Darn. And those spouting off about the decoupling theory all sounded so clever. Who ever could imagine that when the West goes into recession, it would impact China? It sounded so incredibly reasonable that rich buyers, full of money and credit could disappear and be replaced by workers averaging around $1000 per year in income. Gosh, it's just such a shock.
In the past year, chill winds have blown through the Pearl River Delta. Sixty-seven thousand small firms collapsed in the first half of 2008, many in these manufacturing heartlands, says the national economic planning body. Toy firms have been particularly badly hit, by safety scares and product recalls. Textile firms, with wafer-thin margins, are also reeling. Next came tighter credit for many foreign-owned firms, like Hong Kong's Smart Union. And then, in the past two months, a sharp drop in US and European consumer demand.
A local trade association predicts that by late January, Dongguan and its neighbours Shenzhen and Guangzhou will lose 9,000 of their 45,000 factories.
"Many factories are looking at completely empty order books," warned Stephen Green, head of China research at Standard Chartered, who believes the export sector may even shrink next year. Green believes China will see 7.9% growth in 2009 - well below the double digit figures of the past five years.
That may sound enviable to western countries facing recession, but with the working age population still growing, China needs to grow by at least 8% to maintain its employment rate. The fall-out will be concentrated in provinces such as Guangdong.
"The social impact of this is going to be huge. The problems are getting bigger and bigger," said Wooyeal Paik, researching Dongguan's industry and migrant workforce at the University of California at Los Angeles.
"Disgruntled workers left jobless will complain more ... You will see demonstrations and picketing. And probably there's a risk of violence against bosses - especially foreigners."
