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China’s toy juggernaut goes off the rails

Posted by Author on December 20, 2008

Peter Goodspeed, The National Post, Canada,  December 19, 2008 –

Workers smash an office during a protest at Kaida toy factory in Dongguan, Guangdong province in November in a protest over lay-offs and pay. There were protests in three  provinces amid increasing factory closures and government concern about unrest. (REUTERS/Stringer )

Photo: Workers smash an office during a protest at Kaida toy factory in Dongguan, Guangdong province in November in a protest over lay-offs and pay. There were protests in three provinces amid increasing factory closures and government concern about unrest. (REUTERS/Stringer )

There’s trouble in Toyland this Christmas. China’s workshops have been hit by the growing worldwide recession and more than half of all its toy exporters – 3,631 companies – have been forced out of business.

As China celebrates the 30th anniversary of Deng Xiaoping’s initial economic reforms and its “opening up to the outside world,” the country’s leaders find themselves struggling with the worst deceleration of economic growth in a generation.

On Thursday, the ruling Communist Party threw itself a big party. At a triumphant ceremony at the Great Hall of the People in Beijing, President Hu Jintao invoked Mr. Deng and emphasized the party’s unwavering focus on economic development. “Only development makes sense,” said Mr. Hu, quoting Mr. Deng.

The boom, which over three decades transformed an isolated and impoverished communist backwater into one of the world’s greatest economic success stories, is suddenly threatening to go bust.

An adviser to China’s cabinet yesterday revealed that 670,000 small firms closed this year. And about 6.7 million jobs vanished, many in the export hub of Guangdong, pushing unemployment well above the official figure of 8.3 million.

Meanwhile, September’s international credit crisis and the most devastating global financial turmoil in a century have combined to slash growth by almost half.

Construction projects are being suspended; consumer confidence is declining; car sales have crashed; property prices have plummeted; China’s stock markets have lost nearly 67% of their value; and the country is bracing for a harsh winter of more factory closures and mass layoffs.

Yin Weimin, China’s Social Security Minister, has described the unemployment situation as “critical” and said the impact of the world economic crisis is still unfolding.

He warns the economic slump will be felt hardest in the first quarter of 2009.

“The global economic crisis is picking up speed and spreading from developed to developing countries and the effects are becoming more and more pronounced here,” Mr. Yin declared in a recent speech. “Our economy is facing a serious challenge.”

Already, the Federation of Hong Kong Industries has said up to a quarter of the nearly 70,000 Hong Kong-owned factories in southern China could close in a worst-case scenario.

Across the border in Guangdong province, a region that has been transformed in 30 years from marshland and low-lying rice paddies into the world’s largest light-industrial zone, officials are predicting 9,000 of the 45,000 factories in Guangzhou, Dongguan and Shenzhen will close in the next three months.

That could see 2.7 million workers lose their jobs as overseas demand for consumer goods and clothes fades.

The government of Chongqing in Sichuan says as many as 180,000 migrant workers employed in coastal special economic zones may soon return home to look for work.

The World Bank recently predicted China’s growth may slow to 7.5% next year, the lowest since 1990 and the aftermath of the 1989 Tiananmen Square Massacre. Yesterday, the Royal Bank of Scotland and IMF chief Dominique Strauss-Kahn were predicting China’s gross domestic product growth next year would be about five per cent.

Bank experts still predict China’s economy will grow by 9.4% this year, but that is down from nearly 12% in 2007.

Chinese economists insist their country’s economy needs to grow by at least 8% a year simply to provide jobs for the 24 million people who enter the workforce every year.

But while all the economic indicators predict gloom, China’s leaders fear chaos. Violent strikes and protests are soaring as the threat of rising joblessness raises the spectre of social instability.

Last month, hundreds of workers rioted at a toy factory in Dongguan, 80 kilometres north of Hong Kong, in a dispute over severance payments……. (more details from The National Post)

One Response to “China’s toy juggernaut goes off the rails”

  1. […] big boys in Washington did their thing. Are you happy with that? Those corporate executives that outsourced your job took care of business. Satisfied? Either most people are, or never make the connection between […]

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