Chindia Alert: You’ll be Living in their World Very Soon
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Photo taken on April 14, 2020 shows containers at the Lianyungang Port in Lianyungang City, east China’s Jiangsu Province. China’s foreign trade showed signs of stabilizing in March with export and import both beating bearish market expectations, official data showed Tuesday. (Photo by Geng Yuhe/Xinhua)
China’s famed Yiwu International Trade Market, a barometer for the health of the nation’s exports, has been hammered by the economic fallout from Covid-19
Export orders have dried up amid sweeping containment measures in the US and Europe and restrictions on foreigners entering China have shut out international buyers
The coronavirus pandemic has severely dented wholesale trade at the Yiwu International Trade Market in China. Photo: SCMP
The Yiwu International Trade Market has always been renowned as a window into the vitality of Chinese manufacturing, crammed with stalls showcasing everything from flashlights to machine parts.
But today, as the coronavirus pandemic rips through the global economy, it offers a strikingly different picture – the dismal effect Covid-19 is having on the nation’s exports.
The usually bustling wholesale market, home to some 70,000 vendors supplying 1,700 different types of manufactured goods, is a shadow of its former self.
Only a handful of foreign buyers traipse through aisles of the sprawling 4-million-square-metre (43 million square feet) complex, while store owners – with no customers to tend to – sit hunched over their phones or talking in small groups.
A foreign buyer visits a stall selling face masks. Photo: Ren Wei
“We try to convince ourselves that the deep slump will not last long,” said the owner of Wetell Razor, Tong Ciying, at her empty store. “We cannot let complacency creep in, although the coronavirus has sharply hampered exports of Chinese products.”
Chinese exports plunged by 17.2 per cent in January and February combined compared to the same period a year earlier, according to the General Administration of Customs. The figure was a sharp drop from 7.9 per cent growth in December.
After riding out a supply shock that shut down most of its factories, China is now facing a second wave demand shock, as overseas export orders vanish amid sweeping containment measures to contain the outbreak around the globe.
Nowhere is that clearer to see than in Yiwu. The city of 1.2 million, which lies in the prosperous coastal province of Zhejiang, was catapulted into the international limelight as a showroom for Chinese manufacturing when the country joined the World Trade Organisation in 2001.
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Before the pandemic, thousands of foreign buyers would flock to the mammoth trade market each day to source all manner of products before sending them home.
But the outbreak, which has claimed the lives of more than 113,000 people and infected more than 1.9 million around the world, is proving a major test for the market and the health of the trade dependent city.
Imports and exports via Yiwu last year were valued at 296.7 billion yuan (US$42.2 billion) – nearly double the city’s economic output.
Businesses, however, are facing a very different picture in 2020. Most traders at the market say they have lost at least half their business amid the pandemic, which was first detected in the central Chinese city of Wuhan last year.
Just take a look at the situation in Yiwu and you will understand the extent of the virus’ effect on China’s trade with foreign countries – Tianqing
“Yiwu is the barometer for China’s exports,” said Jiang Tianqing, the owner of Beauty Shine Industry, a manufacturer of hair brushes. “Just take a look at the situation in Yiwu and you will understand the extent of the virus’ effect on China’s trade with foreign countries.”
Jiang said his business was only just hanging on thanks to a handful of loyal customers placing orders via WeChat.
“I assume it will be a drawn-out battle against the coronavirus,” he said. “We are aware of the fact that developed economies like the US and Europe have been severely affected.”
The Yiwu market reopened on February 18 after a one-month long hiatus following the Lunar New Year holiday and the government’s order to halt commercial activities to contain the spread of the outbreak.
Jiang Tianqing, owner of hair brush company Beauty Shine Industry. Photo: Ren Wei
But facing the threat of a spike in imported cases, Beijing banned foreigners from entering the country in late March – shutting out potential overseas buyers.
Despite the lack of business, local authorities have urged stall owners to keep their spaces open to display Yiwu’s pro-business attitude, owners said.
“For those bosses who just set up their shops here, it would be a do-or-die moment now since their revenue over the next few months will probably be zero,” said Tong. “I am lucky that my old customers are still making orders for my razors.”
