Tag Archives: Manufacturing sector performance

Cost of China’s anti-virus fight rises with workers idle

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BEIJING —
Real estate agent Du Xuekun’s sales usually jump after the Lunar New Year holiday. But this year, Du has been at home for a month with no income after vast swathes of China’s economy were shut down in a sweeping effort to contain a virus outbreak.

Du, who lives in Jiaozhuo, near the central city of Zhengzhou, is one of millions of people who are bearing the soaring cost of the most extreme anti-disease measures ever imposed. Some businesses are reopening, but Beijing has told the public to stay home if possible.

“People will buy food and clothes online but for sure won’t buy an apartment without seeing it,” said Du.

Industries from auto sales to travel to retailing effectively shut down after curbs were imposed starting Jan. 23 with the suspension of most access to Wuhan, an industrial metropolis of 11 million people at the center of the outbreak.

Travel restrictions expanded to cities with more than 60 million people, while curbs on business spread nationwide. The Lunar New Year holiday was extended to keep factories and offices closed. Nationwide, thousands of restaurants and cinemas have been shut to prevent crowds from gathering.

The rising losses threaten to become a political liability for the ruling Communist Party. Local officials have been ordered to revive business activity but are moving cautiously.

By Sunday, some 1,665 deaths and 68,500 cases had been reported in the two months since the first infections in December.

Economists warn optimism that the disease might be under control is premature. Even if auto manufacturing and other business resumes as planned, activity won’t be back to normal until at least mid-March.

Losses are expected to be so large that forecasters have cut estimates for China’s economic growth.

Forecasters including Capital Economics say growth, already at multi-decade lows, might fall to 2% in the three months ending in March, down from the previous quarter’s official figure of 6%.

“If the economy really gets into a tailspin, the challenge for the party will be substantially increased,” said Steve Tsang, director of the China Institute at London’s School of Oriental and African Studies.

Locking down Wuhan might have hurt more than it helped by causing panic and was “very damaging to the economy,” said Tsang.

“They will have to rethink the lockdown approach,” he said.

The ruling party has responded to the mounting economic pressure by promising tax breaks and subsidies to companies hurt by the anti-disease measures.

The government needs to “maintain stable economic operation and social harmony,” President Xi Jinping said Wednesday.

On Friday, the Ministry of Finance announced that companies with monthly sales below 100,000 yuan ($14,000) will be exempt from value-added and other taxes. It said companies that cannot repay loans might be allowed to invoke “force majeure,” a last-resort legal measure that can waive obligations in disasters.

Travel and hospitality were hardest-hit after the government canceled group tours and told businesspeople to put off travel. Airlines canceled thousands of flights and hotels closed.

The manager of a travel agency in Shenyang, the biggest city in China’s northeast, said its monthly revenue, usually 100,000 yuan ($14,000), fell to zero. He said the agency still is paying rent and wages of 20,000 yuan ($2,800) a month.

“We don’t expect to see a recovery until May or June,” said the manager, who would give only his surname, Xu. “We do hope the government can give us a tax exemption or reduction, but we still have seen no subsidies.”

Property sales have fallen to almost zero over the past three weeks. The industry employs millions of people and drives demand for appliances, furniture and other consumer goods.

Du, the real estate salesman, said he usually closes two sales a month and earns 7,000-8,000 yuan ($1,000-$1,100). He needs to make a 3,000-yuan ($430) monthly loan payment whether he works or not.

“I have no base salary and live on commission,” said Du, 27. “Without sales, there will be no income.”

Chinese leaders already were struggling to shore up economic growth that slowed to 6.1% last year thanks to weak consumer demand and a tariff war with Washington. Some economists, citing industry surveys and other data, say real growth already was much weaker than that.

The anti-disease measures closed factories that supply the world with smartphones, furniture, shoes, toys and household appliances. That sent shockwaves through other developing countries that supply industrial components and iron ore, copper and other commodities.

South Korea and other economies that rely on China as an export market face potential job losses.

E-commerce companies are hiring extra workers to cope with a flood of demand as families stay home and buy groceries online. But streets in Beijing and other major cities are still empty and eerily quiet.

Auto sales plunged 20.2% in January from a year earlier, deepening a 2-year-old decline in the industry’s biggest global market. Sales fell 9.6% last year to 21.4 million, well below their 2017 peak of 24.7 million.

That is squeezing global automakers that look to China to drive revenue as they spend billions of dollars to develop electric vehicles to meet government sales targets.

“Enterprises are under huge pressure,” said a statement by an industry group, the China Association of Automobile Manufacturers.

China rebounded relatively quickly from its 2002-03 outbreak of SARS, or severe acute respiratory syndrome, but economic conditions now are less rosy.

SARS struck when China was entering a history-making boom powered by construction and exports. Growth peaked at a blistering 14.2% in 2007. By contrast, the latest virus hit in the midst of a slowdown.

In smartphones, Apple, Huawei and other brands face a potential hit because China is both their No. 1 market and global production base.

Shipments might fall as much as 50% this quarter compared with the final three months of 2019, according to research firm Canalys.

