China factories brace for more pain as exports fall
With China’s exports falling sharply for a third straight month, factories in China’s southern manufacturing hub are bracing for more pain as tight credit and falling orders bite, though the cost burden could ease a little.
China on Wednesday announced that exports in January fell 17.5 percent from a year earlier, after a more gentle 2.8 percent dip in December, while imports plunged 43.1 percent — twice as much as the month before. [nPEK263772]
For factories on the ground in Guangdong’s Pearl River Delta — which makes a third of China’s exports, the slump shows little sign of abating, as western orders thin and millions of migrant workers return to fewer jobs after the Lunar New Year break.
Hong Kong’s Small and Medium Enterprise Association said five percent of an estimated 60,000 Hong Kong-owned factories in the delta were now “sitting on the danger line” and could fold.
“We expect a significant drop in orders,” said Danny Lau, the Association’s chairman. “It’s going to be very difficult, even those that have been running ok so far will struggling and … profit margins could thin from around 10 percent to 5-8 percent.”
Even among factories able to nail down orders, some were finding their cash flow choked by risk-averse banks on the ground.