"As China's economy stalls, some business owners run away; Analyst predicts 100,000 plants could shut in '08" by Don Lee, Los Angeles Times | November 6, 2008
SHAOXING, China - First, Tao Shoulong burned his company's financial books. Then he sold his golf memberships and disposed of his Mercedes S-600 sedan.
Then he was gone. Just like that, China's biggest textile dye operation - with four factories, a campus the size of 31 football fields, 4,000 workers, and debts totaling at least $200 million - was history.
"We're pretty much dead now," said Mao Youming, one of 300 suppliers stiffed in October by Tao's company, Jianglong Group. Lighting a cigarette in a coffee shop here, the 38-year-old spoke calmly about the bleak future for his industrial gas business. Tao owed him $850,000, Mao said, about 60 percent of his annual revenue. "We cannot pay our workers' salaries. We are about to be bankrupt, too."
Government statistics show that 67,000 factories were shuttered in China in the first half of the year, said Cao Jianhai, an industrial economics researcher at the Chinese Academy of Social Sciences. By year's end, he said, more than 100,000 plants will have closed. As more factories in China shut down, stories of bosses running away have become familiar, multiplying the damage of China's worst manufacturing decline in at least a decade.
Even before the global financial crisis, factory owners in China were straining under soaring labor and raw-materials costs, an appreciating Chinese currency, and tougher legal, tax, and environmental requirements. When the credit crunch took hold, prompting Western businesses to slash orders for Chinese goods and bankers to curtail loans to factories, many operations were pushed over the edge. China's industrial decline is a main factor in the global economic slowdown.
Stanley Lau, deputy chairman of the Federation of Hong Kong Industries, a trade group with 3,000 members, says many more are likely to shut after Chinese New Year in February, when millions of migrant laborers will return home for several days. --more--"