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Pressure on Chinese factories mounts as U.S. demand dwindles

Workers work on an electronics production line at a factory in Longyan, Fujian, China, February 2, 2023.

China News Service | China News Service | Getty Images

BEIJING—Some factories in China are not going full speed ahead after the end of zero Covid.

All of the factories — about 20 — that US toymaker Basic Fun works with in China have instructed workers not to return immediately after the Lunar New Year holidays, said chief executive Jay Foreman. CEO said.

That’s because the inventory was flooded in the first half of last year and it didn’t sell. US consumer prices soar During the summer and fall, he said, Basic Fun products include Care Bears and Tonka Trucks.

The official Chinese New Year holiday ended on January 27th, but the travel period continues until February 15th. Usually, the festival is the only opportunity for migrant workers (more than 170 million of him in China) to visit their hometowns.

“Every factory I spoke with said they were going to have fewer workers this year than they did last year,” Foreman said. He expects US consumer demand to recover later this year.

According to Chinese customs data obtained through Wind Information, China’s exports to the United States in the categories of toys, games and sports account for approximately 6% of all exports to the country. Data showed that that category of toy exports to the United States declined slightly in 2022.

“Retailers, whatever the consumer discretion, they’ve been hit pretty hard. It’s really been a combination of high inventories and a big drop in export market demand,” said Northern said Johann Anel, partner at Asia Perspectives, a consulting firm that works with A European company with operations in East and Southeast Asia.

He said consumer electronics are in a similar situation.

“For other industries, the picture is much better. Some industries are struggling to keep up with subsequent orders and all they had to deliver last year,” he said. Told.

China abruptly ended its zero-coronavirus policy in December last year. However, much of 2022 has been marked by tighter restrictions on business activity, including a lockdown in Shanghai for about two months in the spring.

U.S. demand slows

Retail sales in the United States, China’s largest trading partner on a single country basis, have slowed in recent months. China’s exports to the US will grow little in 2022, and the US economy is expected to slow further in her 2023.

This is in addition to tariffs and bilateral tensions that have escalated over the past few years.

“We expect to continue growing, but the pressure is huge.

“From what I have heard about the market, 2023 is going to be very tough. U.S. demand is declining. The war between Russia and Ukraine is not over yet.”

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Orders for some US clients have disappeared.

Zhao said his company worked with a luxury New York bedding and textile brand that filed for bankruptcy last year. To survive in a “shrinking” market, the company is shifting to lower-priced products that are popular with younger consumers, he said.

In other words, Zhao needs to sell more products than before in order to increase revenue. He plans to hire 10 more workers locally for his 30-person factory in China in the next few months.

How China came to dominate the US in smartphone manufacturing

When questioned by CNBC in January, Chinese customs officials acknowledged that a slowdown in external demand was putting pressure on Chinese exports, noting the growing risk of a global recession.

Trade data shows that demand for Chinese products is growing in other markets such as Southeast Asia.

Employers have increased the proportion of part-time positions since the end of the Covid wave in China, and manufacturers are increasingly paying workers weekly instead of monthly, according to Qingtuanshe, a job search platform within the Alipay mobile app. It looks like

While there has been no clear change in wages since reopening, Qingtuanshe noted that the wage range for factory jobs has dropped sharply during the pandemic.

skill mismatch

For China’s domestic economy, declining foreign demand reveals a broader employment problem: a shortage of highly skilled factory workers.

“Finding workers and finding the right workers in general is becoming more and more difficult,” Anel said.

“Youth unemployment is high and there is a labor pool, but when you start researching in a particular city, it’s hard to find both qualified supervisors and skilled workers,” he said.

Manufacturing accounts for 18% of China’s workforce, with construction workers making up a further 11%, said Dan Wang, chief economist at Shanghai-based Hang Seng China. However, she added that it would be difficult to move to another industry, as the majority only had a middle school education at best.

She expects more than a million unemployed in rural areas, not included in official statistics on urban unemployment. She attributes it to lower exports and increased automation in China, but the real estate sector’s demand for construction workers is declining.

Sluggish consumption growth is also limiting how much new workers the service sector can absorb, just as it was before the pandemic, Wang said.

“The ultimate solution still seems to lie in government-sponsored training. As time goes on, more workers will need to be trained to actually make a living.”

https://www.cnbc.com/2023/02/09/pressure-on-chinas-factories-grows-as-us-demand-falls.html Pressure on Chinese factories mounts as U.S. demand dwindles

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