Signs of global slowdown affecting China

THE GLOBAL economic slowdown is starting to make an impact on China, the world's biggest industrial production centre.

Hundreds of workers rallied at government buildings in the southern factory town of Dongguan in recent days to demand unpaid wages after a toymaker closed with the cost of 7,000 jobs.

In a separate incident, hundreds of people in Beijing scuffled with police outside a government office yesterday, the latest victims of a pyramid-style get-rich-quick scheme involving tree plantations to stem desertification.

The incidents come as a large delegation of Irish companies travels to China to drum up trade to help prop up Ireland's ailing economy and are a sharp reminder that not even China, for so long a prop to global economic growth, is immune to recessionary pressures.

Christmas is eight weeks away, but most of southern China's toys were shipped months ago. Rising raw material and labour costs and slowing US demand have been hard on the region where so many of the world's playthings are manufactured.

According to the Xinhua news agency, 52.7 per cent of China's 3,631 companies making toys for export went out of business in the first seven months of the year.

Smart Union, which makes toys for the giant US toymaker Mattel, has gone out of business and Xinhua said the workers haven't been paid since August.

Xu Hongfei, deputy chief of local Zhangmutou government, said the factories closed because of the international financial crisis. "A serious problem occurred with the circulating capital as Smart Union's shares were pulled out of trading [on] Wednesday."

Output has also been hit by China's stronger currency, which makes their products more expensive. Also, improved safety standards following the discovery of dangerous components last year has hit the bottom line at the companies.

The shutdowns will hit Dongguan hard. This city, adjacent to the boom town of Shenzhen, has thrived on export-oriented manufacturing - half of all toys made in the province are made here.