China's stunning export comeback has factories scrambling for workers
By Gabriel Crossley and Stella Qiu
BEIJING (Reuters) - China's rebound in manufacturing, driven in part by demand from COVID-restricted consumers overseas, has so far exceeded expectations this year that factories are now struggling with shortages of workers to fill to clear the rising orders.
Production of industrial robots, computer equipment, and integrated circuits in the country has declined from coronavirus paralysis - production for the year through November rose 22.2%, 10.1% and 15.9%, respectively.
Much of the manufacturing boom can be attributed to overseas demand, with export growth exceeding expectations for eight of the past nine months.
The notable turnaround comes as China has largely eradicated the virus and stands in contrast to the sluggish comebacks of its big industry peers, in which factories are still grappling with pandemic disruptions and the damage to demand.
According to Nomura, China's global export share rose in the second and third quarters from 11% in the previous year to over 13%. This is the highest value since the 2006 quarter, when the investment bank began compiling the data.
While emergency incentives pumped money into consumer wallets in the US and Europe, the struggle to contain the virus in those markets increased demand for both Chinese-made PPE goods and devices for home-stuck Westerners.
Government data shows that in November Jinhua City, which also includes Yiwu's eastern export hub, employed more people in the industrial sector than it had ever before since late 2017.
"We laid off about 50 employees in the first half of the year, and now that orders are skyrocketing, we are short of staff and we cannot increase production any further," said Deng Jinling, who owns and sells a thermos bottle factory in Yiwu East, USA and Europe.
"We tried to hire dozens of temporary workers, but they are not good enough," said Deng.
Some workers she laid off have found work at home and are unwilling to return just months before the upcoming February New Year holidays.
But at the end of November, Deng bought two automated production lines to increase efficiency.
"We have never thought about it, but this year has been so busy and we have exhausted our options," she said. "One automated production line equals 10 workers."
A Renmin University private index that tracks demand for workers hit a record high in the third quarter. Some factory managers have raised wages by 25% to 10,000 yuan (US $ 1,530) per month, which is well above the average starting wage for graduates, according to local media.
For China's bicycle industry, 2020 is the best year in a decade when overseas consumers are demanding exercise and ways to avoid public transportation, said Liang Xiaoling, general manager at Trinx Bikes, headquartered in Guangzhou.
"Our capacity was full in September and October and we hired a lot of temporary workers to meet the demand," Liang said, adding that orders now extend through 2022.
Around 100 additional temporary workers are currently employed in its factories, in addition to around 1,000 regular employees.
Although manufacturing investment recovered slowly, declining 3.5% in the first eleven months, strong export demand contributed to a recovery in the final quarter.
Investments rose 12.5% year over year in November from 3.7% in October. This is the result of studies by analysts at the investment bank CICC.
According to Zhang Qinming, who owns a company that makes speakers for the European and American markets, demand is 25% higher than in previous years.
He paid his regular employees overtime to keep up and hired temporary workers for around 18-19 yuan an hour, 20% more than his full-time employees. As a last resort, he has rented other factories to handle the cargo.
A labor crisis isn't the only limitation.
China's unilateral trade balance - three containers for every recently imported - and delays in returning containers to China due to the overseas pandemic have created severe shipping bottlenecks that are now limiting exports.
The yuan is also hovering near multi-year highs against the dollar, which continues to put pressure on profits. And an official measure of the cost of raw materials in the factory reached its highest level since 2017 in November.
Despite the ardent demand, Liang of Trinx Bikes said profits will be squeezed. "Some of our orders are already showing losses," he said.
For policymakers, however, the export boom was welcome in a difficult year. The surprising resilience of China's export sector, which employs around 180 million people, has diminished the need for massive stimulus to revive the economy this year, analysts said.
China achieved 122% of its annual job creation target by the end of November.
However, manufacturers don't expect this boom to continue as other economies spike production.
"It started with the pandemic and will end with the introduction of the vaccine," Liang said.
($ 1 = 6.5372 Chinese yuan)
(Reporting by Gabriel Crossley and Stella Qiu; Additional reporting by Beijing Newsroom; Editing by Sam Holmes)
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