Slowing Economy Hangs Over Chinese New Year Holiday

As millions make the trek home in China to celebrate the Lunar New Year Holiday, news about layoffs at big companies, the slowing economy and the rising cost of goods has added a layer of uncertainty at a time that is typically marked by festivity.

In 2018, China’s economy grew at its slowest rate in 28 years and some employers are warning of “tough times” and talking about “surviving” at year-end banquets. On top of that, the U.S.-China trade dispute and tariffs has added to the uncertainty and downward pressure on the broader economy.

On the streets in Beijing, most people that VOA spoke with were still hopeful the situation would improve but nervous as well.

Li Xu, who runs an Internet music startup, said there’s not much one can do but find ways to adapt and create new opportunities.

“Everyone can see what’s happening. Online businesses rely on money and investors are very cautious now,” Li said. To adapt, he said his company is “cutting promotion costs, squeezing the cost of personnel and office rent.”

Tech anxiety

Another tech worker voiced similar concerns, calling the situation serious.

“The overall environment for online businesses is not good. In addition to competition, the industry is taking a downturn and many big Internet companies are making cutbacks,” he said.

The tech worker, surnamed Wang, who works for a small online advertising agency, said the company he works for has not seen any layoffs so far.

Others have not been as lucky. In recent weeks there has been a stream of reports about cutbacks and swift rebuttals as well.

Big companies from ride-hailing app Didi to Apple supplier Foxconn and e-commerce companies such as J.D. Com and Alibaba have reportedly been making adjustments.

In the third quarter of last year, the popular job-listing service, Zhaopin.com, reported that the number of ads for positions in IT and internet industries fell 51 percent year-on-year.

And it is not just Internet companies. Households are feeling the impact too.

More competition

Wang, a student said her parents run a printing publishing business and she’s seen first hand how the environment is becoming more competitive.

“My parents talk with me about a lot of things and I can see how difficult it is for them to do business and how hard they work,” she said. “This year is likely to be even more exhausting.”

A retiree named Guo, who was looking forward to getting together with family over the holiday, was hopeful the Year of the Pig would bring a better economy. Next Tuesday marks the beginning of the new year, according to the Lunar New Year calendar.

“You can feel that prices are gradually rising and are higher than before. Expenses are going up too,” she said, adding that prices for everything from vegetables to clothing were on the rise.

According to China’s official statistics, inflation is under control but the experience of most tells a different story. At the same time, however, the government is rolling out stimulus and other measures to keep the economy humming, including steps to boost consumption.

Just this week, China announced plans to cut taxes and boost purchases of 5G technology, home appliances, and cars. Last year, car sales shrank for the first time in decades. Details are still fuzzy, but the measures include reduced taxes for second-hand automobiles and subsidies for the purchase of new-energy friendly vehicles.

To help with the threat of looming layoffs, China’s leaders have taken steps to shore up jobs. Joblessness is something that deeply concerns the Communist party because of fears that large numbers of unemployed workers could create social unrest.

Government to the rescue

In December, the government announced a long list of measures to support struggling companies as the economy slowed and the impact of the trade war started to hit.

The measures, which went into effect in January, include benefits for enterprises for not laying off employees and support for some eight million graduates expected to join the workforce this year. According to the plan, firms that have fewer layoffs will be given tax refunds. The government will also provide internship subsidies for companies that help unemployed high-school and college graduates, as well as easier access to start-up financing.

The trade war has forced some companies to relocate overseas. In big cities like Beijing, however, production has moved out to surrounding areas such as Hebei province, but that hasn’t lowered costs. Still, good paying jobs are out there, says one worker surnamed Du.

“There are cutbacks, but there is still strong demand for high-skilled workers. For those who are less skilled, it is survival of the fittest,” he said.

Liu Yi, a company management consultant, said the outlook is still good for cutting-edge firms but notes the slowdown is forcing companies to rethink about the way they do business.

“Money and liquidity are tight for many companies and that is having an impact on business operations and profits,” Liu said.

He said after years of rapid growth that has led to massive debt and overcapacity, tighter times may help companies to be more forward-thinking and practical.

 

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