There is a “high risk” that component suppliers, with factory workers still stranded in their hometowns by travel bans, “will not be able to ramp up to normal capacity if the outbreak is prolonged,” Canalys said in a report.

Apple and other global vendors face a “serious impact” if the virus spreads and those suppliers close, the report said.

“The current situation will likely lead to some of the worst ever shipment numbers,” it said.

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Cost of China’s anti-virus fight rises with workers idle

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BEIJING —
Real estate agent Du Xuekun’s sales usually jump after the Lunar New Year holiday. But this year, Du has been at home for a month with no income after vast swathes of China’s economy were shut down in a sweeping effort to contain a virus outbreak.

Du, who lives in Jiaozhuo, near the central city of Zhengzhou, is one of millions of people who are bearing the soaring cost of the most extreme anti-disease measures ever imposed. Some businesses are reopening, but Beijing has told the public to stay home if possible.

“People will buy food and clothes online but for sure won’t buy an apartment without seeing it,” said Du.

Industries from auto sales to travel to retailing effectively shut down after curbs were imposed starting Jan. 23 with the suspension of most access to Wuhan, an industrial metropolis of 11 million people at the center of the outbreak.

Travel restrictions expanded to cities with more than 60 million people, while curbs on business spread nationwide. The Lunar New Year holiday was extended to keep factories and offices closed. Nationwide, thousands of restaurants and cinemas have been shut to prevent crowds from gathering.

The rising losses threaten to become a political liability for the ruling Communist Party. Local officials have been ordered to revive business activity but are moving cautiously.

By Sunday, some 1,665 deaths and 68,500 cases had been reported in the two months since the first infections in December.

Economists warn optimism that the disease might be under control is premature. Even if auto manufacturing and other business resumes as planned, activity won’t be back to normal until at least mid-March.

Losses are expected to be so large that forecasters have cut estimates for China’s economic growth.

Forecasters including Capital Economics say growth, already at multi-decade lows, might fall to 2% in the three months ending in March, down from the previous quarter’s official figure of 6%.

“If the economy really gets into a tailspin, the challenge for the party will be substantially increased,” said Steve Tsang, director of the China Institute at London’s School of Oriental and African Studies.

Locking down Wuhan might have hurt more than it helped by causing panic and was “very damaging to the economy,” said Tsang.

“They will have to rethink the lockdown approach,” he said.

The ruling party has responded to the mounting economic pressure by promising tax breaks and subsidies to companies hurt by the anti-disease measures.

The government needs to “maintain stable economic operation and social harmony,” President Xi Jinping said Wednesday.

On Friday, the Ministry of Finance announced that companies with monthly sales below 100,000 yuan ($14,000) will be exempt from value-added and other taxes. It said companies that cannot repay loans might be allowed to invoke “force majeure,” a last-resort legal measure that can waive obligations in disasters.

Travel and hospitality were hardest-hit after the government canceled group tours and told businesspeople to put off travel. Airlines canceled thousands of flights and hotels closed.

The manager of a travel agency in Shenyang, the biggest city in China’s northeast, said its monthly revenue, usually 100,000 yuan ($14,000), fell to zero. He said the agency still is paying rent and wages of 20,000 yuan ($2,800) a month.

“We don’t expect to see a recovery until May or June,” said the manager, who would give only his surname, Xu. “We do hope the government can give us a tax exemption or reduction, but we still have seen no subsidies.”

Property sales have fallen to almost zero over the past three weeks. The industry employs millions of people and drives demand for appliances, furniture and other consumer goods.

Du, the real estate salesman, said he usually closes two sales a month and earns 7,000-8,000 yuan ($1,000-$1,100). He needs to make a 3,000-yuan ($430) monthly loan payment whether he works or not.

“I have no base salary and live on commission,” said Du, 27. “Without sales, there will be no income.”

Chinese leaders already were struggling to shore up economic growth that slowed to 6.1% last year thanks to weak consumer demand and a tariff war with Washington. Some economists, citing industry surveys and other data, say real growth already was much weaker than that.

The anti-disease measures closed factories that supply the world with smartphones, furniture, shoes, toys and household appliances. That sent shockwaves through other developing countries that supply industrial components and iron ore, copper and other commodities.

South Korea and other economies that rely on China as an export market face potential job losses.

E-commerce companies are hiring extra workers to cope with a flood of demand as families stay home and buy groceries online. But streets in Beijing and other major cities are still empty and eerily quiet.

Auto sales plunged 20.2% in January from a year earlier, deepening a 2-year-old decline in the industry’s biggest global market. Sales fell 9.6% last year to 21.4 million, well below their 2017 peak of 24.7 million.

That is squeezing global automakers that look to China to drive revenue as they spend billions of dollars to develop electric vehicles to meet government sales targets.

“Enterprises are under huge pressure,” said a statement by an industry group, the China Association of Automobile Manufacturers.

China rebounded relatively quickly from its 2002-03 outbreak of SARS, or severe acute respiratory syndrome, but economic conditions now are less rosy.

SARS struck when China was entering a history-making boom powered by construction and exports. Growth peaked at a blistering 14.2% in 2007. By contrast, the latest virus hit in the midst of a slowdown.

