JINTANG COUNTY, China — For more than two decades, Zhang Yunxiu’s family has relied on shoe factories half a country away for their livelihood, gradually climbing out of poverty with the rest of China.
This story first appeared in the March 17, 2009 issue of WWD. Subscribe Today.
Zhang, now 46, ventured to Dongguan to work in a shoe factory in the early Eighties as part of the country’s first wave of migrant workers to staff assembly lines that ignited an economic juggernaut. The work wasn’t tough, but being away from her young son and daughter was unnerving.
Zhang would wonder, “Were they eating? Did they have proper clothes? I couldn’t eat, I couldn’t sleep.”
The family separation eventually made Zhang give up work in Dongguan’s shoe factories. But when her children turned 17, they both headed hundreds of miles from the family farm in Sichuan province to China’s Pearl River Delta to work in shoe factories, where her son remains one of the fortunate that are still employed. Her daughter, Wu Wenjun, 21, now does marketing for a medical supplies firm. Though separation of family has been tough, Zhang’s children have earned enough money to build a two-story, tile-and-concrete farmhouse, one of many perks that never would have arrived without China’s manufacturing boom.
But that boom now appears to be over. Wu got out of the shoe business just in time, as estimates have it that nearly half of China’s shoe factories shut their doors in the past year as a result of higher prices and a sudden drop in demand. Similar scenarios have occurred in apparel and textile manufacturing.
As a result of the global economic slowdown, 20 percent of the migrant workers from this county in Sichuan province have lost their jobs. Nationwide, at least 20 million migrant workers have lost jobs and the problem is growing fast.
In Jintang County, the hometown of thousands who staffed China’s shoe assembly lines for decades, a mood of grim resignation has settled in as they wait and hope for government policies to kick-start new opportunities.
The government has outlined some specific policies. Foremost, it plans to spend $586 billion over two years in government and private investment to stimulate the economy, primarily through tax restructuring and infrastructure investments. Part will focus on shoring up manufacturing industries, though the government has yet to release many specifics. There will be retraining for migrants who have returned to farms, along with possible health care and unemployment insurance.
In early February, the State Council increased for the third time since August export tax rebates on textiles and apparel from 14 percent to 15 percent in an effort to boost exports. But industry groups have said much more is needed. Growth in China’s textile exports was down more than 10 percent in 2008 from a year earlier and companies continue to bleed on lost demand from the U.S. and Europe.
Factory managers have little information about what might happen next. Several said the export tax rebate increases have helped and other government policies including looser credit are easing the pain. Still, subsidies are a touchy subject with China’s World Trade Organization partners. Most factories continue looking for emerging markets in the Middle East, central Asia and elsewhere.
“These new markets can make up part of the loss from America and Europe, but not all,” said Zhong Minhua, marketing manager for a garment maker in Guangzhou. “We will also turn to domestic markets, but the competition will be stiff as many others do the same.”
Ji Feng, business manager of a textile firm in Zhejiang province, looks on the bright side. His company, a large fabric producer, is doing well and he expects business to continue. Smaller, less competitive firms are the ones dying, he said.
“China’s textile industry did not really collapse,” said Feng. “It’s still growing, although more slowly. There are companies closing down. At the same time, there are also new ones emerging and getting stronger. The big picture is positive.”
Few would agree. Though China’s gross domestic product is still expected to grow by 6 to 8 percent this year, that’s a far cry from the 13 percent growth of last year that propelled the country to be the world’s third-largest economic power. Behind that slowed growth are millions of newly unemployed workers. The central government has made it clear their continued economic prosperity is critical to social stability and replacing lost manufacturing jobs with other options.
It’s a tenuous situation, as the government grapples with trying to move forward amid global stagnation.
“For China, this is, of course, a disaster compared with the good development of the past 10 to 20 years,” said economist Liu Yuhui, head of the economic evaluation center at the Chinese Academy of Social Sciences. “We’ve never encountered a situation like this in 30 years of development.”