Pearl River Downturn

Anthony Townsend's picture

China's economic boom has often been compared to the West's industrialization, only running in fast-foward. IT looks as if the decline of Western industrial regions may be playing out in the China on the same accelerated time frame. BusinessWeek Asia is reporting on "China's Factory Blues" this week on how a perfect storm of recent developments - from the decline in the US housing market to soaring commodity prices and new labor regulations - is shuttering factories in the Peal River Delta at an alarming rate.

The forecasts are pretty alarming in a country grown addicted to vigorous growth. "Comprehensive statistics on shutdowns are hard to come by. But the Federation of Hong Kong Industries predicts that 10% of an estimated 60,000 to 70,000 Hong Kong-run factories in the Pearl River Delta will close this year. In the past 12 months, 150 factories making shoes or supplying shoemakers have closed in Dongguan, says the Asia Footwear Assn. More plants will disappear as demand slows: UBS (UBS) analyst Jonathan Anderson expects overall export growth of just 5% or less for China this year."

That would be a problem in any economy. But in a place like southern China, where you are already dealing with a huge population of young, socially isolated migrant workers (with, I suspect a huge male-female imbalance) the situation could become combustible much sooner than anyone suspects. Or, it will just mean a lot of suffering. Either way, it's going to be a new set of challenges for modern China.

Technorati Tags: China, globalization, land use, manufacturing

Anthony Townsend is a research director at the Institute for the Future (IFTF) in Palo Alto, California.

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