In smartphones, Apple, Huawei and other brands face a potential hit because China is both their No. 1 market and global production base.

Shipments might fall as much as 50% this quarter compared with the final three months of 2019, according to research firm Canalys.

There is a “high risk” that component suppliers, with factory workers still stranded in their hometowns by travel bans, “will not be able to ramp up to normal capacity if the outbreak is prolonged,” Canalys said in a report.

Apple and other global vendors face a “serious impact” if the virus spreads and those suppliers close, the report said.

“The current situation will likely lead to some of the worst ever shipment numbers,” it said.

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India’s financial system slows, stalling as soon as thriving manufacturing

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Anuj Kapoor took over his father’s booming auto components enterprise in 2012, hoping to raise the corporate from promoting to suppliers to promoting on to carmakers.

Seven years later, he is needed to lay off half his employees as drooping gross sales prompted his revenue to plummet by at the very least 80%.

Confidence within the Indian financial system is giving option to uncertainty as progress within the labor-intensive manufacturing sector has come to a close to standstill, braking to 0.6% within the final quarter from 12.1% in the identical interval a 12 months earlier.

The financial system grew at its slowest annual tempo in six years in April-June, 5%. Many economists imagine Prime Minister Narendra Modi’s signature financial insurance policies are at the very least partly guilty.

A shock demonetization in 2018 and the hasty rollout of a items and companies tax had been dire blows to manufacturing, particularly the auto trade. The fourth largest on this planet, it is a pillar of the Indian financial system, contributing 7.5% to the nation’s GDP.

The trade employs nearly 37 million individuals and is on its option to shedding as many as one million jobs within the months forward due to declining gross sales, in line with the Auto Element Producers Affiliation of India.

Automotive deliveries in August dropped 41% from a 12 months earlier, truck and bus gross sales fell 39% and bike gross sales, a key indicator of the well being of the financial system in rural India, sank 22%.

“It is a trickle-down influence of the slowdown,” mentioned the affiliation’s director common Vinnie Mehta.

No section of the trade has been spared. India’s greatest carmaker, Maruti, has laid off 3,000 non permanent staff and shut down two of its crops for 2 days.

The 15 employees in Kapoor’s plant in a Delhi suburb make clutch buttons utilized in heavy obligation vehicles and tractors.

The primary hit got here in November 2016, when Modi determined to drag 86% of money out of circulation to undermine black markets. On the time, practically all transactions in India had been carried out in money. Seven months later, Modi’s authorities launched a GST, items and companies tax, forcing small companies like Kapoor’s to shortly digitize their cost methods.

Mid-size and small companies, the spine of a lot of India’s financial system, are nonetheless affected by the mixed penalties of each reforms, economists say.

India’s unemployment fee was 3.4% when the GST was launched in July 2017. As of the tip of August, it was 8.4%, in line with the Centre for Monitoring the Indian Economic system, a Mumbai-based analysis agency.

“The auto parts market nonetheless features with none billing system and greater than 50% of our market continues to be cash-driven,” mentioned Kapoor. “How will we file tax returns when sellers do not give us any payments?”

The sudden demonetization was the “greatest coverage mistake of impartial India,” says Jayati Ghosh, an economist at Jawaharlal Nehru College in Delhi. It drastically diminished consumption — the bedrock of India’s financial system — “as a result of individuals had no money to pay.”

Provide chains, manufacturing and job markets had been all disrupted, Ghosh mentioned.

Measures of shopper confidence have weakened amid rising pessimism over jobs and the financial system usually.

“Demonetization pulled the rug underneath the ft of India’s money financial system and the casual sector was the worst hit. The much-hyped reform triggered the present financial slowdown,” mentioned Dr. Pronab Sen, India’s former chief financial adviser and the director of the India program on the London Faculty of Economics’ Worldwide Progress Heart.

As a substitute of bettering authorities funds, the GST and demonetization have undermined India’s monetary stability.

To counter that, in August the Reserve Financial institution of India transferred $24 billion to the cash-starved authorities to assist help stimulus measures, prompting criticism from opposition events that it compromised the central financial institution’s autonomy.

Finance Minister Nirmala Sitharaman lately introduced piecemeal coverage reforms to stimulate the financial system.

“We’re acutely aware that we have to reply,” she mentioned.

Even getting a transparent image of the general financial system is a problem for policymakers given the large dimension of India’s casual financial system of day laborers and small companies.

For employees with no assure of a paycheck or different protections, the slowdown can imply simply going hungry. Such troubles had been evident on a latest morning at a employee pickup space about 25 kilometers (15 miles) east of Delhi.

Mohammad Shamshad, a day laborer who moved his spouse and three kids from the northeastern area of Uttar Pradesh to the Delhi area a decade in the past, says he used to make practically $200 a month — sufficient to feed his household and pay for education.

Now, he spends extra time standing on a nook ready for jobs than he does working, and averages lower than half that quantity.

“There may be work for a day or two, after which nothing for the following 5 days,” he mentioned. “Some days we now have to sleep (on an) empty abdomen.”

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