Coronavirus pandemic

China's factories reopen to shuttered global trade

Country likely to see dramatic cut in exports as virus-hit economic partners scrap orders: Analysts

A worker at an air-conditioner production line at a Midea factory in Wuhan on Wednesday. Before the coronavirus outbreak, China's manufacturing sector was already suffering from the trade war with the US.
A worker at an air-conditioner production line at a Midea factory in Wuhan on Wednesday. Before the coronavirus outbreak, China's manufacturing sector was already suffering from the trade war with the US.PHOTO: AGENCE FRANCE-PRESSE

BEIJING • Mr Shi Xiaomin, who used to export suits and blazers by the thousands to South Korea, the Netherlands and the United States, was luckier than many other Chinese factory owners.

When his 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. Mr Shi's optimism was short-lived. In the past week, requests to cancel orders or delay shipments from his European and US clients have flooded in.

Early in the outbreak, China imposed tough travel restrictions and factory suspensions to curb the spread of the virus, squeezing labour supplies and sending exporters scrambling to fulfil orders.

Now, the reverse is happening - overseas orders are being scrapped as the pandemic hits the economies of China's trading partners.

"The unprecedented shutdown of normal economic activity across Europe, the US and a growing number of emerging markets is certain to cause a dramatic contraction in Chinese exports, probably in the range of a 20 to 45 per cent year-on-year drop in the second quarter," said Mr Thomas Gatley, senior analyst of research firm Gavekal Dragonomics.

Economists had initially anticipated a V-shaped recovery for China's economy, similar to that seen after the severe acute respiratory syndrome 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 per cent of economic growth last year. "The last overseas orders we received were for April," said Mr Zhu Hongping, chairman of Hangzhou Hongli Food, a supplier of pre-cooked 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, he said, adding he may have to suspend production in three months.

Even when they do have orders, exporters are worried about constantly changing restrictions that 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 Shenzhen worker Yi-Cheng Sung, who helps manage a factory that produces make-up brushes and accessories in the city.

On Tuesday, state-owned Securities Times reported that Good Will Watch Case Manufacturing, a supplier to the US 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 per cent of gross domestic product and over 20 per cent of jobs, was already suffering from the US-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 gross domestic product and disposable incomes from a decade ago.

China's urban jobless rate hit 6.2 per cent last month, up one percentage point from the end of last year, and a record since the statistics bureau started publishing the data in early 2018.

Economist Intelligence Unit analyst Dan Wang 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 five million jobs lost between January and February.


A version of this article appeared in the print edition of The Straits Times on March 27, 2020, with the headline 'China's factories reopen to shuttered global trade'. Subscribe