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China insists slower growth is part of the plan to bring years of explosive expansion under control. But this may make it hard for the economy to make a soft landing. And what is being called China’s ‘new normal', could mean wages going unpaid and businesses shutting down.
Han Bin visits one manufacturing company in East China's Zhejiang Province, to see the tough times of transition.
The big question for Chinese manufacturers: How long can they run? For many, it is not a matter transforming under the new normal, but surviving under new difficulties.
Chen Guirong's company, Rongye Furniture, provides a telling example. The slowdown has broken its production chain — one built on low labor costs and scale production. Sales have fallen by two-thirds.
"The new normal has had a significant impact on our manufacturing companies. Our original goal was scale production. But the shrinking market has made that goal unrealistic,” Chen said.
“We must face the challenges with an open mind. The market still exists, and good products will always find their places. But we can no longer produce products on a massive scale. We have to keep our strength, which is production and key products, focus on different kinds, high quality and innovative products to meet customer demand.”
Hard times have forced the company to go lean and mean. That means cutting costs and finding new sources of revenue.
Chen says half of the staff has been cut, along with the divisions for procurement, brand promotion and new product design. His dream to make Rongye Furniture a global giant is on indefinite hold.
China’s furniture industry grew drastically in the past 30 years, making the country the world’s top exporter. But the sluggish global economy, plus China ’s structural reform under the new normal, this industry is taking a pounding. Cutting costs is the only way to survive.
For workers, the new normal is lower wages. Kuang Xiantao and her husband Cao Xiaode came to Rongye three years ago, when the company expanded. Now their pay has been reduced by nearly half. But they feel lucky they were not let go.
"I do feel a bit worried about losing my job. But I also believe such a big company can sustain the current difficulty, and guarantee workers' livings. As long as we worker harder and ensure product quality, when the company’s fortunes revive, our wages could be raised again," Kuang said.
Kuang Xiantao now has a second job. And she is hopeful things will turn around.
Despite the changes and losses, Chen Guirong tries to be optimistic.
The new normal has pushed his company to give up the traditional pattern of growth, and forced him to take costs more seriously.
Gone are the decades of explosive expansion. But for millions of workers, like Kuang Xiaotang, the slow down could be an uneasy calm before a personal storm.
"With the crisis coming, our top priority is how to keep the company’s core competitive strength. If something is not a core part, we have to cut it without hesitation. All this is aimed to keep the best, and wait for spring to come," Chen said.
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