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Trade-war-hit Chinese manufacturers cut hiring and pay

Half-empty job fair adds to signs of trouble for consumer spending

Workers assemble scale models of the moon rover for China's Chang'e 4 lunar probe in Dongguan. Job cuts are starting to set in at the country's smaller manufacturers as the economy slows.   © Reuters

SHANGHAI -- Smaller Chinese companies are starting to curb hiring in 2019, threatening to put further pressure on weak consumer sentiment as the economy slows.

A Nikkei survey of 30 companies present at job fairs in the neighboring cities of Shanghai, Kunshan and Suzhou last week found that 10 of them plan to cut back or freeze hiring in 2019 from a year earlier.

Late February is normally the busiest season for job hunting and hiring in China, as workers return to cities after the Lunar New Year holiday. But a job fair at a Kunshan career center last Thursday was nearly half empty.

Only 80 companies, mostly manufacturers, participated as many gave up on hiring or left booths unattended with only their names displayed.

Suffering from trade tensions, suppliers of liquid-crystal displays and smartphone components in particular plan to cut back on hiring. Taiwan-based display maker AU Optronics said it will take on just 20 to 30 people in China this year, down from 2018's target of 60 to 80.

A Shanghai-based maker of air conditioning components said it would cut 20 assembly-line workers owing to a drop in orders. "We are only hiring sales managers," said the company.

China's economy has slowed noticeably since the second half of 2018, but employers face strong social pressure against job cuts. Many companies appear to have held off on adjusting their hiring to economic conditions until after the Lunar New Year.

Applicants crowd into a recent job fair in Shanghai. Many prospective employers cut hiring this year. (Photo by Yusho Cho)

Those companies that have stopped short of layoffs are increasingly limiting wages. Pegaglobe, a Kunshan-based affiliate of Taiwanese iPhone assembler Pegatron, said monthly take-home pay ranges from 3,500 yuan to 3,600 yuan ($523 to $538) compared with going rates of 4,000 yuan to 5,000 yuan at nearby manufacturers. Overtime has fallen owing to a drop in orders, a company representative said.

Compal Information Technology (Kunshan), a unit of Taiwanese computer maker Compal Electronics, said it expects wages for May-July to be down to the 2,000 yuan range.

Not every employer is so bearish. Qingdao Chengri Construction Machinery, whose earnings are driven by subway construction and other infrastructure projects, is upbeat about the year ahead. The Shanghai distributor for Japan-based Hitachi Construction Machinery said it expects to pay generous bonuses this year.

Large companies began to cut payrolls in earnest late last year. Beiqi Foton Motor said it is streamlining its organization and personnel as the Borgward passenger car -- a revived German brand -- struggles. A UBS survey of 200 export-related manufacturers found that more than 60% were suffering from U.S.-China trade tensions. Of that amount, a third said they would let workers go within the next six months.

Even high-growth startups are maturing to the point where they need to worry about profit margins. Chinese ride-hailing leader Didi Chuxing said this month it would not renew the contracts of 2,000 low-performing workers, or about 15% of its workforce. The Uber Technologies rival will boost hiring in technology and other roles, keeping its overall number of employees flat.

Although hiring has slowed, Chinese cities are not overflowing with jobless laborers from the hinterlands. Job search site Zhaopin reports 2.38 job openings per applicant in the October-December quarter. While that is down from the year-earlier level of 2.91, China still suffers from a labor shortage overall. Many workers appear simply to have stayed in their home rural areas after the Lunar New Year.

But the chances of finding one's ideal job are lower, and applicants are feeling cornered into settling for lower wages to find work, job hunters say.

"I worked at an electronics factory from 2011, but I was let go after my contract expired," said Tian Lei, who was born in 1994. "My priority is just to find a job now."

"Pay is often late for my current job as machine repairman," said a 36-year-old man. "I want to find a job that pays me on time."

Consumers are tightening their purse strings as prospects for income growth fade. The slide into single-digit growth for retail sales is evidence of the slump in Chinese consumption and suggest continued weakness in consumer confidence to come.

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