China’s factories are reopening, only to fire workers when the virus disconnects global trade

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BEIJING (Reuters) – Shi Xiamen, who has exported thousands of cases and blazers to South Korea, the Netherlands and the US, is more fortunate than many Chinese factory owners.

When his factory in the eastern city of Wenzhou reopened last month after an extended shutdown caused by the outbreak of the Corona virus, the local government sent a bus to the nearby province. Staff with cars volunteered to bring in colleagues.

Shi’s confidence was short-lived.

Over the past week, requests for cancellation of orders or his European and U.S. counterparts have been announced. They delay exports from customers.

At the start of the outbreak, China imposed severe travel restrictions and factory suspensions to prevent the spread of the virus, squeeze labor products and send exporters to fulfill orders.

Now, the reverse is happening – foreign orders are being eliminated as the epidemic destroys the economies of China’s trading partners.

“The unprecedented shutdown in Europe, the US and emerging markets will ensure a dramatic contraction in Chinese exports, probably in the range of 20-45% year-over-year.” Said Thomas Gatley, senior analyst at research firm Cavegal.

Shi said his textile supplier stopped operations in the hard-hit Italy on Sunday, meaning no new raw materials since May. Her fabric presence will last until the end of April.

Shi said he was slowing production and that if the business did not improve, all output could be stopped soon.

He told the 50-odd workers who had not yet returned from Hubei province, the center of the outbreak in China, to seek employment elsewhere.

“We know this year is bad. Next year will be better, but the question is how many industries will be able to make it next year.” Sh.

SLUMPING EXPORTS

Economists initially anticipated a V-shaped recovery for China’s economy, as seen after the SARS epidemic in 2003. But researchers have slashed their forecasts since the end of the Cultural Revolution in 1976.

China’s net exports accounted for 11% of economic growth last year.

Said Zhu Hongping, head of Hangzhou Hongli Foods, a supplier of pre-made foods to restaurants in Japan, South Korea, Australia and New Zealand.

Typically, at this time of year, orders can be extended to June and July, Zhu said, and he will have to stop production in three months.

Exporters are concerned about the continued shifting of restrictions imposed by countries to prevent the spread of the virus, even when they have orders.

“Even if we finish the product, we don’t know if the countries we send will be locked up,” said Yi-Cheng Chung, who helps manage the factory that produces cosmetics brushes and accessories in Shenzhen.

Tuesday, U.S. Goodwill Watch Case, a supplier of watch brand Fossil, has sacked its 600 workers for at least three months, state-owned Securities Times reported.

Placement

China’s manufacturing sector, which accounts for about 40% of GDP and over 20% of jobs, has already been hit by the US-China trade war.

Even greater layoffs are a concern for the ruling Communist Party, and its concern for social cohesion and economic stability, especially in a year where Beijing aims to double GDP and disposable income.

China’s urban unemployment rate reached 6.2% in February, a 1% increase from the end of 2019, and a record since the Bureau of Statistics began publishing data in early 2018.

Dan Wang, an analyst with the Economic Intelligence Unit (EIU), said the unemployment rate could rise by a further 5 percentage points this year, which coincides with urban unemployment at 22 million, over an estimated 5 million jobs in January.

Wang said a further 30 million -50% pay cuts could affect another 103 million workers.

A 23-year-old salesman at a glass factory in Yuevu, Zhejiang Province, said he was looking for a US. Customers canceled more than 500,000 orders on Saturday alone.

Some of the factory’s more than 1,000 workers have been suspended, others have more days off weekly, and the seller refused to be named.

“I think the company will start firing people soon,” he said.

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