May 27, 2024

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Why the Chinese economy faces a perilous road to recovery

Why the Chinese economy faces a perilous road to recovery

Klaus Zinkel, head of the chamber’s South China branch, said many European manufacturers in China were forced to work with about half of their usual staff for two to three weeks, which affected production to some extent. As a precaution against lockdowns, many companies had stockpiled spare parts in warehouses before the Covid wave and relied on those warehouses to continue operating.

But to save costs, a few small suppliers of certain ingredients have suspended operations early for the Lunar New Year holiday, which begins on January 21. Zinkel said.

The damage done by Zero Covid to China’s previously unbeaten appeal as a manufacturing hub may be difficult to repair.

Lockdowns and border closures slowed or disrupted the delivery of goods and prevented many companies from sending buyers to factories. Some global retailers, seeing the danger in over-reliance on China, have instead turned to other countries for supplies. Wal-Mart, for example, Plan to ramp up Imports from India to $10 billion annually by 2027.

Even Chinese exporters are trying to diversify.

In Yangjiang, Velong Enterprises, a Chinese maker of knives, grill thermometers and other kitchen gadgets for Walmart, Ikea, Target, Carrefour and other retailers, is expanding operations in Cambodia, Vietnam and India. Co-founder and co-CEO Jacob Rothman said the company has reduced its workforce in Yangjiang from 1,700 to 1,200 through attrition and is examining potential factory locations from Mexico to Turkey.

Companies like Velong find some savings when they venture out. The company pays workers in Cambodia half as much as its workers in Yangjiang.

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