CCP Virus takes heavy toll on China’s trade and economy

This photo taken on March 25, 2020 shows an employee working on an air conditioner production line at a Midea factory in Wuhan in China's central Hubei province. (Photo by STR/AFP via Getty Images)
This photo taken on March 25, 2020 shows an employee working on an air conditioner production line at a Midea factory in Wuhan in China's central Hubei province. (Photo by STR/AFP via Getty Images)

News Analysis

China, the biggest producer of masks and personal protective equipment (PPE), has come under fire from several countries in recent weeks for faulty or damaged equipment. 

Last week, Finland, Britain, and Ireland joined Australia, the Netherlands, Spain, Turkey, Georgia, and the Czech Republic in voicing concerns over defective equipment or low-accuracy COVID-19 test kits. 

Read more: As Pandemic Crisis Grows, China Ships Shoddy Medical Supplies to Virus-Hit Countries

Since the start of the pandemic, the Chinese regime has been eager to project itself as humanitarian by sending medical supplies to virus-hit countries after having previously hoarded global medical supplies in the early stages of the outbreak. 

According to an April 5th statement by the Chinese Customs Administration, the country has around four billion masks, 37.5 million protective suits, and 2.8 million testing kits. 

However, it appears that the Chinese Communist regime has more on its agenda as it proceeds to profit from the pandemic. 

On April 9th, former Mexican ambassador to China, Jorge Guajardo tweeted, “Early during the outbreak, China bought the entire stock of PPE [personal protective equipment] in Mexico. Now selling it at 20 [times] what they paid.”

Amongst countries hit hardest by COVID-19, Italy was also in desperate need of medical supplies in mid-March. Despite having donated PPE to China previously as a humanitarian gesture, the Chinese government had reportedly forced Italy to buy back the protective gear it had originally donated to China earlier in the outbreak. 

US Sources Medical Supplies from Alternative Suppliers

On April 9th, a shipment of nearly half a million protective suits arrived in the US from Vietnam. According to VOA, a second shipment of 450,000 suits from Vietnam would follow.

President Trump tweeted, “This morning, 450,000 protective suits landed in Dallas Texas. This was made possible because of the partnership of two great American companies—DuPont and FedEx—and our friends in Vietnam. Thank you!”

Analysis from the Epoch Times suggests that the trade will bring an income of US $35 million to Vietnam which amounts to the wages of 30,000 labourers in China over two months. 

On April 7th, a shipment of 45 million items of PPE including N95 masks and medical gloves was reported to have arrived in Chicago from Malaysia.

It was announced on April 13th that South Korea will begin sending COVID-19 testing kits to the US. Foreign Minister Kang Kyung-Wha told France that the country will send 600,000 test kits.

With a growing number of countries that share concerns for China’s lack of PPE quality control, it is likely that countries may begin to look to suppliers in Thailand, Malaysia, Vietnam, Taiwan, India, Honduras and Mexico.

Japan and US Looks at Moving Firms out of China

To address supply chain shortages and minimise dependence on China for crucial equipment such as medical PPE amidst the COVID-19 pandemic, nations are looking at shifting production onshore. 

As part of its COVID-19 emergency relief package, Japan had budgeted $2.2 billion to encourage its manufacturing firms to leave China. 

A similar proposal was introduced by White House National Economic Council Director Larry Kudlow on April 10th. 

Experts suggest that the move of US companies out of China carries implications for the Chinese economy, and will likely accelerate the move of non-US companies. When businesses relocate, employees with the highest skill set will likely follow; China will see a rise in unemployment rates among Chinese workers previously employed by foreign companies.

Furthermore, foreign exchange reserves are likely to drop. 

Pandemic Likely to Accelerate US companies Moving out of China, Report Finds

A new report by Global manufacturing consulting firm Kearney, has found that the pandemic is likely to accelerate the process of US companies moving out of China, a trend that began during the U.S.-China trade war.

Kearneys annual Reshoring Index released on April 9 found that the US imported less from Asian low-cost countries in 2019—a “dramatic reversal” of a five-year trend. This drop came almost exclusively from a collapse in imports from China. The report noted this is likely a direct result of US tariffs on billions of Chinese goods amid the trade war.

While the supply chain developments in 2019 were influenced by the US-China trade war, the COVID-19 pandemic in 2020 is forecasted to be an even greater disruption. The firm predicted it to be one that would lead to companies going “much further in rethinking their sourcing strategies—indeed, their entire supply chains.”

“Specifically, we expect companies will be increas­ingly inclined to spread their risks, as opposed to putting all their eggs in the lowest cost basket,” the report said, which has long been in China.

“More fundamentally, we anticipate that the threat of future crises will compel companies to restructure their global supply chains with an eye toward increased resilience, as well as lower risks and costs, as resil­ience is the key to operating profitably in the face of ongoing disruptions,” the report said.

Unemployment at all-time-high in China as Production Halts

As reported by the Epoch Times, China’s official unemployment rate issued by the National Bureau of Statistics (NBS) jumped to an all-time-high of 6.2 percent in January and February combined, from 5.2 percent in December 2019—equating to roughly 5 million new people out of work.

Some home appliance manufacturers have announced that they laid off employees because of a lack of export and domestic demand due to the pandemic. 

Home appliances manufacturer, Hisense, have proposed to make 10,000 staff redundant by the end of May. 

Haier appliances have also been reported to be laying off staff. According to AVC statistics released on April 5th, the market has experienced a 45% drop in retail sales of white appliances during the first quarter of 2020. 

According to a recent article by the Epoch Times, a large number of other export-oriented Chinese factories have recently stopped production entirely, and asked staff to resign after they didn’t have enough orders to fill.

As some factories in China reopened in March, they realized they faced a larger problem—having no orders to fill. Many orders across China were canceled as COVID-19 spread to other countries.

Guangzhou Brightlywell Shoes Co., in Guangdong, notified its employees to return home, as its factory halted production on April 1.

“From today, all resigned employees can receive their salaries for February and March in cash. … Our company decided to close the factory for three months,” Dongguan Good Will Watch Case Co. in Guangdong suggested that its employees resign because of a lack of orders. The company didn’t say when employees would be paid if they don’t resign.

Wenzhou Titan Shoes Co. in Zhejiang Province stated on March 19: “Because customers canceled their orders, we stopped all recruitment from yesterday. All employees can take unpaid leave from April 1 to May 30. … We encourage all of you to find new jobs.”

A knitting company in Ningbo, Zhejiang, notified its employees that due to the epidemic, production will be suspended until Sept. 30.

US based China affairs commentator Tang Jingyuan said in an interview, “This is the inevitable result of the pandemic.,” and that the Chinese economy is relying on exports. 

“No orders in the near future means more factories will close in China, and many people will lose their jobs. When lots of unemployed people don’t have money to pay their mortgages or to buy goods, China will suffer a bad financial crisis,” said Jingyuan.

Related: Editorial: Giving the Right Name to the Virus Causing a Worldwide Pandemic

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