China Restarts Factories But Faces Job Cuts As Overseas Orders Slump

China’s status as the first country to get in and out of the coronavirus revolving door does not seem to have benefited its economy. With global markets battered by the pandemic, the Chinese economy was contracting even though the factories have reopened.

China’s manufacturing began rebounding late last month when the lockdown restrictions eased and workers began returning to the factories, a CBS report said. The purchasing managers' index issued by the Chinese statistics bureau and the official China Federation of Logistics & Purchasing rose to 52 from February's record low of 35.7. Anything above 50 showed activity increasing.

Pace of recovery linked to supply chain

Chinese authorities said state-dominated industries like steel were close to normal production, but private sector-dominated segments like the auto industry were operating below normal levels. The private sector thinks its pace of recovery would depend on how quickly the supply chains revive.

However, Chinese manufacturing is finding it difficult to expand in an integrated world as major economies were still battling the virus that has so far infected 2.06 million across the world and took nearly 137,100 lives.

In response to the battered global supply chains, export-reliant businesses have started to freeze hiring and lay off workers, according to Nikkei Asia Review. "I go to hiring events every day, but I’m struggling to find a job,” a report quoted Zhao Wenfeng, a former auto factory worker in Suzhou, a city near Shanghai, as saying. Zhao was laid off as the virus spread across China.

The situation was a marked reversal from last year when employers were prepared to offer a job to anybody willing to work. Now, they are choosy and looking for experienced workers amid the global uncertainty, with no end in sight.

Pressure on staff to accept pay cuts

Along with staff cuts, businesses were reportedly offering lower wages to the survivors. Yabao Pharmaceutical proposed up to 20% pay reduction to its workforce in March, according to the report. The Shanxi Province company said it would make up for the cut once its performance recovered while hinting employees who did not accept the offer could lose their jobs.

The overseas conditions were reflected in the marked fall in container traffic at China’s biggest ports for a second week in a row, a report in the South China Morning Post said. The drop was a result of a decrease in overseas orders that hit the nation’s exports, the report said, citing a note of from the shipping body China Ports and Harbours Association.

There was a 5% drop in the week starting April 6 in the number of freight containers that the eight major ports of Shanghai, Ningbo, Shenzhen, Guangzhou, Qingdao, Tianjin, Xiamen, and Dalian handled. The Chinese ports resumed some operations in late February. The container traffic fell 4.4% between March 30 and April 5 from the previous week.

The China Port And Harbor Association, warned the authorities of the risk to container volumes as early as the third week of last month when the country began lifting the lockdowns. The volume increased 6.2% in the third week in the eight major ports. Shenzhen and Guangzhou ports showed a 20% increase then. Half of China’s top 10 trading partners have announced restrictions to contain the outbreak, which could hit the container throughput for the second quarter of this year by up to 10%, the association said.