Three years ago, factories in this industrial park would stay open until 9 p.m. every night, and Mr. Chen’s Shanghai Shininger Electronics Co. was paying his workers just 1,500 yuan a month. Now many of the workers are gone by 5 p.m. and wages have doubled to 3,000 yuan a month for labourers cranking out machinery that prints invoices and receipts. The wages for his engineers have gone up 50 per cent to nearly 10,000 yuan a month.
Many of the factories here that helped the world out of recession are now gone. The low-skill garment factories were the first to go, and now other owners are either shuttering their operations completely or moving to the Chinese interior. As the economy in China has sagged, Mr. Chen’s customers are taking longer and longer to pay for orders, asking for 30-, 60- or even 90-day payment periods, which have hit his cash flow and made him increasingly reliant on loans. However, since the state-owned banks are refusing loans to small to medium-sized businesses like his own, Mr. Chen says, he has been forced to rely on private lenders with usurious interest rates as high as 60 per cent.
As he says this, Mr. Chen leans toward his factory, stretches his hands out, and then mimes the process of picking up a pile of cash and tossing it into the street.
“Now you have vacancies in every industrial park … If I move inland, the property there will just increase in price, too, and then what will I do?” asks Mr. Chen, standing in a crisp white shirt and khakis, holding up his hands with thoughtful resignation. “All I can do is increase efficiency. This year, I can squeeze out 20 per cent. But next year? The salaries must rise. I’m not sure I can survive.”
As Chinese manufacturing and exports have dipped, the country has also been hit by cripplingly high rates of inflation – 6.2 per cent for consumer prices in August. That ties the hands of government, which is reluctant to unleash more stimulus spending that could spur inflation even more.
“China may not have the same strength we used to, [in order]to help the global economy,” said a senior Chinese economic analyst in Shanghai, who spoke on the condition of anonymity because he often consults for the government. The analyst pointed to persistent inflation, decreasing manufacturing and exports, and weak domestic consumption as evidence of China’s inability to pitch in as the world confronts yet another global downturn. “China cannot do the same things that we did in 2008.”
China’s government has taken steps to boost domestic consumption as a way to even out its might as an exporter. But now many consumers are now feeling the pinch.
In Shanghai’s ritzy Xujiahui neighbourhood, 25-year-old Zhao Zheng Qi and her 26-year-old friend Xia Yan Jie, who are six-months pregnant and four-months pregnant respectively, were busy shopping in the maternity section of a trendy mall. Ms. Zhao, who confesses that she used to liberally spend her parents money, says she has had to adjust to the times and change her shopping habits.
“Before, if I liked it, I bought it,” she says bluntly. “Now I have to compare prices.”
Before the two of them stroll off, arm in arm, Ms. Xia, Ms. Zhao’s pregnant friend, chimes in: “Though our salaries have increased, it can never catch up with our expenses.”
In the same mall, James Zhu, a 30-year-old who works in the pharmaceutical industry, says he has taken advantage of a stronger currency, but frets over the fact that the real estate market around him in China is starting to decline, as global equities are falling. “There are no good investments that I can think of,” he says. “I’m worried about the future.”