The impact of the coronavirus is just the latest challenge for local merchants, who normally pay 200,000 yuan (US$28,000) per year for a 10-square-metre (108 square feet) stall at the market.
Traders were hard hit by the trade war between China and the United States when the Trump administration imposed a 25 per cent tariff on US$200 billion of Chinese imports last year.
At the time, some Chinese companies agreed to slash their prices to help American buyers digest the additional costs.
“But it is different this time,” said Jiang. “Pricing does not matter. Both buyers and sellers are eager to seal deals, but we are not able to overcome the barriers [to demand caused by the virus].”
Ma Jun, a manager with a LED light bulb trading company, said the only export destination for her company’s products was war-torn Yemen because it was the only country with ports still open.
It is a public health crisis that ravages not just our businesses, but the whole world economy – Dong Xin
Dong Xin, an entrepreneur selling stationery products, said he could not ship the few orders he had because “ocean carriers have stopped operations”.
“It is a public health crisis that ravages not just our businesses, but the whole world economy,” he said. “The only thing can do is to pray for an early end to the pandemic.”
Most wholesale traders in the Yiwu market run manufacturing businesses based outside the city, so a sharp fall in sales has a ripple effect on their factories, potentially resulting in massive job cuts.
Workers pack containers at Yiwu Port, an inland port home to dozens of warehouses. Photo: Ren Wei
At Yiwu Port, an inland logistics hub full of warehouses where goods from the factories are unpacked and repacked for shipping abroad, container truck drivers joke about their job prospects.
“We used to commute between Shaoxing and here five times a week, and now it is down to twice a week,” said a driver surnamed Wang, describing the trip from his home to the shipping port, just over 100km away.
“At the end of the day, we may not be infected with the coronavirus, but our jobs will still be part of the cost of the fight against it.”
China is now making more than 100 million masks a day, up from 20 million before the coronavirus outbreak, and may start to export more to other countries
Mask shortages elsewhere once more raise the debate about an over-reliance on China, with critics pointing to a lack of US industrial policy
China was producing 116 million masks per day of February 29, including a mix of disposable and high-end masks like the American-designed N95 model worn by President Xi Jinping on his trip on Tuesday to Wuhan. Photo: Xinhua
The Liu family factory has been making diapers and baby products in the Chinese city of Quanzhou for over 10 years, but in February, for the first time, it started making face masks, as demand soared spectacularly due to the coronavirus outbreak.
The business – which employs 100 people in the Southeastern Fujian province – has added two production lines to make up to 200,000 masks a day.
And while the decision was primarily commercial, “encouragement” from the Chinese government – in the form of subsidies, lower taxes, interest-free loans, fast-track approvals for expansion and help alleviating labour shortages – made the decision an obvious one, said Mr Liu who preferred only to give his family name.
“The government is advocating an expansion in production,” Liu said. “With faster approvals, producers need to prioritise the government’s needs over exports.”
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The factory is one of thousands of refitted pop-ups around China making masks and other protective equipment for the first time, part of a massive industrial drive to respond to the spread of the coronavirus.
Before the outbreak, China already made about half the world’s supply of masks, at a rate of 20 million units a day. That rose to 116 million as of February 29, according to China’s state planning agency, a mix of disposable and high-end masks like the American-designed N95 model worn by President Xi Jinping on his trip on Tuesday to Wuhan, the epicentre of the outbreak.
This exponential jump is the result of a wartime-like shift in industrial policy, with Beijing directing its powerful state-owned enterprises to lead the nationwide mask-making effort, and the country’s sprawling manufacturing engine following their lead.
For me, this is the big advantage of China, the speed Thomas Schmitz
“For me, this is the big advantage of China, the speed,” said Thomas Schmitz, president of the China branch of Austrian engineering giant Andritz, which has seen a big uptick in demand for its wet wipe-making machines in recent weeks, also due to the virus. “When you need to run, people know how to run, and this is something which has been lost in other countries since their industrial heydays.”
