hangzhou.

Other reports of factory closings may be found here and here [Many thanks to Sean Hocking in Hong Kong for these links.] I haven't even begun to search Chinese language websites for reports of factory closings.

The popular opinion noted at Asiabizblog several months ago -- that the growth slowdown began well before the global financial meltdown -- has been borne out by Chinese government statistics.

Those statistics, invariably unreliable for reasons we have discussed often before, posit a decrease in the rate of GDP growth in the most recent quarter, compared with the same quarter in 2007. Nevertheless, 9% growth, as claimed by China, remains extraordinary. But is it accurate? Is it even close? (Economists posit that 8% growth is required simply to maintain a satisfactory level of employment growth.) Is the Chinese economy still growing by leaps and bounds, or is it qualitatively as bad as the Washington Post reports, also relying upon government statistics?

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.

Perhaps we will know when we see more news reports of massive Chinese companies suddenly filing for bankruptcy, like this.

Full post as published by Asia Business Intelligence on October 27, 2008 (boomark / email).