China has published its official Manufacturing Purchasing Managers’ Index (PMI) for July, showing that production and business activity continue to contract.
Meanwhile, many manufacturing companies in the Pearl River Delta, a major manufacturing base in China, have been suspending production, laying off workers, and closing down.
Data released by the Chinese regime’s National Bureau of Statistics on July 31 show that China’s manufacturing PMI was 49.3, down from 49.7 in June and below the median forecast of 49.7. A PMI below 50 indicates that the manufacturing sector is in contraction.
The new orders index fell to 49.4 in July from 50.2 in June, while the new export orders index fell to 47.1 in July from 47.7 in June.
The nonmanufacturing PMI, which measures activity in the construction and services sectors, fell to 50.1 in July from 50.5 in the previous month.
The data reflect a systemic decline in China’s manufacturing industry, U.S.-based independent economist Davy J. Wong told The Epoch Times on July 31.
“Furthermore, deeper indicators like new export orders have all declined, suggesting that businesses are cautious and pessimistic about the future,” Wong said, adding that the current situation isn’t a cyclical problem, “but rather a problem with China’s entire economic development model.”
After reaching a temporary trade agreement with the Chinese regime, the Trump administration lowered tariffs on imported Chinese goods from 150 percent to between 40 percent and 50 percent. However, amid China’s domestic political uncertainty and continued trade friction with the West, foreign trade orders have continued to decrease, which has put businesses in a dire situation.
An employee of Yee Fung Sports Technology, a long-established Hong Kong-invested enterprise in the town of Tangxia in Dongguan city in the Pearl River Delta, told The Epoch Times on July 30 that all workers, except a few to handle matters after shutdown, were laid off after the company issued an internal notice on July 14, announcing a complete shutdown of its factories.
“The machinery in the factory had long been moved out days ago, and the air conditioners had already been removed,” said the employee, who didn’t give his name for safety reasons.
Yee Fung Sports Technology, part of Yee Fung Group, which was founded in Hong Kong in 1977, is an international manufacturer of sports helmets and shoe soles. The shutdown of factories in Dongguan is because orders dropped to zero recently, according to an insider.
Since the beginning of July, several foreign-funded and privately owned enterprises in Dongguan have closed down, including major companies such as Canadian-owned Tianhong Technology, which announced its dissolution on July 1.
On July 22, Wuzhu Electronic Technology, a leading semiconductor company with annual revenue of 1.5 billion yuan ($207.9 million) and nearly 6,000 employees, filed for bankruptcy and liquidation, as have other firms.
One company’s financial director, with the surname Chen, who didn’t give her full name out of concern for her safety, told The Epoch Times that “even factories in Jiangsu and Zhejiang provinces are struggling now.”
“It’s not that they don’t want to operate, but they can’t continue. People are short of money, products are not selling, and overseas customers are no longer actively placing orders,” she said.
The wave of production suspension is not limited to Dongguan. According to official data, from January to May, in Guangzhou city, the provincial capital of Guangdong Province, 72,769 companies were deregistered, an average of 482 companies closing down every day.
The wave of factory closures in the major manufacturing base has exacerbated China’s unemployment crisis.
After the United States and China reached a temporary trade deal to reduce tariffs on Chinese goods in mid-May, factories in Dongguan and the Pearl River Delta continue to close, “indicating that the tariffs have caused a foundational blow to China’s exports and manufacturing,” Sun Kuo-hsiang, a professor of international affairs and business at Nanhua University in Taiwan, told The Epoch Times on July 31.
Wong said that the pause in the tariff war between the United States and China is “more of a technical respite amid high-level political wrangling than a substantive structural improvement.”
The current factory closures in Dongguan and the Pearl River Delta “are not due to a new round of foreign exchange shocks, but rather to the combined effects of China’s internal system being out of sync with the international structure and a decline in foreign orders,” Wong said.
