China’s silent factory workers caught between virus fear and needs

Beijing, China - Janey Zhang, the owner of an umbrella factory in China’s east coast city of Shangyu, spends her days watching the news for coronavirus updates and fielding calls from cash-strapped employees asking when they can go back to work.

“I don’t know,” says Zhang, whose Zhejiang Xingbao Umbrella Co employs about 200 workers. “We await government instructions. If it’s just me, I can tighten my belt for a few months. But if the epidemic lasts a long time, China’s economy will slump. That will be horrible.”

Across China’s vast east-coast manufacturing heartland, the story is the same. Thousands of businesses are in limbo, waiting to hear from local authorities on when they can resume operations. Even when they get the allclear, it might take days for them to climb back to full staff, as many workers who traveled home for the Lunar New Year holidays are stuck there because of travel restrictions. Completed orders would pile up anyway, because the logistics companies that deliver them aren’t working either.

China’s efforts to contain the coronavirus are rippling far beyond Hubei province, the epicentre of the disease. At 4.6tn yuan (US$660bn) in 2019, Hubei’s economy is bigger than Poland’s or Sweden’s and accounts for 4.6 per cent of China’s national gross domestic product.

Disruptions there scale up to nationwide impact, which at peak last week saw provinces accounting for almost 69 per cent of China’s GDP closed for business, according to Bloomberg calculations.

And while Hubei is not itself an export powerhouse, the factories along China’s east coast are tightly embedded in global supply chains, so plant closures there could disrupt assembly lines in South Korea and India.

Bloomberg Economics estimates that if the outbreak is successfully contained, the impact on China’s economy will be severe but short-lived - with growth slowing to 4.5 per cent in the first quarter, followed by a recovery and then stabilisation in the second half.

Lost orders

“We are missing our peak sales season,” laments David Ni, the chief executive of Jiangsu Siborui Import and Export Co headquartered in the Yangtze port city of Nanjing, the company buys aluminium alloy wheels for cars from Chinese producers and exports them to retail outlets in the US.

None of its suppliers have gone back to work yet, and it’s unclear when they will, says Ni, who’s based in Los Angeles.

“There’s little factory owners can do except wait. On and off, the epidemic could delay production for at least two months. Most factories this year wouldn’t be able to make any money.”

For factories in China that make lower-end goods such as furniture and cheap phones, the coronavirus is the latest in a series of existential threats. Already operating on paper-thin margins because of rising labor and materials costs, these businesses sustained another blow from the tariffs the Trump administration levied on US$360bn worth of Chinese exports to the US.

For others, the coronavirus

outbreak is a more severe threat. “The impact of the epidemic is even worse than the trade war,” says Zhou Xinqi, owner of Cixi Jinshengda Bearing Co in Cixi city. The company gets 60 per cent of its 100mn yuan annual sales from abroad.

“The trade war just decreased our margin, but at least we were still making money,” said Zhou.

“Now we are not making money. We are losing more than a million yuan.”

About 90 per cent of the 300 employees at Cixi Jinshengda come from other provinces. Zhou has told them not to come back to the city until the government announces a restart date, and he doesn’t expect to resume production until February 25 at the earliest. Anyone who does return early would have to pay hotel fees to quarantine themselves, he says.

In a survey of 995 small- and medium-size companies by Tsinghua and Peking university professors, 85 per cent said they would be unable to sustain operations for more than three months under current conditions, and 30 per cent expect revenue to plunge by more than half this year because of the virus.

The epidemic could delay production for at least two months. Most factories this year wouldn’t be able to make any money