Life returns to the 'workshop of the world'
Posted: Friday, September 25, 2009 4:00 PM
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Beijing, China
By Ian Williams, NBC News correspondent
DONGGUAN, China – "It's been a rough year," Ben Schwall shouted above the rumbling furnaces of a giant Chinese glass factory. He watched as workers, blowing down long tubes, transformed blobs of molten glass into juicers, bowls and lights.
"Orders are picking up. Things are getting better," he said. "The telephone is starting to ring again. Everybody feels there is something coming back."
We were in Dongguan, in the manufacturing heartland of southern China. Frequently called the "workshop of the world," the region was battered last year when the world stopped buying and exports collapsed.
Schwall supplies Chinese lighting equipment to the United States, linking American buyers with Chinese factories. Before the economic crisis, he was shipping 70 containers a month, but then his business fell by nearly two-thirds.
Thousands of factories across China closed last year, and some 20 million migrant workers lost their jobs.
Suddenly, though, this region is buzzing again. Factories are being renovated and are hiring. Vast public works and infrastructure projects have transformed parts of the area into sprawling building sites. Shops are full, with electronic goods flying off shelves; car sales have almost doubled over last year.
Economic jump-start
Beijing is confident of achieving a growth rate of 8 percent this year, easily outperforming the other members of the G-20 nations gathering in Pittsburgh for a summit this week.
The Chinese economy has been jump-started by an astonishing government spending spree – a $600 billion stimulus and more than a trillion dollars in easy loans from China's state-directed banks.
"That's something unheard of in China's history. That's unheard of in world history," said Dong Tao, Chief Asia Economist at Credit Suisse in Hong Kong.
Dong, like most regional economists, applauds the speed by which Beijing moved to shore up China’s economy. "China was the first country getting out of this mess," he said. But the downside is a big asset bubble is in the making, with more than $250 billion flooding into stocks and property, sending prices of both soaring.
"Maybe Beijing will have to hit the brakes," Dong said. "And that will create another round of instability in the economy."
He also wondered whether Chinese leaders have fully grasped that their export-led model of growth may now be over.
"This crisis marks the end of America's lifestyle. Americans can no longer have zero savings rate. And that also marks the end of Asia's growth model."
But many, like Schwall, built their businesses on the export trade. "It was a real frenzy," he said, "year after year of growth. But I don't think we are ever going to ever see that again."
‘Beginning to recover’
At the bar of the Hollywood Baby, a lively expatriate watering hole in Dongguan, nobody wants to shout too loudly about the recovery. But they are quietly confident the worst is over. The turnaround may have come too late, though, for the Thirsty Dog, a nearly deserted bar just down the road that was a favorite of buyers in the hard-hit furniture business.
Frank Jaeger, who runs the Hollywood Baby, also owns a factory making cables for robots, computers and other electronic goods. "For the first time, I've put together a sales team to target domestic consumers," he told me. "The market's growing. You see the newest items, the shops are full, [and] people are buying."
The longer term hope is that Chinese and Asian consumers increase their spending to fill the void and lift the world economy – what economists call rebalancing the world economy – but that may take some time to happen.
Still, the recovery in Dongguan is remarkable, though uncertain. A year ago, Schwall said it was like factory owners where being hit over the head with a baseball bat. I asked him how they are feeling now.
"Some of the guys got knocked down and they're never going to get up again. Some folks are staggering after the hit, but they are regaining their senses. They've still got a headache, but I think they're beginning to recover."
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