Date
15 December 2017
Workers demonstrate after electronics firm Fuchang Group suddenly shut a factory in Shenzhen recently.
Workers demonstrate after electronics firm Fuchang Group suddenly shut a factory in Shenzhen recently.

Is the slowdown spreading to China’s tech sector?

China’s economic slowdown is having a big impact on the manufacturing sector.

Industries suffering from excess capacity and inventory have been hit particularly hard. Companies are now forced to streamline their operations as their very survival is at stake.

Meanwhile, rising wages and other costs are also posing a challenge to many factories.

Some are cutting back their headcounts, while others are shifting production lines to cheaper locations elsewhere in Asia.

Amid the struggles, some firms have even gone bankrupt.

Recently, electronics player Fuchang Group suddenly closed its factory in Shenzhen, leaving its 4,000 employees in panic.

A wave of bankruptcies is being witnessed across a wide range of industries including shoe making, textile, electronics and furniture manufacturing, according to a Hong Kong Commercial Daily report.

Citing unofficial surveys, the report said 4,000 companies folded or suspended their operations last year just in Dongguan, Guangdong’s manufacturing hub.

Even in the tech sector, which is supposed to be picking up the slack and become China’s new growth engine, is not immune from the trouble, at least to some extent.

Last week, Baidu was reported to be putting on hold its massive recruitment and expansion campaign. Earlier, Alibaba was said to have cut its 2016 new graduate recruitment target to 400 from 3,000.

While these are not necessarily signs that things are falling apart, it however suggests that things may get ugly before any strong recovery.

If the government wants to realize its goal of upgrading to high-tech and high-valued added industries, it will certainly take years and constant fine-tuning of the growth model.

– Contact us at [email protected]

RC

EJ Insight writer

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