Posted by: Dark Defender | October 19, 2008

China begins feeling effects of the financial crisis updated

Chinese workers begin to feel the pinch of the financial crisis

Chinese workers begin to feel the pinch of the financial crisis

Factories in China are closing and people are losing their jobs according to this artice.

“This financial crisis in America is going to kill us. It’s already taking food out of our mouths,” the 42-year-old laborer said Friday as he stood outside the shuttered Smart Union Group (Holdings) Ltd. factory in the southern city of Dongguan.

….

Already, China’s toy industry is hurting. The official Xinhua News Agency reported this week that 3,631 toy exporters — 52.7 percent of the industry’s enterprises — went out of business in 2008. The causes: higher production costs, wage increases for workers and the rising value of the yuan, the report said.

Chan Cheung-yau, chairman of toy and games subcommittee under the Chinese Manufacturers’ Association of Hong Kong, agreed that the outlook was gloomy for toy makers. He predicted that thousands more factories would close in China next year.

“The tightening credit market has made it more difficult for manufacturers to raise funds,” he said. “It has created a huge cash flow problem.”

Workers at the Smart Union toy factory said that for several months the plant was less busy and paychecks were arriving late.

“The management said the problem was that our American customers weren’t paying for the goods they ordered so the company couldn’t pay us,” said worker Shao Xiaoping, who was still wearing his blue company shirt with a red patch above the pocket that said “Smart.”

This is an interesting story for a few  of reasons:

1) Many experts have been saying China was insulated from the financial crisis, obviously not so much.  This reminds me of how Europeans used to be crowing about how the US screwed up and then…well their own banks started to fail and their stock markets tanked along with ours.  The point is this crisis is worldwide and everyone is going to suffer for it.  People who have been popping champagne at the thought of the end of American financial power were idiots, both because its not going to happen and because even if it did it wouldn’t be desirable for them. 

2) I find it interesting that on the ground leve the Chinese are trying to blame this on America.  I think that has much to do with their fears that an economic slowdown will destabilize the political situation and endanger themselves.  That they had already warned of penalties for protesting confirms for me that the Chinese leadership is acting out of big stinky fear

A sign posted by the local government on the factory gates said workers could be detained for 10 to 15 days for stirring up unrest, unlawful gathering, protesting and ignoring orders from security officials.

Blaming mean ole American just makes good domestic politics for them, much like blaming those mean old wall streeters is a good way for American politicians to distract the public from their own role in creating the crisis.

3) As the article notes this could be deflationary to the US (really around the world, China exports to everyone).  This worries me a bit, but we have already poured hundreds of billions of stimulus into our economy, Pelosi wants more, and I cant imagine that whomever wins will not want some more to.  This could be bad, it makes me worry.  Im told by someone who’s opinion I respect (and will hopefully be posting about it here soon) that deflation is the big risk right now, if that’s the case I suppose this helps.

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