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Chill winds blow into China's boom cities

Source:??December ?03, ?2011 | The Aust     Date:2011-12-07
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By MICHAEL SAINSBURY, ZHANG YUFEI

YIWU is a unique city. It produces more than 50 per cent of the world's Christmas decorations. It's one of the iconic trading towns of China's original manufacturing hub: its southeast provinces of Guangdong, Fujian, Zhejiang -- where Yiwu is situated -- and the Yangzi delta north of Zhejiang, around Shanghai.

This Christmas, however, for the second time in just four years, there is less cheer for the factory owners in Yiwu, who are at the very sharp end of the first contraction in manufacturing activity in China since February 2009. If Christmas of 2008 was tough, as the global economic crisis saw demand slump for China's mountain of exports, 2011 for many has been even tougher.

Since 2008, there has been a raft of government policies deigned to shift the centre of China's growth away from both low-value, labour-intensive industries and away from its coast to its vast inland. Now demand from the world's biggest consumer markets, Europe and the US, is taking another hit and the signs are that things will get worse before they improve.

"Most of the factories here in Yiwu have large proportion of our orders come from overseas, so we're being affected by the financial crisis in Europe and US,'' the manager of Qunle Christmas Crafts Company in Yiwu, Liu Yin, told The Weekend Australian.

"Most of the factories here have encountered difficulties in the past two or three years, when the country decided on a policy to reduce labour-intensive industries, but leave us to face the fate of die or survive on our own.

"Production costs have been rising in past three or four years, including wages and materials, as well as energy and transportation. Workers' salaries have been increasing by 30-40 per cent every year.

"For our factories, local labour can not meet the demand, many workers came from the (inland provinces of ) Sichuan, Guizhou and Hubei.

"Now the country decides to develop the western regions, giving them preferential policies and encouraging industries to move to those areas -- so many workers choose to stay at home, rather than migrate and work in the east coastal region.

"Though local payments may not be the same level as in the east, the advantage of staAir Max 90 Ultra 2.0 Essenti

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