ZCZC
BCN-16
CHINA-ECONOMY-US-TRADE,FOCUS
Businesses struggle as cracks appear in China’s economy
BEIJING, Jan 27, 2019 (BSS/AFP) – Cracks are opening in China’s mighty
economy: investors are backing away from deals, factories are moving abroad
and companies are shedding jobs.
The world’s second-largest economy is losing steam, hitting its slowest
growth in almost three decades last year, and flagging further in recent
months.
While gross domestic product grew at 6.6 percent in 2018 — a rate that
would be the envy of most nations — China’s efforts to cut its debt mountain
have weighed on the economy.
Private businesses in particular face new hurdles as costs rise and
financing becomes harder to come by, while the trade war with the United
States has not helped.
Here is a look at some of the struggles faced by Chinese companies and
people:
– Game over for gamers –
Feeding China’s addiction to video games seemed an easy bet for Beijing
Yixin Technology, a tech startup behind the mobile game Farm Take Home.
The game allows players to harvest wheat, raise chickens and plant apple
trees — a bucolic refuge from the pressures of urban China.
But in real life, the tech firm has struggled to find investors.
“In December our company’s funding ran out, we had an investment lined up,
but the money never came through,” said chairman Cui Yi.
“This month I arranged another investor, then he backed out too. I think
we can’t hold out.”
His company is not alone.
Venture capital funding dried up at the end of last year. Total investment
in the fourth quarter fell 13 percent from a year earlier, according to data
from Preqin market research.
MORE/HR/1018
ZCZC
BCN-17
CHINA-ECONOMY-US-TRADE,FOCUS 2 BEIJING
Policymakers are partly to blame, pushing a war on debt and financial risk
that has cut the funding flowing into investment firms, industry insiders
say.
Another government diktat halted new video game approvals for months —
officially due to youth gaming addiction concerns — sending firms like
Beijing Yixin into a deep freeze.
– Trade war –
Other companies are facing the fallout from the trade war with the United
States.
More than a handful of exporters have sought to get around US tariffs by
building factories outside China, according to a review of public stock
filings.
Others are sending workers home early for Chinese New Year or cutting
overtime.
Last month China’s exports fell.
“It has hit our profits,” Harry Shih, manager of Runfine Bearings in
eastern Zhejiang province, said of the trade war.
Washington slapped 25 percent taxes on many types of ball bearings in
July. Shih said he had shared the cost increase with his customers, roughly
half of whom are from the US.
“Business is going down for most companies including factories. Like me
they have the same problems, profits are going down” as costs rise, said
Shih.
– Dearth for a salesman –
Slowing disposable income growth and tighter credit have hit consumer
spending, with car sales falling last year for the first time in more than 20
years.
“Volumes have fallen by half,” said Wang Jingjing, a fast-talking 23-year-
old salesman at a Ford dealership in Beijing, noting about one third of the
salespeople had been fired or left.
MORE/HR/1020
ZCZC
BCN-18
CHINA-ECONOMY-US-TRADE,FOCUS 3 LAST BEIJING
Wang’s own salary has roughly halved, he said, from around 10,000 yuan
($1,474) a month in 2017 down to less than 5,000 yuan ($737).
“I’ve definitely controlled my own spending, going out to eat less, buying
less, cutting down on these things,” he said, adding he believes things will
turn around this year with new car models coming out.
– Job crunch –
Official data shows unemployment at a stable rate, rising slightly to 4.9
percent last month.
But independent data paints a different picture.
In October-December advertised tech positions fell by 20 percent from a
year earlier, after declining 51 percent in the third quarter, according to
data from Zhaopin, China’s largest recruitment website and Renmin University.
China’s economy “faces downward pressure, and to some extent this pressure
will be transmitted to the job market,” said Meng Wei, a spokeswoman for the
National Development and Reform Commission, China’s state planner.
A lawyer who consults on labour disputes, Guo Xuehai of Beijing Zhonghai
Law Firm, said, “there are definitely more employees coming for help than
before,” but added this was usually the case at this time of the year.
At Beijing Yixin, Cui said he could only afford to pay his 30-odd
employees 70 percent of their salaries as money ran out in November. By
December he paid them nothing and this month he cut their insurance and
benefit plan, unofficially firing them.
“We worked 9 am to 9 pm plus Saturdays with no overtime pay and now no pay
at all,” said a 3D designer surnamed Li, who helped build Farm Take Home.
Employees looking for new jobs have found that companies are not hiring at
the moment.
“Hopefully it will be better after Chinese New Year,” Li said.
BSS/AFP/HR/1022