Southern China sees wave of manufacturing bankruptciesA wave of...

Southern China sees wave of manufacturing bankruptcies

A wave of bankruptcies with a severity not seen since the 2008 financial crisis is sweeping through the manufacturing industry in the Chinese provinces of Guangdong and Zhejiang.

Industry sources predicted that the tide, triggered by the appreciation of the renminbi, scarcity of credit and a decrease in overseas orders, would shut down 10% of textile companies in Dongguan, the manufacturing stronghold of Guangdong Province, and 20% of the manufacturing businesses in Zhejiang Province.

The China Economic Weekly in Beijing reported that Dongguan Soyea Toys Co Ltd, the world's second largest contract toy manufacturer with annual revenue of over US$30m, closed down unannounced on April 1 after its South Korean owner went into hiding.

Many of Soyea Toys' creditors rushed to the company, demanding repayment.

In mid-June, well-known textile manufacturer Dinkind Knitting Fashion Co Ltd abruptly went bankrupt. The company employed more than 2,000 workers in Dongguan.

Chen Yaohua, president of the Dongguan Textile and Garments Trade Association, said the second half of the year is usually a boom season for the textile and toy industries, but added that business will not recover unless credit is eased and labor and commodity prices are reined in.

The China Economic Weekly quoted business leaders in Zhejiang as predicting that nearly 20% of small- and medium-sized enterprises in the eastern province would close down within the next three years, for the same reasons that Mr Chen listed.