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China’s Jobless Rate to Rise as Canceled Orders Hurt Manufacturers

An employee works at a metal production plant in Huangshi in China's central Hubei province, April 1, 2020.

China’s hope for a quick rebound from COVID-19 is now put on hold as the global pandemic is taking another toll on its export-oriented manufacturers.

The cancellation of orders from buyers in the West has forced many of their assembly lines to remain shut unless some manage to shift to the making of coveted medical supplies such as surgical masks.

That, analysts say, may lead to more layoffs in the near future and fewer job opportunities for a record number of nearly 9 million university graduates entering the Chinese job markets this summer.

Only masks sell

Eric Lin is in the trade of commodities including souvenirs, gifts and toys in Yiwu, Zhejiang province – the world’s largest petty commodity wholesale market.

He said that many of the city’s export-oriented wholesalers have gone bankrupt after having no income in the past three months.

Foreign buyers are now placing orders for nothing but surgical masks.

“[Many businesses] have closed down,” he said. “It’s a disaster. Everyone asks: where can I find orders? These days, we’re mostly busy with sourcing masks.

“Many are talking about making masks. Some have set up one assembly line while others say they have five. It’s no joke that many have been in debt for three months.”

Making matters worse, a tight supply of raw mask materials has forced some of the city’s newly created assembly lines to sit idle for another month or so, according to Lin.

But the world still has to buy masks from China, which has a daily capacity of 200 million masks even if some of its output has been substandard, he added.

Expansion or contraction?

China’s latest manufacturing purchasing managers (PMI) index, at 52.0 in March from February’s 35.7, indicates an expansion for the world’s second-largest economy.

But observers say the reality runs contrary to the rebounded March indicator, which was from a very depressed base of surveyed responses in February, when China was on lockdown.

EHL International Logistics in Henan province is seeing a 50 percent drop in recent sales after imports of foreign goods have come to a halt and orders for Chinese goods have greatly declined except for masks, according to a company executive.

“Many small- and medium-sized exporters have shut down their assembly lines. [That accounts for], approximately, 20 percent to 30 percent [of our exporter clients],” said Sun Zongliang at EHL.

In a notice, Ganghui Knitting Co. in Guangdong province said it is “under a heavy financial difficulty” and has told all workers to move out of its dormitory by Tuesday after orders from major European and U.S. clients were canceled.

Workers will remain on leave for six months until further notice, the announcement read.

VOA’s repeated calls to the apparel knitting mill went unanswered.

Layoffs to come?

If global pandemic isn’t contained soon, China may next see massive layoffs and a surging unemployment rate, analysts say.

“The layoffs are not just in manufacturing, a lot of service sectors are finding it very difficult to keep their staff employees particularly in hospitality, catering, these industries. They have been very badly impacted as well,” said Geoffrey Crothall, spokesperson at China Labor Bulletin.

Crothall expects China’s official urban unemployment rate, which stood at 6.2 percent in February, to go up.

But he said the rate has failed to reflect the reality as it doesn’t include those who are under-employed, that is, a significant proportion of migrant workers who are on unpaid leave even though they are technically not laid off at the moment.

Grim prospects for fresh graduates

Amid a slowing economy and the health crisis, future prospects for a record number of nearly 9 million college job-seekers look grim, Crothall added.

Already, a survey conducted by Peking University’s Guanghua School of Management and career platform found the number of available jobs for fresh graduates in the first two months of this year has declined by 30 percent compared to the same period last year.

The Wall Street Journal Monday quoted Iris Pang, chief economist at ING Bank NV in Hong Kong, as saying China’s urban unemployment rate could rise to as high as 10 percent by the end of the year unless local governments introduce fiscal stimulus to bolster the economy.

Wang Zhangcheng, head of the Labor Economics Institute at the Zhongnan University of Economics and Law, isn’t as pessimistic.

He agreed that China’s unemployment is worse than it looks and warned of increasing pressure on job seekers as many jobs will be replaced by robots and automation.

But he said recruitment will likely recover after June as there remains a huge demand for labor.

“The current employment market is lying between two extremes. There’s a tight shortage for high-end talent and low-end labor. The mid-end segment is doing just fine,” he said.