Behind the statistics, trouble looms in China’s export belt

carolynne wheeler

BEIJING— Globe and Mail Blog

Posted on Wednesday, August 24, 2011 11:33AM EDT

With growth still hovering around 9 per cent and a trade surplus last month at its highest point in more than two years, China appears to be well-positioned to weather the threat to its export industry from another economic slowdown abroad.

But tell that to factory owners in Dongguan, the third-largest city in China’s southern Guangdong province, and a major hub of manufacturing. Reports in two leading Chinese media outlets this week have chronicled closings and relocations of some of Dongguan’s most reliable industries, including shoe manufacturers, toy makers and textile factories.

“When I opened this factory in Dongguan in 1987, the orders were plentiful, the monthly wage for workers was only around 100 yuan, and it was easy to hire labour at the time. Exporting one pair of woman's shoes worth $4 could make profit of around $2,” Bei Youping, general manager of Beihui shoe factory, told Jin Rong Jie, a Chinese-language financial news website. “Nowadays we're scraping out a living, the exporting price for one pair of shoes is $20 or $30, but the average monthly wage in the factory is 2,800 yuan [about $440], the monthly wage for managers is 16,000 yuan, and the surging costs and appreciation of the yuan make it difficult to achieve even a 1 per cent profit.”

According to Caixin business magazine, Dongguang’s Bureau of Foreign Trade has recorded 265 companies with foreign investor backing closing in the first half of this year, slightly less than the number that closed in that period last year. Total export value, they say, is actually growing, up 19.5 per cent in the first quarter year-on-year.

The apparent demand for key commodities last month also fell, according to calculations issued by RBC economists, but only slightly; what isn’t clear, they said, is whether this is the start of a bigger decline.

“We actually feel confident about China’s continued economic growth, although there is more downside risk and uncertainty developing with the world market,” said Sun Junwei, China economist for HSBC, who acknowledged more factories in China’s traditional southern manufacturing zone are moving inland from the coast. “They are faced with pressures of higher costs and exchange rate appreciation, but still we are seeing the overall situation is stable,” she said. “We do think China’s exports are likely to slow down for the rest of the year, but if there is no global double-dip [recession] we will continue to see China’s exports growing.”

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