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Slowdown hits Wenzhou firms

(China Daily/Agencies)
Updated: 2008-09-03 10:56

Zhejiang province was the country's biggest furniture exporter in the first five months, but many manufacturers are now shedding staff to survive. [China Daily]

The furniture factories outside the manufacturing hub are eerily quiet. They are victims of a housing crisis half a world away in the United States that is sapping demand for everything from beds to bookcases.

Wenzhou is the entrepreneurial heart of Zhejiang, a thriving eastern province that was the country's biggest exporter of furniture in the first five months of the year.

China sells about 40 percent of its furniture output overseas, with half its exports shipped to the United States, according to the China National Furniture Association.

"Business is poor this year, especially since May," said Liu Yongcheng, a senior executive at Zhejiang Adwin Furniture Co Ltd, which is running well below capacity.

When order books are full, the company can churn out $1 million worth of furniture a month.

The difficulties facing Liu and countless other exporters up and down China's coast have grabbed the attention of the leadership in Beijing.

Officials from President Hu Jintao down have carried out a series of high-profile inspection visits, including trips to Wenzhou, to see for themselves how the still-unfolding global credit crunch is hitting Chinese industry.

Seen from Wenzhou, a major producer of garments, shoes, lighters and even sex-toys, the picture isn't pretty.

Liu's company was the first to move into an industrial estate about 90 minutes outside Wenzhou set up in 2005 to specialize in furniture manufacturing.

Many firms in the cut-throat sector have since come and gone, but Liu said this year's burst of bankruptcies was unprecedented.

Apart from weakening US demand, companies are having to cope with tight credit and reduced tax rebates. Many are shedding staff to survive. Liu says he has reduced his own workforce by one fifth to around 400.

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