Cascading effect of shutdowns in Pearl River Delta belt

15 Dec '08

2 min read

On October 15 this year, Smart Union Group (Holdings) Limited, one of the world's largest toy enterprises, announced closure of its two plants, leaving about 6,500 workers jobless overnight. The incident has been seen as the concrete manifestation of the devastation created by the financial crisis and also shocking the companies of the Pearl River Delta.

All of a sudden, the Pearl River Delta was covered with in an atmosphere of sorrow. On October 23, the president of the Federation of Hong Kong Industries Mr. Chen Zhenren, said that of the 70,000 Hong Kong enterprises existing in the Pearl River Delta, 17,500 enterprises would suffer business failures, nearly 25 percent of all companies. He added by saying that the 70,000 factories in the Pearl River Delta employed more than 10,000,000 workers and if 17,500 of these were to close down, it would leave 2,500,000 unemployed workers.

Two days after the declared bankruptcy of Smart Union Group, Bailingda Industries (Shenzhen) Co. Ltd announced that it would stop operation on October 20 leading to laying off of more than 1,600 employees. It was like a cascading effect which led to other small and big companies in the Pearl River Delta also announcing closures on the heels of the announcement from these two big companies.

According to data from the Guangdong Provincial Bureau of SMEs, 1,464, 956, 709, 704, 587 526 and 432 companies in Dongguan City, Zhongshan city, Zhuhai City, Shenzhen city, Shanwei city, Foshan city and Chaozhou City respectively had pulled down their shutters. According to the data, the closure of maximum number of enterprises is concentrated in traditional industries with low-skilled but high employment generating industries like textile and garment, plastics and hardware, electronics, ceramics and building materials.

According to the statistics released by Guangdong Province, from January to September this year, 56,000 enterprises have announced shutdowns while 92,000 new companies have been set up in the same period which is a good sign in these troubled times. According to statistics, from January-September 2008, in various main markets of the province 62,361 enterprises of all types cancelled their registrations while at the same time 100,634 new units were registered, a net increase of 38,273 enterprises.

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