Chinese oil and gas major Sinopec upped production of mask raw materials such as polypropylene and polyvinyl chloride in January. This week, it set up two production lines in Beijing to produce melt-blown non-woven fabric, intended to make four tonnes of the fabric each day, which can then be used to produce 1.2 million N95 respirators or six million surgical masks a day.
The maker of China’s new J-20 stealth fighter jet, Chengdu Aircraft Industry Group, repurposed part of its factory to design a mask production line, according to local media reports. The SichuanDaily said 258 of the company’s engineers spent three days fast-tracking development of an assembly line with more than 1,200 components.
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More than 2,500 companies in China have reportedly started making masks, among them 700 technology companies including iPhone assembler Foxconn and smartphone makers Xiaomi and Oppo, in an extraordinary mobilisation of resources.
The result resembles “the war effort” in the middle of the last century in the United States and western Europe, but arguably no other nation could undergo such a transformation so quickly today.
It is a reminder of what can happen in a centrally-planned economy with a strong manufacturing base, but also brings into sharp focus some of the geopolitical issues which have characterised China’s at-times difficult relationship with the rest of the world, particularly the European Union and US, over the past couple of years.
China’s dominance in manufacturing has become all the more evident as the rest of the world scrambles to shore up their own dwindling medical supplies, leading many to wonder why the world is so dependent on it for vital supplies.
The lesson for Washington is not that we need to emulate the Chinese economic model, but rather that we need to better steward the industrial base in key sectors Rush Doshi
The Italian government, which is dealing with the highest number of coronavirus cases and deaths after China, is to take shipment of 1,000 ventilators, 2 million masks, 100,000 respirators, 200,000 protective suits and 50,000 testing kits from China.
Italian foreign minister Luigi Di Maio said after a phone call with Chinese counterpart Wang Yi, they had agreed the export deal in the same week that European neighbours France and Germany banned masks from being exported because of low domestic supplies.
The Italy export deal showed that “China is emerging as a global public goods provider as the US proves unable and unwilling to lead,” said Rush Doshi, the director of the China Strategy Initiative at the Washington-based Brookings Institute think tank.
“China’s ability to produce what is needed to fight coronavirus is not simply a product of its economic model – it’s also a product of its industrial capacity,” Doshi said. “The US once had this capacity too, but it has lost important parts of it. The lesson for Washington is not that we need to emulate the Chinese economic model, but rather that we need to better steward the industrial base in key sectors.”
The frustration is felt acutely by Michael Einhorn, president of medical equipment distributor Dealmed-Park Surgical in New York, who has been trying to source stock from China for weeks, “but cannot get straight answers” from vendors.
Einhorn said he placed an order with a private seller in China’s virus-stricken city last week, but that the goods had not been shipped.
“Everyone is running out here, people are panicking in hospitals and we want to be able to help our most important customers,” Einhorn said. “We are dealing with hospitals that do not have products, how in the United States of America in 2020 did this happen?”
With the number of confirmed coronavirus cases in China falling daily, it is not inconceivable that the sort of export deal struck with Italian leaders becomes commonplace, although for now, it deal can be chalked up as a significant public relations coup for Beijing.
The World Medical Association is unable to specify how many masks are required to supply frontline medical staff in virus-hit areas, but said that “this crisis should be a wake up call for politicians and societies to make the necessary investment in emergency preparedness and to look into the vulnerability of our supply chains”.
Australian-listed manufacturer Eagle Health announced on Friday that it had installed production lines at its Xiamen factory in southern China to make 300 million masks a year and said it had already received orders from China and would be securing further larger orders internationally.
The group, which normally makes products including amino acids, protein supplements and lozenges in China, said it would prioritise meeting the large domestic demand, but was aware of an impending global shortage.
Eagle Health has already commenced production of its first order of 3.2 million medical masks for the Yiling Hospital Management Group in China, a process which will take 10 days. It has other smaller orders from Chinese government agencies and expects to receive more orders outside China.
The decision to make more masks came from increased demand. These are opportunities. The global demand for high quality masks will be significant Xu Gang
“The decision to make more masks came from increased demand. These are opportunities,” said chief executive Xu Gang. “The global demand for high quality masks will be significant. Imagine when the schools open. The situation will take some time to peak.”
