Three weeks after Xi Jinping, China’s top
leader, tried to reinvigorate China’s stalled economy by abruptly abandoning
his stringent pandemic restrictions, he struck an upbeat note in his annual New
Year’s Eve address. “China’s economy has strong resilience, great potential and
vitality,” he said.
اضافة اعلان
But that optimism is hard to find in
downtown Guangzhou, the commercial hub of southern China. Nearly three years of
“zero-COVID” measures have crushed businesses. Streets are lined with shuttered
stores and workshops. Walls are plastered not with “help wanted” signs, but with
notices from entrepreneurs putting their businesses up for sale. Roads and
alleys once packed with migrant workers are now mostly empty.
China’s reversal of its COVID restrictions
in early December was meant to help places like Guangzhou. But the chaotic
approach has contributed to a tsunami of infections that has swept across the
nation, overwhelming hospitals and funeral parlors. In many industries, truck
drivers and other workers have quickly fallen ill, temporarily stretching staff
and slowing operations.
Now, faced with an unpredictable,
uncontrolled epidemic and financial uncertainty, people and companies are
spending cautiously, suggesting that the road to recovery will be uneven and
painful.
Stagnant demandChina is also confronting broader challenges
beyond its borders. The global economy is slowing, dragged down by high
inflation, an energy crisis, and geopolitical turmoil. As American and European
shoppers tighten their budgets, China increasingly faces a double blow of
slumping demand both at home and abroad.
Now, faced with an unpredictable, uncontrolled epidemic and financial uncertainty, people and companies are spending cautiously, suggesting that the road to recovery will be uneven and painful.
Weak spending is further depressing the
already razor-thin or nonexistent profit margins of many of the small private
businesses that power China’s economy.
In Guangzhou, Tony Tang, the owner of a
fifth-floor workshop that makes women’s clothing, said his sales plunged by
two-thirds in the past year. Competition among small factories in China and
overseas is fierce, pushing down the wholesale price he can charge for a
woman’s jacket with no brand name from $14 to $11.30 apiece.
Tang’s workforce has shrunk from 30 to 10,
but there is no shortage of labor. When he needed a worker to help sew an order
of halter tops, he went out on a street corner with a handmade cardboard sign
and hired one within several minutes, for one-sixth less than he paid about a
year ago.
The problem, Tang said, is a lack of
orders. His workshop has “a lot of workers, but we don’t have work to do,” he
said.
China’s factory activity contracted further
in December as rapidly spreading infections grounded workers, snarled
deliveries, and dampened demand, according to a survey of manufacturers that
the government released on Saturday. For service industries like restaurants,
the same survey found, business was almost as bad as in early 2020, during the
nearly nationwide lockdown that followed the first COVID outbreak in the city
of Wuhan. Eateries and other businesses closed last month as customers stayed
home to avoid infection or because they were sick.
“The epidemic has had a great impact on the
production and demand of enterprises, the attendance of personnel, and
logistics and distribution,” the National Bureau of Statistics said in a
statement that accompanied its release of the survey data.
Manufacturing had already been in decline
in November, when many cities and regions in China imposed lockdowns on
residents in a futile bid to contain outbreaks. Car dealerships are crammed
with unsold cars. Stores have little need to order more for their shelves when
they are already full of unsold merchandise.
But even as many cities and provinces are
in the throes of deadly outbreaks that have silenced once-busy streets, in
other places, there are early signs that economic activity is resuming. In a
few cities in northern China like Beijing, which saw widespread outbreaks that
have since peaked, people have been going out again in recent days.
The lifting of quarantine rules has helped
drive sales of airline tickets ahead of the Lunar New Year holiday later this
month. The removal of onerous COVID restrictions like daily PCR testing on
people and imported goods has saved time and money for companies and workers.
However, the damage that “zero-COVID”
inflicted on China’s once-unbeatable attractiveness as a manufacturing hub
could be hard to repair.
Competition from other labor marketsLockdowns and closed borders slowed or
disrupted deliveries of goods and prevented many companies from sending buyers
to factories. Some global retailers, seeing risk in overreliance on China, have
turned instead to other countries for supplies. Walmart, for example, plans to
ramp up imports from India to $10 billion a year by 2027.
The damage that “zero-COVID” inflicted on China’s once-unbeatable attractiveness as a manufacturing hub could be hard to repair.
Even Chinese exporters are trying to
diversify.
In Yangjiang, Velong Enterprises, a Chinese
manufacturer of knives, grilling thermometers, and other kitchenware for
Walmart, Ikea, Target, Carrefour, and other retailers, is expanding its
operations in Cambodia, Vietnam, and India. It has shrunk its workforce in
Yangjiang from 1,700 to 1,200 through attrition and is considering potential
factory sites from Mexico to Turkey, said Jacob Rothman, a co-founder and
co-CEO.
Companies like Velong find some savings
when they venture out. The company pays workers in Cambodia half as much as its
workers in Yangjiang.
But China’s strengths in industrial prowess
and labor, even in the midst of a raging epidemic, are hard to beat.
One-fifth of Velong’s remaining factory
workers in China are now out sick. But the company has been able to avoid
missing deliveries by hiring temporary workers from among the large pool of
workers in Yangjiang with knife-making experience, said Iven Chen, the
company’s other co-founder and co-CEO.
Tightened purse stringsThe pressure on exporters has only
intensified in recent months. China’s exports fell in November compared with a
year earlier, led by a 25 percent plunge in exports to the US. Households in
the West had spent heavily on exercise equipment and other manufactured goods
from China during the first two years of the pandemic, but are now more
budget-conscious as prices rise.
The Communist Party has pledged to spur
domestic demand to revive growth. But convincing people to spend after three
years of stop-start activity and punishing lockdowns will be tough. Many
Chinese workers are now looking for ways to rebuild their savings, even as the
Lunar New Year holiday approaches, a time when families used to splurge.
“The overall wages are quite low, you can’t
make much money,” said Gong Shuguang, a garment worker in Guangzhou who plans
to stay in the city for the holiday instead of returning to his hometown in
Sichuan province for a family reunion. He lost two months’ wages during a COVID
lockdown in the autumn.
“I want to find more work to do,” he said
late last month. “I have worked here for seven or eight years and this year is
the worst.”
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