This month, the Chinese zero-COVID policy is forcing large numbers of private manufacturers to close in Guangdong province.
RFA cited Financial commentator Cai Shengkun on August 11 that Dongguan’s status as a manufacturing hub was predicted to fade over time.
According to Cai, Dongguan served as the production hub for goods marketed by giant global corporations in its heyday. Dongguan maintained high GDP growth for almost 20 years and accumulated enormous wealth during its prime. However, there are fewer high-end firms in Dongguan because of the relocation of several industries and the ongoing inflow of foreign capital.
Cai said that the Chinese government’s insistence on a zero-COVID policy, which allows for the immediate lockdown of individuals and entire cities and the requirement for universal testing and quarantine, has also dealt a severe blow to the factories.
He said, “currently, due to increasing transportation costs and the impact of the pandemic, machining enterprises’ profits decrease greatly. If the sea transportation costs are increasing, basically, these export goods will not have any export advantage.”
Announcing its closure this month-end, Dongguan Jieying Precision Hardware Products Co., Ltd. cited increased costs and logistical difficulties brought on by COVID.
On July 29, Huizhou Sound New Energy Technology Co., Ltd. announced a five-day leave for most departments due to COVID and insufficient orders.
Previously, Dongguan Koppo Electronics Co., Ltd., based in Guangdong’s manufacturing hub of Dongguan, announced the closure on July 18.
RFA cited financial analyst Guan Min who said that the government has failed to provide any policy incentives or financial help to private firms affected by the zero-COVID policy, which could be an intentional choice.
Due to rising operating costs, many Chinese foreign-invested firms have recently moved their operations to Vietnam, Cambodia, and other Southeast Asian countries.