Chinese exporters gear up for worst crisis

October 21, 2008

, China, October 21 – Richard Fan is preparing for what may be the worst crisis of his six-year manufacturing career as the world markets that made his business in eastern China thrive are drying up at an alarming rate.

Standing on the shop floor of Henwei Industrial, which produces everything from bottle openers to first aid kits, he explains how the global crisis has already taken its toll among colleagues here in Cixi East Industrial Zone.

"Some factories have stopped or at least closed temporarily, because they had no orders," said the casually dressed 38-year-old company owner, a product of the entrepreneurial spirit found in east China\’s Zhejiang province.

"It\’s not easy this year."

The Cixi zone, not too long ago a pristine agricultural area of rice fields and fish ponds, thrives on its proximity to Ningbo, a city of six million whose natural harbour makes it a convenient interface with overseas markets.

Anyone older than 20 will tell visitors how drastically trade has changed this area since they were children.

Now, with the United States and Europe potentially buying much less from China, many locals have started worrying how the global economic turmoill may hurt their trade-focused region.

China\’s trade surplus for the first nine months of the year fell 2.6 percent to 180.9 billion dollars.

It is a slowdown that is felt in areas such as Cixi and Ningbo, local exporters say, pointing to one clear indicator: The brownouts are gone.

Two years ago, many plants had to close down four days a week because there simply was not enough power as everyone rushed to fulfil orders. This year, there has not been a single interruption.

Meanwhile, news is circulating of harder times to come. Manufacturers have returned from the Canton Trade Fair in south China\’s Guangdong province with stories of thin interest among buyers.

"We can feel it," said Andy Zhang, local chief representative for MZ Resources, a company that sources products for American companies among the thousands of factories in the Ningbo region.

"The US customers are placing fewer orders than before. It\’s down by about 30 percent from a year ago. The enterprises have a difficult time."

As Ningbo seeks ways to cope with the trough, hoping it will not last too long, the rest of China is also crossing its fingers.

Wealth generated here has had a rippling effect benefiting the most remote parts of the giant nation.

"In a good month, I can make 2,000 yuan (295 dollars). It\’s at least twice what I could have expected at home," said Zhang Wenchou, a 35-year-old construction worker from southwest China\’s Sichuan province.

His home was flattened in the devastating May earthquake, but he plans to build a new house. "I\’ll have to borrow money from my family. But mainly I will spend money I have saved here in Ningbo."

This spirit of self-reliance reflects the mentality in Ningbo, a free-wheeling area where no one expects the government to come and help.

That is because the government rarely did. When economic reform kicked off in China 30 years ago, the Ningbo area was not among the areas favoured by the political elite in far-off Beijing.

Instead, local farmers took matters into their own hands, creating one of China\’s most remarkable export miracles.

"The government never put money in the province. It was self-helped reform. Most of the money came from the peasants," said Zhang from MZ Resources.

Fan from Henwei Industrial said he planned to cope with the receding promise of the overseas markets by focusing more on the domestic economy.

He sells 100 percent of his products overseas, but he expects to start selling 10 percent domestically as early as next year, rising to about half by 2013.

"Everybody has to change," he said with an optimistic smile. "I have friends who do domestic marketing, and they know the right way to do things."

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