Last week, the Australian Dental Association said supplies of masks at many practices were expected to run out within four weeks. The Australian government has since arranged a supply of 54 million masks for both the dental and medical industries.
At the same time, the US only has 1 per cent of the 3.5 billion masks it would need to counter a serious outbreak, Bloomberg reported.
While China has no quota on the volume of masks that had to be hived off for local consumption, the government has said domestic demand needs to be prioritised.
Businesses are free to export but overseas demand has yet to explode like it has in China, said Fujian factory owner Liu.
Wendy Min, sales director of Pluscare, a manufacturer based near the virus’ epicentre in Hubei province, said her company is making 200,000 masks per day, much of which are sold to the government, with exports still restricted by partial lockdown of workers and cargo transport.
“We previously exported to Europe, South America and other parts of Asia,” Min said. “But at the moment we can’t export. We are trying to discuss this with the government, but we cannot wait any more – we have to export soon.”
Min said that while she was receiving countless cold calls up until last week from people in China looking for masks, these have stopped, perhaps unsurprising given the abundance in supplies becoming available.
An influx of Chinese-made masks, though, is likely to be welcomed in other virus-stricken parts of the world.
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Miguel Luiz Gricheno, CEO of Brazilian mask manufacturer Destra, said that his company is making 30,000 masks a day, but cannot meet local demand due to a lack of supplies, including the non-woven fabric from which masks are made.
“In disposable masks, most Brazilian companies are paralysed due to the lack of raw materials,” Gricheno said. “With the arrival of the coronavirus in Brazil, the demand has increased a lot but the main raw material comes from abroad.”
However, a short-term supply fix will not answer underlying questions about how so many countries found themselves in such dire straits,meaning the geopolitical fallout of the coronavirus will be extensive.
Decades of weak industrial policy helped elect US President Donald Trump, who said he would bring manufacturing jobs back to America at China’s expense. While he has waged a bruising two-year trade war with China in response, the current situation shows just how difficult it will be to change the global manufacturing processes, which are so heavily controlled by China.
One of the great flaws of globalisation is that everyone wanted things cheaper, but did you compromise your health care infrastructure in the process? Stephen Roach
“In the guise of trying to improve efficiency and create value for price-sensitive consumers, we’ve created a global production network that is very difficult to unwind,” said Stephen Roach, a professor of economics at Yale University and a veteran China watcher. “One of the great flaws of globalisation is that everyone wanted things cheaper, but did you compromise your health care infrastructure in the process.
Reuters reported that Trump is considering invoking the emergency provisions of the Defence Production Act, which would allow the government to instruct companies to alter production to help address the domestic shortage of medical supplies like masks. If a company is producing 20 per cent N95 masks and 80 per cent standard masks, the White House could order them to rejig the ratio, an unnamed official said.
The New York Times reported on Wednesday that the White House is preparing an executive order that would allow the government to buy medical supplies from overseas in the hope that it will incentivise companies to make them within the US.
But these changes still do not give Trump the sort of sweeping powers enjoyed by Chinese counterpart Xi.
“When you have a pluralistic, democratic situation that Trump is overseeing, it becomes more unwieldy” to take the steps necessary to address a crisis situation, said Harry Broadman, chair of the emerging markets practise at the Berkeley Research Group and a senior US government official in the 1980s and 1990s.
“That is why I think Trump looks at Xi with envy, because he doesn’t have to deal with a disparity of views or democratic interests,” Broadman said. “I think Trump is at heart a bilateral guy, as you saw with the phase one [US-China] trade deal and the state-to-state purchases. That is why he likes dealing with [Russian President Vladimir] Putin and Xi, because each of them can move mountains. I think Trump is very envious of that ability.”
Image caption The pack of cards cost £1.50 from Tesco
A factory in China has denied it used forced labour after a six-year-old girl found a message from workers inside a Tesco charity Christmas card.
The card supplier, Zhejiang Yunguang Printing, told China’s Global Times it had “never done such a thing”.
Tesco halted production at the factory on Sunday over the message, allegedly written by prisoners claiming they were “forced to work against our will”.
