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Economy

China's factories cut pay and workers as exports sputter

From shoes to cars, global demand sapped by pandemic

People in masks browse job advertisements in Shandong Province on April 8. Many companies have stopped hiring as the coronavirus outbreak saps global demand.   © Reuters

SHANGHAI/GUANGZHOU -- As the coronavirus pandemic squeezes consumption around the world, China's export-reliant businesses have started to freeze hiring and lay off workers in a blow to the country's economy as a whole.

"I go to hiring events every day, but I'm struggling to find a job," said Zhao Wenfeng, a former auto factory worker in Suzhou, a city near Shanghai. Zhao was let go while back home for the Lunar New Year holidays as the virus spread across China.

About 80 companies took part in a job fair in Suzhou on March 27, an event that attracted about 150 following the Lunar New Year recess in 2019.

Employers are also growing more picky. Last year, many offered jobs to almost anybody and brought them to factory dorms the very same day. Now, many are only accepting workers with previous experience.

Meanwhile in Guangdong Province, hiring has slowed mainly among export-driven sectors like electronics and bags. Many Chinese factories came back online in mid-February after an extended Lunar New Year holiday. They initially aggressively hired workers to make up for those who could not return to work amid travel restrictions, but are now correcting course as global demand plummets.

"There are less than half as many job openings as there were last year," said a representative at a Dongguan staffing agency that specializes in electronics factories. "Sometimes, employers will even cancel existing contracts to fill positions."

"There are zero openings for export-driven factories, like for shoes or bags," added a staffer at another agency in the city.

One man who was browsing job listings said he was told to take April off from his job making suitcase parts. "I think suitcase sales are down because of the outbreak's impact on tourism," he said.

Businesses are also cutting wages and staff. Yabao Pharmaceutical proposed a 10%-to-20% pay reduction to its workforce last month. The Shanxi Province company said it will make up for the cut once its performance recovers, while hinting that employees who do not accept the offer could lose their jobs.

Midtier automaker Jiangling Motors Corporation Group slashed wages by about 10% to 30%, while SAIC Motor trimmed performance-based bonuses at certain units.

Advertising agency Xinchao Media laid off about 500 employees. Property developer Zodigrand Group, vacation rental startup Tujia and the Chinese arm of India's Oyo Hotels & Homes have also conducted, or are considering, job cuts.

Over 60% of roughly 7,000 workers surveyed by staffing agency Zhaopin in mid-March said their employers either lowered, delayed or had not paid their wages.

Concerned with growing unemployment, Chinese authorities have repeatedly asked employers not to lay off workers, and are offering to pay back unemployment insurance premiums to those who keep their workforce intact.

Still, the unemployment rate in urban areas has climbed to 6.2% in February from 5.2% at the end of last year, reaching its highest point since China began publishing comparable data in 2018. Another 8.7 million university graduates will be entering the workforce later this year, which could further pressure the economy, depending on how the outbreak and government policies progress.

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