A new wave of factory closures threatened in China

Published on WSWS, by John Chan, July 26, 2011.

The closure of two major plants in Dongguan—one of the key manufacturing hubs in southern China—is a sign that the government’s credit tightening policy to curb rampant real estate speculation is unexpectedly threatening a new round of factory closures.

The shutdown of the South Korean-owned Dongguan Soyea Toys in mid-July, one of the oldest toy factories in Dongguan, was a shock for Beijing. Soyea had been operating since 1992 and was a supplier to major American retailers. It went bankrupt, however, as export orders fell amid rising costs for inputs. 

A major textile company, Dingjia, in the same city, closed in June, leaving 2,000 workers without a job. In both cases, the factory owners fled, leaving debts to suppliers and unpaid wages of millions of dollars.

Soyea left 470 workers with their wages for June and first half of July, unpaid. More than 200 workers gathered at the gates of the municipal government compound last Tuesday in protest. Workers demanded the authorities intervene to obtain their wages of around one million yuan ($US154,000).

Chinese economic commentators have compared the Soyea and Dingjia closures to those of the Hejun toy plants in Dongguan in 2008, which signalled the beginning of a wave of factory closures. In the midst of the 2008 global financial crisis, more than 20 million migrant workers lost their jobs, mainly in China’s export industries.

Chen Yaohua, director of Dongguan’s textile and garment industry association, told the official Xinhua news agency that 10 percent of textile companies in Dongguan were now under financial pressure. Hong Kong Small and Medium Enterprises Association chairman Lau Tat-pong pointed particularly to the 18.6 percent rise in the minimum wage in Guangdong in March … //

… Rising unemployment produced by any large-scale factory closures in China, on top of the intensifying exploitation of workers, will vastly exacerbate social tensions in China and inevitably unleash an explosion of working class discontent. (full text).

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