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Factories Closing In Guandong

Thursday, November 6, 2008

This morning, I posted Global shipping slump stokes fears

The following passage caught my attention.


  • While there could still be an estimated 8-per-cent jump next year in China's gross domestic product, it would be a deceleration from the 12-per-cent GDP growth last year. "Factories in Guangdong province in the south, the world's shop floor with the greatest concentration of manufacturing output on earth, are closing down as costs are overwhelming skinny profit margins," HSBC said.

So I decided do some search on this issue.

Posted on Asia Wall Street Journal, Chinese Toy Firm Becomes Casualty of Global Crisis

  • BEIJING -- In one of the first casualties in China from the U.S. economic slowdown and the global financial crisis, Smart Union Group Holdings Ltd. said it filed for bankruptcy and moved to liquidate the company.

    The Hong Kong-listed company issued a statement Friday that the Hong Kong High Court has appointed provisional liquidators to wind up the toy and recreational products company and its subsidiaries. The company's statement didn't say what prompted its move for liquidation, but Chinese media agencies suggested the move stemmed from a slowdown in consumer consumption in the U.S. and Europe because of the global financial crisis.

    According to Chinese media reports, the company Friday shuttered the two factories it operated in Dongguan city in the southern Chinese province of Guandong, triggering an angry protest by some 6,500 workers over unpaid wages. Xinhua news agency said the workers haven't been paid since August.

    Xu Hongfei, deputy chief of Zhangmutou Township Government, said the factories closed because of the continuing international financial crisis.

    "A serious problem occurred with the circulating capital as Smart Union's shares were pulled out of trading Wednesday," said Mr. Xu, according to Xinhua. Mr. Xu said workers with the two factories hadn't been paid since August.

    The news agency said the government of a township in Dongguan city where the two factories are located has raised 23 million yuan ($3.4 million) and started to pay the workers' salaries in an effort to quiet their anger. It said factory bosses have gone into hiding, a factor that also helped fan worker anger.

    Earlier this week, citing a report by China's General Administration of Customs, Xinhua reported the yuan's appreciation, along with escalating production costs, drove half of China's toy exporters out of the market in the first seven months of this year.

    According to the Customs report, a total of 3,631 toy exporters or 53% of the industry's businesses shut down in 2008, leaving 3,507 toy exporters in business. They were mainly small-sized toy producers with an export value of less than $100,000 U.S., it said.

Posted on Australia's On Line Opinion, The Rudd strategy Part II: just how good is China's economy? , the following passage was mentioned..

  • Factory closures
    Guandong is the major centre for export manufacturers which employ about 10 million.

    In the first seven months of 2008,
    safety standards non-compliance closed over 50 per cent of China's toy exporting factories.

    New credits restrictions are severely impacting on the supply chain. Exporter's who once received payment ex-factory, are now giving 90 days credit and warehousing surplus stock.

    Closures range from global brands to component manufacturers: 18,000 of the 70,000 Hong Kong owned factories will close following deliveries for Christmas and Chinese New Year orders. Some will close earlier...

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