Smart Union Collapse Signals Deepening Economic Problems In Southern China

Workers seeking unpaid wages from Smart Union Group, a leading toy maker that went into liquidation on Friday, were still milling around outside the company’s Dongguan factory on Sunday, AFP reports.

The toy company stopped production at all its factories last week, leaving more than 6,000 workers looking to recoup unpaid back wages. Smart Union, which makes toys for Mattel and Disney, is the most high-profile casualty of the wave of bankruptcies sweeping through China’s toy exporters, half of which have gone out of business, Xinhua recently reported (see: “Toymaking Is No Child’s Play As Business Failures Soar“). Most are small operations, squeezed out of business by rising costs, falling demand and tighter product safety standards, so the Smart Union closure may point to an escalating problem that is starting to affect larger manufacturers.

Cost have been rising in the coastal manufacturing hubs while exports are at risk of falling away with the rise of the renminbi and falling demand in financial crisis struck U.S. and European markets. Appliance maker BEP shuttered a Shenzhen plant yesterday, laying off 1,500 workers. The company said the global credit crisis had made it difficult for it to get bank funding.

The prospect of rising bankruptcies and large scale lay-offs across China’s southern provinces will worry central and local governments alike.

As a footnote, this anecdote shows how global the fallout from the credit crisis can be: Chinese labourers on the Turks and Caicos are demanding back wages from Israeli contractors for work on a project stopped because of the collapse of the New York investment bank Lehman Bros.

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One response to “Smart Union Collapse Signals Deepening Economic Problems In Southern China

  1. Pingback: China Journal : Best of the China Blogs: October 20

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