Chinese exporters feel the pain

Bloomberg.com: Exclusive

Chinese exporters are the latest victims of the global recession as sales slow and buyers in the U.S., Europe and Japan drive prices lower. At the same time, employee wages and benefit costs are rising following demands from customers, including Wal- Mart Stores Inc., that they enforce new labor laws.

The crunch may close a fifth of Guangdong’s factories and leave 6 million migrants without work next year, according to the Institute of Contemporary Observation, a labor rights group in the province. That would further slow the world economy because Guangdong accounts for 12 percent of the nation’s gross domestic product and China is the biggest driver of international growth.

The World Bank last week slashed its forecast for China’s economic expansion next year to 7.5 percent, the lowest in almost two decades, citing reduced overseas demand. China has averaged 9.9 percent annual growth for the past 30 years.

Exports Fell

Two-thirds of China’s small toy exporters closed in the first nine months of 2008, according to government statistics. Exports in November fell for the first time in more than seven years, Fan Gang, an adviser to China’s central bank, said at a forum in Beijing today.

“The bankruptcy of small and medium-sized exporters is going to have a huge effect on China’s economy,” says Guan Anping, a former trade official who is now managing partner at the law firm Anjin & Partners in Beijing.

Some 95 percent of exporters with assets of less than 40 million yuan ($29 million) may fail in the next three years, Guan estimates. China’s 42 million businesses of that size provide three-quarters of China’s urban jobs and 60 percent of GDP, according to the government.

Growth in Guangdong slid to 10.4 percent in the first three quarters, 4.3 percentage points less than the same period last year. Signs of the squeeze are littered across Dongguan, which is dotted with factories sitting empty behind padlocked gates.

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