Chinese factories stop production and look for new markets while American rates bite

Beijing – Chinese manufacturers pause production and turn to new markets as the impact of American rates is set, according to companies and analysts.

The lost orders also touch jobs.

“I know different factories that have told half of their employees to go home for a few weeks and to stop most of their production,” says Cameron Johnson, senior partner based in Shanghai at Tidalwave Solutions consultancy. He said that factories toys, sporting goods and cheap dollar store-type goods are most affected at the moment.

“Although it is not yet large -scale, it happens in the key [export] Hubs from Yiwu and Dongguan and there is concern that it will grow, “said Johnson.” There is a lot that rates will be reduced so that orders can resume, but in the meantime companies leave employees and stationals some production. “

About 10 million to 20 million employees in China are involved in the American export companies, according to Goldman Sachs Estimies. The official number of employees in the Chinese cities last year was 473.45 million.

During a series of fast announcements this month, the US added more than 100% to rates to Chinese goods, to which China took revenge with mutual tasks. While US President Donald Trump was underway with Beijing on Thursday, the Chinese party was denied that all negotiations are underway.

The impact of the recent doubling in rates is “much greater” than that of the COVID-19 Pandemie, said Ash Monga, founder and CEO of IMEX Sourcing Services in Guangzhou, a supply chain management company. He noted that for small companies with only a few million dollars in resources, the sudden increase in rates could be unbearable and they could put it bankrupt.

He said that there is so much demand from customers and other importers of Chinese products that he is launching a new “rate help” website on Friday to help small companies find suppliers outside of China.

The business disturbance forces Chinese exporters to try new sales strategies.

Woodswool, a manufacturer of athletics clothing located in Ningbo, near Shanghai, quickly turned to sell the clothing online in China via live streaming. After launching the sales channel about a week ago, the company said it received more than 30 orders with gross merchandise value of more than 5,000 Yuan ($ 690).

It is a small step in the direction of saving lost things.

“All our American orders have been canceled,” said Li Yan, factory manager and brand director of Woodswool, in Mandarin, translated by CNBC.

More than half of the production once went to the US, and some capacity will be inactive for two to three months until the company can build up new markets, Li said. He noted that the company has sold to customers in Europe, Australia and the US for more than 20 years.

The company to live streaming is part of an attempt by large Chinese technology companies, commissioned by Beijing, to help exporters to divert their goods to the domestic market.

Woodswool sells its products online via Baidu, whose search engine app also contains a live streaming e-commerce platform. Li said that he chose the company's virtual human live streaming option because it enabled him to get started within two weeks, without having to spend time and money renovating a studio and hiring a team.

Baidu said it worked with at least a few hundred Chinese companies to launch domestic e-commerce channels after this month that announced that it would offer subsidies and free artificial intelligence tools-such as the “house” virtual people for 1 million companies. The virtual people are digitally simulated versions of people who use AI to mimic sales pitches and to automate interactions with customers. The company claimed that return on investments was higher than that of the use of a person.

E-commercial company JD.com was one of the first to announce similar support and promised 200 billion Yuan ($ 27.22 billion) to buy Chinese goods originally intended for exports and ways to sell them in China. Food delivery company Meitan has also announced that the exporters in their own country would help distribute, without specifying an amount.

However, $ 27.22 billion is only 5% of the $ 524.66 billion in goods that China exported to the US last year.

“A few companies have told us that their business model below 125% is not workable,” Michael Hart, president of the American Chamber of Commerce in China, told reporters on Friday. He also noticed more competition between Chinese companies last week.

Rates from both countries are likely to remain in force at a certain level, with exemptions for certain rates, Hart said. “That is exactly where they are deteriorating.”

Products branded and developed for an American consumer for the American works may not be directly for a Chinese apartment dweller.

Manufacturers went directly to Chinese social media platforms Red Note and Douyin, the local version of Tiktok, to ask consumers to support them, but fatigue is growing, be on Ashley Dudarenok, founder of Chozan, a China Marketing Consultancy.

Fewer and fewer Chinese companies are considering distracting exports to the US through other countries, given the increasing American supervision of transfers, she said. Dudarenok added that many companies diversify the production to India to India over Southeast Asia, while others turn from American customers to people in Europe and Latin -America.

Some companies have already built companies on other trade routes from China.

Liu Xu runs an e-commerce company called Beijing Mingyuchu that sells bathroom products to Brazil. Although his company has entered into challenges of fluctuating exchange rates and high container costs, LiU said he expects that the trade with Brazil will ultimately not be affected by the VS tensions with the US

The export from China to Brazil has doubled between 2018 and 2024, as well as the export from China to Ghana.

During the COVID-19 Pandemie, Cotrie Logistics was established to help companies in purchasing, to coordinate shipments in the midst of port retractions and to build reliable logistical routes, said CEO Bright Tordzroh. The company mainly works in the trade between China and Ghana and now earns $ 300,000 to $ 1 million annually, he said.

The trade tensions in the US have led many companies to explore the sourcing and production locations outside the United States, said Tordzroh, which he hopes can create more opportunities for Cotrie.