China’s private sector, the provider of more than 80 per cent of the nation’s urban jobs, has been particularly hard hit by the coronavirus pandemic, as companies struggle with balancing their profitability with a social obligation to maintain jobs, according to a survey by the biggest industry guild.
The All-China Federation of Industry and Commerce (ACFIC) said its survey of the country’s 500 largest privately owned companies showed 96 per cent of them being walloped by the deadly coronavirus, where risks were increasing and spreading along the supply chains. The study also found 60.8 per cent of companies unable to fulfil customer orders because of supply chain disruptions.
“The unexpected Covid-19 outbreak has had a big impact on China’s economy and society, particularly on private businesses,” said the report published on Thursday. Private sector companies “are facing mounting pressure to keep employment rate and the risks are spreading along the supply chains,” the survey said.
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The findings underscore how the worst global public health crisis in decades has exacerbated a slowdown in the world’s second-largest economy after a bruising two-year trade war with the United States. China’s economy contracted 6.8 per cent in the first quarter as the country went into lockdowns to contain the outbreak. Second-quarter growth picked up by 3.2 per cent as the country became the first to emerge from lockdowns, and the economy clawed its way back to life.
“Unemployment is one of the biggest concerns about China’s economy,” said Wang Feng, chairman of Shanghai-based financial services company Ye Lang Capital. “When the leading private companies, the major source of jobs in China, grapple with problems in maintaining jobs, it means an economy recovery has yet to be back on track.”
Private-sector employers generated more than 80 per cent of the 440 million urban jobs in the nation of 1.4 billion people. The government’s survey-based unemployment rate – which does not include most migrant workers – stood at 5.7 per cent in July, unchanged from June. That’s still higher than the 4.06 quarterly average over the past 12 years since 2002, according to government statistics.
Since February, the Chinese authorities in Beijing had been striving to underpin the companies by offering cheap loans, requiring state-owned landlords to reduce rent payments and cutting pension tax contributions by employers.
The federation said 64.2 per cent of the top 500 firms felt that higher operating costs were one of the major stumbling blocks to their growth.
It added that 54.8 per cent firms were received fewer orders from clients because of the Covid-19 disease.
From January to August, China’s exports to the US dipped 3.6 per cent from a year earlier, and shipments to the Association of Southeast Asian Nations bloc rose 3.7 per cent.
The top 500 companies include Huawei Technologies, the telecom equipment maker facing Trump administration’s move to cut off their access to American components and networks, retailing giant Suning and property developer Evergrande.
More from South China Morning Post:
- Companies rush to replace ‘just in time’ supply chains with ‘just in case’ contingencies as Covid-19 upends global manufacturing
- Coronavirus: China unemployment rate rose more than during US trade war
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