China's economic slowdown is threatening the strength of the nation's small business employment landscape, new reports in South China Morning Post said over the weekend.
The publication noted that the mix of the ongoing trade dispute with the U.S., along with subsequent trade tariffs, tightening cash flows and the struggle for the yuan to compete in the global FX markets have all led to rising costs of importing materials, energy, rent, labor and taxes. According to reports, venture capitalists have pulled back from investing in such a climate, and small business owners are now turning to staff cuts to maintain financial stability.
"That's the trend spreading and increasing in Dongguan, that factories there have been downsizing their workforce," said Guo Fengcen, the owner of a cake shop in one of the nation's largest export manufacturing markets.
He told the publication that another company, the Suyin Electronics factory, has cut staff levels from 10,000 to about 2,000. "These workers were my clients," said Guo. "They bought cakes every day for breakfast, birthday parties and various occasions."
The internet, high-tech and online gaming industries, usually some of the strongest employment producers, have also experienced staffing cuts in recent times, reports said. Another small business owner, Leo Liis, said he has "kept only the senior skilled workers" for his garment factory.
"According to what I know from many of my friends and their friends, all private manufacturers are doing the same, because there aren't enough orders to sustain so many workers," he continued. "We can hire temporary workers if new orders come."
Reports noted that staff cuts could offer a boost to the on-demand workforce, which can be hired by small businesses without having to pay social security contributions. On-demand workers typically receive fewer benefits and are paid less, according to the publication.
While ongoing trade disputes have led to a slowdown in orders for manufacturers, previous reports also noted that small businesses in China are increasingly looking outside the country for new business.