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China's biggest export hub struggles to stay afloat amid uncertainties

Located 50 km from Shanghai, Kunshan used to boast up to 30 per cent higher wages than other provinces, but now the companies there are cutting back their production amid the slowing economy of China

Photo: Bloomberg

Photo: Bloomberg

BS Web Team New Delhi

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Amid a weakening global economic outlook and a rise in tensions with the United States of America (USA), China's manufacturing sector is finding it difficult to stay afloat. According to a Financial Times (FT) report, China's biggest export hub Kunshan is struggling to provide jobs and competitive wages to its workers.

Located 50 km from Shanghai, the county used to boast up to 30 per cent higher wages than other provinces, mainly due to the presence of critical component manufacturers there. But now the companies are cutting back their production amid the slowing economy of China, high inflation and weak global sentiments. Exports from China have declined for the last five months.

This impact has been exacerbated as China's economy is mainly led by exports. According to FT, policymakers are struggling to find another growth engine to offset a decline in foreign trade.

Some companies have reduced wages by up to 66 per cent and have scrapped the sign-on bonus. Moreover, many have also stopped taking more orders creating a labour oversupply. This has pulled the hiring down.

The companies have also tightened the age limit for unskilled workers. For example, Foxconn Kunshan has reduced the eligibility to apply for entry-level jobs to 40 years from 45 years earlier.

One of the main reasons for weakness in the labour market is the relocation of Taiwanese manufacturers to other countries to limit their exposure to the US-China tensions. The Joe Biden administration has asked its companies to restrict trade with China and restore its operations based on national security.

Kunshan has 1,529 export-focused manufacturers from Taiwan alone, employing nearly 1 million people there.

The report added that some clients have started shifting their orders to facilities in Vietnam and India.

In the near future, the picture is expected to remain bleak for job seekers and companies operating in the region.

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First Published: Mar 27 2023 | 10:59 AM IST

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