Global crisis hits over 1,300 south China firms, Export houses shut in India

by Sanjay Jha | November 10, 2008 at 11:55 pm

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The after effects of the economic meltdown are affecting China and India severely. Export oriented companies have been hit hardest in both countries. In southern China, factories that have relied on exporting to the United States and other rich nations have begun closing down, laying off thousands of workers.

China's third quarter economic growth had slowed to 9.0 percent, the first time since late 2005 that quarterly growth has slipped into single digits and the lowest growth figure since the second quarter of 2003.

India is not faring any better. The global economic downturn has started hitting Indian garment exporters.

More than 1,300 companies shut down, suspended operations or moved out of south China's Pearl River Delta in the first nine months of the year due to the global downturn, state press said on Tuesday.

The number is from the cities of Shenzhen and Dongguan only and the overall figure for all of Guangdong province, just north of Hong Kong, could be much larger, the China Daily said.

About 30% of overseas-invested firms in the delta region are losing money, the report said, citing Wu Jun, a senior official with the province's foreign trade department.

Half of them just manage to break even and only 20% post a profit, he said.

Exports from the province rose by 13.5% in the first nine months, down from 24.2 % in the same period last year, customs data showed.

With the major overseas markets facing a big meltdown, Indian garment industry owners and export houses are shutting shops. Several have already left business and doing something else to survive. US is the single largest destination for Indian exporters, accounting for almost 13 per cent of exports last year. Due to low export order many temporary employees have been retrenchment. If situation persists longer than there is prospect of further job cut.

Most of these export houses and garment manufacturers were severely affected when the dollar took a plunge in 2007. “Since the payments are made in US dollars and not Indian rupees, exporters had to bear the losses. If companies fail to fulfil the commitments made by them, they are blacklisted,” said Kapoor, adding that since countries such as China and Pakistan did not face such problems, they increased their share in the global trade.

Over 100 companies had then packed up their units in Gurgaon and shifted to other states like HP and Uttaranchal where electricity and land rates are cheaper. Also, industries in these states are exempted from excise duty for 10 years.

According to Kapoor, the orders have decreased by almost 35 per cent since the slowdown. “Be it spare parts exporters or electronic parts producers or those in garment export, the slowdown has taken its toll on everyone. Though companies abroad are bound by the contract, they can reject the consignment on the slightest of pretext, like poor quality or delay by even a day or two,” he said, adding that it was the responsibility of both the Haryana Government and the Centre to help the industry at a time like this.