China’s low-tech manufacturing struggles amid declining orders

The Financial Times article examines the mounting challenges faced by China’s low-tech manufacturing sector, which is struggling to maintain its foothold amid shifting global demand and increased competition. The article highlights the plight of factories that produce labour-intensive goods such as clothing, toys, and furniture, which are facing declining orders, trade restrictions, and competition from cheaper alternatives in Southeast Asia.

In the face of waning global demand and rising competition from countries like Vietnam, Indonesia, Bangladesh, and India, many of China’s low-tech factories are operating under severe financial strain. The article features insights from Wang Xiaosha, general manager of Fujian Jie Ao Industrial, who describes how the factory is grappling with reduced orders and price pressures despite efforts to enhance product quality. These factories, once the backbone of China's rapid economic expansion, are now struggling to compete as their traditional markets shrink.

The piece notes a significant shift in China's export profile, with labour-intensive goods accounting for a smaller share of total exports compared to a few decades ago. For instance, apparel and furniture exports have decreased from 20% of China’s total exports in 2001 to 9% in the first eight months of the previous year. This decline is attributed to the rise of Southeast Asian competitors and a strategic pivot towards high-tech industries in China, as emphasized by Fred Neumann, chief Asia economist at HSBC.

China remains a major player in labour-intensive industries, but its share of global footwear and apparel exports has diminished. This decline is partly due to geopolitical factors and trade restrictions that have further compounded the challenges for Chinese manufacturers. The article underscores the broader implications of these changes, suggesting potential job losses and economic repercussions for regions dependent on these low-tech sectors.

In conclusion, while China continues to pursue advancements in high-tech industries, the low-tech manufacturing sector faces a precarious future. As highlighted in the Financial Times, adapting to these new realities will be crucial for sustaining both the economic stability of traditional manufacturing regions and the broader Chinese economy.