China manufacturing hub hit by downturn

By Tom Mitchell in Dongguan
Dongguan, the south China city whose factories alone outpace those of Vietnam in exports, has recorded a 10 per cent decline in employment since the onset of the global economic downturn, its mayor said on Wednesday.
The city, about 90 kilometres north of Hong Kong, was hit by a 24 per cent year-on-year decline in exports over the first six months of 2009 as developed country consumers reined in spending. As a result, gross domestic product grew just 0.6 per cent in the first half, compared with the national figure of 7.1 per cent and a 30-year average in Dongguan of 18 per cent.
”Manufacturing is Dongguan’s pillar industry,” Li Yuquan said at a briefing. ”The global financial crisis has had a strong impact on Dongguan.”
Mr Li said registered employment has fallen to 5.7m, an implied loss of 630,000 jobs.

In January, a central government study estimated that 20m of the country’s approximately 130m migrant workers had lost their jobs and returned home for the annual Chinese new year holiday. The vast majority of Dongguan’s 10m residents are migrants from other areas of the country.
Despite the grim data, the mayor expressed confidence that Dongguan could still reach its official annual GDP growth target of 10 per cent.

”We are under great pressure to meet our GDP goal because Dongguan is an export-oriented economy,” Mr Li said. ”But we have every confidence we will achieve it.”
The Dongguan government, whose own revenues are also under pressure, has allocated Rmb1bn ($147m) in emergency financing for smaller entreprises, with another Rmb4bn earmarked to support technological upgrades, research and development and worker training.
According to Mr Li, some 1,200 companies have taken advantage of the funds.

He also said that the local government had helped entreprises secure an additional Rmb20bn in bank loans.
The crisis has primarily affected smaller factories, with 342 closing in the first six months of this year. Some 865 closed in 2008.

”I can assure you that these figures are accurate,” Mr Li said. ”The main impact of the financial crisis has not been factory closures but shrinking orders and manufacturing capacity.
Larger, more established factories appear to be benefiting from the pain at the bottom end of the manufacturing chain.

C K Choi, general manager of a large Nokia factory in Dongguan, said his facility was on track to better last year’s 5 per cent increase in export revenues.
Dongguan last year ranked behind only Shenzhen, Shanghai and Suzhou in exports among Chinese cities, with $65.54bn in shipment.