The COVID-19 pandemic has caused a series of private businesses in southern China to decide to close before the end of August. A Hong Kong toy factory located in Dongguan District with over 30 years in the business also expects to close in the middle of the month. In addition, many private businesses announce closures and give employees time off due to insufficient orders.
After Koppo Electronic Company in Dongguan announced a production stoppage in the middle of last month, many businesses in Dongguan also announced production suspensions and closures. Some companies announced over half-a-year periodic breaks. According to RFA, on Aug. 9, not long after Kaishan Toy Company in Dongguan announced its closure, there was news that Jingli Plastic Electronics Company in Dongguan had laid off employees, and was preparing to close. The announcement of the Kaishan Toy Factory said that due to the pandemic orders dropped sharply, it was too diffficult to continue to pay salaries. Therefore, it officially announced it would close it doors on Aug. 19, lay off employees, and pay economic damages to laid-off employees in accordance with the labor laws.
In recent years, a large number of Chinese foreign-invested enterprises have turned to Vietnam, Cambodia, and other Southeast Asian countries to invest and set up factories due to increasing operating costs. The zero COVID policy contributed to a rapid increase in the decision to withdraw foreign capital from China, leading to a decrease in orders from private enterprises.
Cai Shenkun, a financial commentator, said in an interview with RFA on Aug. 11:
“Dongguan was once the base of the Chinese manufacturing industry, once the production base of the world’s largest brands in its heyday. Dongguan had continuously maintained a high GDP growth rate for 20 years, therefore, it amassed a huge fortune. But now, with the industrial chain transfer, foreign capital continuously flows out of China. At the moment, high-quality industries do not remain much in Dongguan.”
Shipping costs for export goods increase, machining enterprises face difficulties
Cai said: “Currently due to increasing transportation costs and the impact of the pandemic, machining enterprises’ profits decrease greatly. If the sea transportation costs are increasing, basically, these export goods will not have any export advantage.”
RFA said that Kaishan Toy Company was established in 1998 and was one of Hong Kong’s most prestigious toy manufacturers with over 2,000 employees during its heyday. Since 2021, the company’s orders have dropped sharply as a large number of toy orders have moved to Southeast Asia. Currently the company only has just over 100 employees.
In addition, Jieying Precision Hardware Products Company in Dongguan City decided to officially suspend production and close up its business on Aug. 31. The company’s announcement clearly states that, since the outbreak of the COVID-19 pandemic, the company has tried to maintain production activities and ensure the employees’ lives, but man proposes, God disposes. Since May, the company has had no orders. As a result, it is difficult for the company to operate, and impossible to maintain personnel.
On July 29, Wan Zhi Sheng New Energy Technology Company in Huizhou City issued a notice saying that due to the impact of the pandemic, the company’s orders fell sharply and it announced 5 days off for large departments.
Even on July 30, a company in Shanghai announced a holiday from July 30, 2022 to February 2023. The company explained that it is for employees to have a quiet spring festival break.
The government said to support small- and medium-sized enterprises but did not act
Financial officer, Guan Min told RFA that since the COVID-19 pandemic entered its third year, the government has not provided private businesses with preferential policies and financial support, which is also one of the reasons these businesses had to close down.
He said: “This is a good opportunity for state-owned enterprises to move forward and private enterprises to retreat. Private enterprises have such good technology and abundant equipment. These advantages of private enterprises could have become an opportunity to merge with state-owned enterprises.”
In addition, according to Aboluowang, Shandong Guangfu Group, a private enterprise iron and steel joint venture established in 1983, completely stopped production on July 19, and a restart has yet to be determined. Employees of a technology company in Anshan, Anhui, will have a holiday from July 14 this year to January 22, 2023. During the holiday, everyone will be entitled to the standard minimum wage.