A major Chinese export manufacturing company with an 18-year history has recently suspended production due to the ongoing U.S.–China trade war, which is significantly affecting China’s export-oriented industries.
Dongguan Dehong Electrical Appliances Co. Ltd. (Dongguan Dehong), based in Dongguan city, Guangdong Province, issued a notice to all employees, relieving them from work for a month starting on April 11, according to Chinese media reports.
The company cited suspended orders from clients and recent changes in the external economic environment, including U.S. tariff hikes, as the reasons. It said an update will be announced in a month, depending on the circumstances.
During the month off, employees will receive their basic wages; if they choose to resign, the company will settle their wages immediately, the notice said.
According to public data, Dongguan Dehong was established on March 30, 2007. It is a manufacturing enterprise engaged in research and development, manufacturing, and sales of household appliances. All of its products are sold to European countries and the United States.
Dongguan Dehong is not the only factory in China that has suspended production indefinitely due to the U.S.–China tariff war. There have been reports on Chinese social media that foreign trade companies in Zhejiang, China’s major exporting province, will halt production or operations and allow employees to take indefinite leave.
This trend also appears to have extended to other major export cities and provinces, such as Suzhou in Jiangsu Province and Dongguan in Guangdong Province, signaling a challenging period for China’s foreign trade.
Mr. Fan, a former factory owner in Yiwu—Zhejiang’s largest export hub, boasting the world’s largest small commodities market—who did not give his full name due to fear of retaliation from the authorities, told the Chinese-language edition of The Epoch Times that “now, all orders for export to the United States are gone.”
“The economic environment was already bad, and [the Chinese regime] has to keep retaliating against the United States [in tariff increases],” he said. “All kinds of businesses in Yiwu have been affected. Many people are pessimistic and fearful about the Chinese economy.”
Dongguan Dehong’s suspension of production is representative in the industry, “marking the beginning of a structural decline,” U.S.-based economist Davy J. Wong told The Epoch Times on April 22.
He pointed out that “Dongguan is not a big city in the general sense; however, it is one of the birthplaces of China’s global original equipment manufacturer [OEM] and a leader for the entire Chinese OEM industry.”
“Dongguan is a labor-intensive city and a base for global exports,” he said.
Now, even large factories like Dongguan Dehong can’t hold on, which indicates that “China’s entire export manufacturing industry has begun to shrink,” he said.
“Small- and medium-sized Chinese private enterprises currently have no way out due to high tariffs and shrinking demand,” Wong added.
However, Wong pointed out that these factories are suspending production, not filing for bankruptcy.
“They operate at a low frequency for self-preservation, and are at a half-dead state,” he said.
Many of them are still registered open, but most of their employees have left, Wong said.
“They are not included in official statistics because they are not closed down for good,” he said.
It indicates a semi-dormant state of the real economy in China, Wong said, adding that “this kind of silent fall is the most terrifying because it has no sound and cannot be prevented.”
Tariff War Impacts
Wong said that the U.S.–China tariff war will reshape the global economic and political landscape.“At present, the United States’ goal is not merely to negotiate tariffs, but to establish a new supply chain with universal values, common beliefs, and a common legal system,“ he said. ”If China can comply, then it can join. Otherwise, it may be marginalized.”
The tariff war may lead to conflicts in areas unrelated to the economy, according to Sun Kuo-hsiang, a professor of international affairs and business at Nanhua University in Taiwan.
“As the tariff war continues, China may take non-economic countermeasures, such as increasing confrontations in the diplomatic, technological, or military fields, further escalating tensions,” Sun told The Epoch Times.
However, Sun does not rule out the possibility that “both sides will seek negotiations and compromises in the future to avoid causing greater damage to their own economies.”
“This could include reducing some tariffs, renegotiating trade deals, or negotiating under a multilateral framework,” he said.
U.S. President Donald Trump told reporters on April 22 that the 145 percent tariff on Chinese goods will “come down substantially, but it won’t be zero.”
“Don’t think that the Chinese regime will disintegrate if the economy can’t hold up,” Wong said, noting that China’s economy relies on adjustments in its three lifelines.
“First, although the residual value of real estate is very poor, it still brings in a small amount of cash flow,” he said.
“The second is that local government debts are constantly extended, with today’s debt being pushed onto tomorrow and the day after tomorrow.”
The third is that “while a large number of high value-added orders exported to the United States are being cut, the regime will replace them with relatively low value-added orders from Asia and Africa, while at the same time hoping to expand trade with Europe,” Wong said.
“These three lefeliines have all shrunk to a certain extent, but they will not collapse immediately, especially trade with Europe,” he said.
Wong surmised that European countries do not want the United States to dominate, “so they may secretly give China a break,” he said.
However, the Chinese economy’s problem is not external but internal, he said, noting that “its mechanism is shrinking and lacks creativity.”