The Chinese foreign ministry said the allegation was “a farce”.
Speaking to the nationalist newspaper Global Times on Monday, a spokesman for the card supplier said: “We only became aware of this when some foreign media contacted us. We have never done such a thing.
The message – first reported by the Sunday Times – was found by Florence Widdicombe, who was writing cards to her school friends. She found that one of them – featuring a kitten with a Santa hat – had already been written in.
In block capitals, it said: “We are foreign prisoners in Shanghai Qingpu prison China. Forced to work against our will. Please help us and notify human rights organisation.”
The message in the card asked whoever found the message to contact Peter Humphrey, a British journalist who was himself imprisoned there four years ago.
Chinese foreign ministry spokesman Geng Shuang told reporters on Monday the allegation was “a farce” created by Mr Humphrey.
“Shanghai’s Qingpu prison has no such foreign prisoners undergoing forced labour,” Mr Shuang said.
Zhejiang Yunguang Printing’s factory manager, Shu Yunjia, told the BBC it had not outsourced any of its work to the Qingpu prison.
Media caption Florence Widdicombe was writing the cards last Sunday when she discovered the message
Florence, from Tooting in south London, said she was writing her “sixth or eighth card” when she saw “somebody had already written in it”.
“It made me feel shocked,” she said, adding that when it was explained to her what the message meant she felt “sad”.
Tesco added that it would de-list Zhejiang Yunguang if it was found to have used prison labour.
A Tesco spokeswoman said: “We were shocked by these allegations and immediately halted production at the factory where these cards are produced and launched an investigation.”
The supermarket said it has a “comprehensive auditing system” to ensure suppliers are not exploiting forced labour.
The factory in question was checked only last month and no evidence of it breaking the ban on prison labour was found, it said.
Sales of charity Christmas cards at the company’s supermarkets raise £300,000 a year for the British Heart Foundation, Cancer Research UK and Diabetes UK.
Tesco has not received any other complaints from customers about messages inside Christmas cards.
‘Very bleak life’
The message in the card urged the recipient to contact Peter Humphrey, who was formerly imprisoned at Qingpu on what he described as “bogus charges that were never heard in court”.
After the Widdicombe family sent him a message via Linkedin, Mr Humphrey said he then contacted ex-prisoners who confirmed inmates had been forced to work.
Media caption Peter Humphrey: “I think I know who it was but I will never disclose the name”
Mr Humphrey told the BBC that the cell block of foreign prisoners has about 250 people in it, who are living a “very bleak daily life” with 12 prisoners per cell.
He added that when he was in there, manufacturing labour work was voluntary – to earn money to buy soap or toothpaste – but that work has now become compulsory.
Mr Humphrey told the BBC: “I spent two years in captivity in Shanghai between 2013 and 2015 and my final nine months of captivity was in this very prison in this very cell block where this message has come from.
“So this was written by some of my cellmates from that period who are still there serving sentences.
“I’m pretty sure this was written as a collective message. Obviously one single hand produced this capital letters’ handwriting and I think I know who it was, but I will never disclose that name.”
It is not the first time that prisoners in China have reportedly smuggled out messages in products they have been forced to make for Western markets.
In 2012, Julie Keith from Portland, Oregon, discovered an account of torture and persecution by a prisoner who said he was forced to manufacture the Halloween decorations she had purchased.
And in 2014, Karen Wisinska from Co Fermanagh in Northern Ireland, found a note on a pair of Primark trousers reading: “Our job inside the prison is to produce fashion clothes for export. We work 15 hours per day and the food we eat wouldn’t even be given to dogs or pigs.”
Under the UN’s guidance for human rights and prisons, prisoners “should not be subordinated merely to making a profit either for the prison authorities or for a private contractor”.
Photo taken on April 14, 2020 shows containers at the Lianyungang Port in Lianyungang City, east China’s Jiangsu Province. China’s foreign trade showed signs of stabilizing in March with export and import both beating bearish market expectations, official data showed Tuesday. (Photo by Geng Yuhe/Xinhua)
CHINDIA ALERT: You'll be living in their world, very soon 