China jobs: Suspended production, extended unpaid leave embody problems as private companies face pressure

Because production has stopped, employees who choose to continue working at Golden World Innovation Aluminum have been told they will only receive 80 percent of the minimum monthly salary of 1,900 yuan ($266) allowed under labor laws in Foshan, which is one One-third or less of their regular income until early April.

“We can't find the owner,” said a 50-year-old migrant worker surnamed Tong from neighboring Guangxi province, who has worked for the factory for nearly a decade but has not been paid since September.

Golden World Innovation Aluminum did not respond to requests for comment.

Since 2008, Chinese provinces and cities have established systems to monitor corporate workplace changes and issued quarterly public disclosures. However, there are no statistics available to estimate the overall extent of production disruptions or extended unpaid leave, other than from company statements or media reports.

A Foshan government labor market report released in early November said demand from the city's manufacturing sector rose in the third quarter compared to a year ago, but still lagged behind the services sector for two consecutive quarters.

“It suggested that significant pressure is being exerted on the manufacturing industry due to economic headwinds at home and abroad,” the local government said in the report.

The private sector has long been the backbone of China's economic growth and job creation, but has yet to fully recover, with its fixed investment falling 0.5 percent in the first 11 months of the year, as opposed to an increase of 6, 5 percent for the state sector.

The housing crisis seemed overwhelming this year. Fewer and fewer workers are needed. Migrant workers surnamed Tong

During the real estate sector's heyday, Tong said Golden World Innovation Aluminum recorded strong orders, with the domestic market sufficient to offset external shocks, including tariffs imposed by the United States since 2017.

Skilled workers in their 40s can still earn over 7,000 yuan a month if they work about 60 hours a week, he said.

But now the manufacturer, which has a production capacity of around 400 tons per month, is struggling to break even amid declining orders.

“When real estate was China's most profitable industry, aluminum goods were needed everywhere and exported around the world,” Tong said.

“However, the housing crisis seemed overwhelming this year. Fewer and fewer workers are needed.”

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The property market slump has worsened despite Beijing's loosening of the reins, posing a significant drag on the economy across many sectors.

In central Henan province, Yaxin Iron and Steel Group in Tangyin county also announced a halt to production from last month until after the Lunar New Year holiday in mid-February, according to an employee who asked not to be named due to the sensitivity of the issue.

Yaxin Iron and Steel Group did not respond to requests for comment after China Industrial Securities Futures, an industrial analysis firm, reported news of the suspension.

And Raymond Zheng, owner of a small pile-dwelling company that drills foundations for buildings in Guangdong, had already put most of his employees on unpaid leave since June.

“The financing chain is broken and many upstream and downstream companies are facing solvency problems,” said Zheng, who also warned that a lack of funds would affect the quality of construction projects.

But despite the widespread problems, China is still on track to solve its problems “around 5 percent” growth Target for this year, thanks to supportive policies and also a low comparison base. At the central economic work conference last week, which set key economic tasks for 2024, China's top leadership said Development was the biggest political priority, and pledged to make every effort to consolidate economic growth, including further measures to stabilize the employment situation, support the private sector and increase household incomes.

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Insufficient demand is one of the biggest risks hindering economic growth, and external markets have become increasingly complicated and uncertain, but favorable conditions still outweigh unfavorable development factors, the meeting said, urging confidence.

However, there are also challenges high youth unemployment, Weak business expectations, a decline in exports, a dismal recovery in the manufacturing sector and rising local government debt will test future growth prospects.

And Peng Peng, chief executive of the Guangdong Society of Reform, a Guangzhou-based think tank, said many small and medium-sized businesses may not survive this winter despite some signs of export recovery.

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The reasons for the high youth unemployment rate in China

The reasons for the high youth unemployment rate in China

“Authorities should pay attention to the severity of the economic situation,” he said. “There is an urgent need to strengthen supportive measures.”

The slowdown was also felt in other industries, including electronics, plastics and printing.

In August, Simatelex, an electronics manufacturer headquartered in Hong Kong, has closed its factory in Shenzhen After 38 years, hundreds of workers have been affected, according to a Securities Times report.

Plastics manufacturers Shenli and Forward and Good Printing have also closed their factories in Shenzhen, causing thousands of job losses, local media reported earlier this year.

Unless confidence can be revived, private entrepreneurs are likely to remain flat-footedGuangzhou Institute of Greater Bay Area

Promotion manager Liang Lu experienced the problem firsthand in early December when he tried to visit three shoe companies in Dongguan but found that they had all stopped production.

The closures also affect nearby businesses, restaurants and hotels that rely on workers for their income.

“It feels like many communities in the city have become quiet,” Liang said.

The problem, Paris-based investment bank Natixis said at the end of November, is that China has not yet found emerging industries strong enough to replace real estate as a pillar of the economy.

And the government should guard against the risk of further deterioration in investment conditions and financing difficulties for private companies in 2024, said a report from the Guangzhou Institute of Greater Bay Area.

How great is the employment pressure that China is facing?

“If confidence cannot be revived, private entrepreneurs are likely to continue to stagnate,” said the report by the think tank, led by prominent political economist and government adviser Zheng Yongnian.

Continued weakness in private investment would lead to a decline in demand, which could dampen hopes for a solid economic recovery, said the report published in late November.

Xu Qiyuan, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said in an article in October that urban unemployment rates are likely to underestimate current work pressures and that more gauges are needed to better reflect the real situation .

“China still has enough policy space to grow the economy and achieve high-quality growth,” Xu said.