China’s economy has been in a serious downturn. For over a month, the Chinese government has been holding large-scale meetings, urging them to solve economic issues. 

The first one was the 3 top-level meetings related to finance and economics that lasted for 4 days at the end of April. According to Apollo News, it shows that the Chinese economy is facing great pressure. 

Factors such as strong supervision of many industries since last year, the Russian-Ukrainian war, the U.S.Federal Reserve raising interest rates, and China’s epidemic control measures were counted as reasons. 

According to Apollo News, whether China’s economy is safe depends on follow-ups of the policies discussed in these meetings. 

In addition, on May 25, Premier Li Keqiang confessed to 100,000 officials across the country that China’s economy has been severely impacted. He urged local governments to boost the economy. 

 According to Chinese media Xin Tang Ren, Li Keqiang said that the national fiscal revenue declined in April by 5.9%, and local fiscal revenue fell even faster by 6.6%. 

Many provinces requested emergency bond issuance to help them get through the crisis. However, Li Keqiang said that the central government only had one emergency fund left. 

He went on to say that local governments had to rely on themselves.

In addition, according to Xin Tang Ren media outlet Li Keqiang bluntly stated that the current impact on China’s economy was worse in 2020. His statement indicates that China’s economic market is indeed in jeopardy.

CNN cited the Global Times that Li Kqiang listed unemployment, industrial production, and freight traffic as factors in the downturn.

However, the state-owned media deleted his full speech on social media overnight.

Mass layoffs and a high unemployment rate

According to Chinese media outlet Da Ji Yuan, Premier Li Keqiang 李克强 has insisted on employment stability three times since the end of April. It shows that the challenges of China’s employment situation cannot be underestimated.

As of April 18, the official figure for the unemployment rate in 31 large cities and towns was 6%. 

Li Keqiang once stated that there are about 200 million people in flexible employment nationwide. The term “flexible employment” refers to people who do not have regular jobs. Their lives are actually precarious.

Xie Tian, a Chinese economist and marketing professor, believes that several factors are to blame for the country’s rising unemployment rate, including the impact of the pandemic. He said that many of these businesses have no way to restart operations after a few months of inactivity.

For the past few months, many well-known companies in China have recently reported large-scale layoffs. 

According to VOA Chinese, analysts believe that under the unfavorable factors, these companies want to reduce costs and increase efficiency. In addition, there is no chance of any reversal in the short term.

In March, 2.76 million tech employees marked their status as “left the job” on Lagou, one of China’s largest tech recruitment websites. It is 260,000 higher than in December and approximately 60,000 higher than in the same month last year.

On April 8, it was estimated that Meituan may have laid off 15% to 20% of its overall workforce.

As Reuters reported, Douyu and Huya, the live broadcast platforms invested in by Internet giant Tencent, started layoffs of employees in April. Huya’s international operations are laying off 70% of its workforce. Meanwhile, the company will reduce 20% of its workforce domestically. 

Tech companies are the worst-hit sectors, but other industrial fields also reduce their workforce. 

CNN cited data from Tongdao Liepin, another major recruitment website. According to a January survey, 57% of Chinese enterprises laid off between 10% and 50% of their workers last year. The worst-hit fields were education, real estate, and internet-related industries.

Many companies closed down and filed for bankruptcy

The case of 16 state-owned enterprises in Chongqing also marks the market’s attention. 

According to the Chongqing Bankruptcy Court, 16 companies, including Chongqing Energy Investment Group, applied for bankruptcy and reorganization in April 2022. Tens of billions of assets and tens of thousands of employees are involved in this case. 

According to the Shanghai Japan Chamber of Commerce and Industry survey results released on May 5, 63% of Japanese-funded enterprises in Shanghai have been closed due to the long-term closure of Shanghai’s logistics network.

In addition, the Wall Street Journals reported China’s HNA enterprise owes a partner 185 million dollars for investment in real estate. 

Apple was also reported to have closed its factories in China.

Moreover, Bloomberg reported that China’s lockdown hit 180 companies on May 16. In the previous quarter, fewer than 50 companies were on the list.

Suspended operation firms include Toyota, New York-based apparel company PVH, and Nidec Corp.

Bloomberg stated that the list would continue to grow as more companies report financial results in the upcoming months. 

Withdrawals of foreign companies from the Chinese market

Some companies have decided to stop their operations in China, while some are considering this option. 

As Bloomberg reported on May 1, Apple’s CEO, Tim Cook, stated again that the company’s supply chain was truly global at a conference. He also mentioned that the company could shift more of its manufacturing away from China.

Apple has been producing chips domestically. Cook said, [quote] “We continue to look at optimizing.” [end quote]

In addition, CNBC reported the case of Airbnb. 

This company planned to announce its closure in China to employees on Tuesday, May 24. As informed by the Washington Post, AirBnB will officially stop operations in China on July 30 of this year. 

Airbnb co-founder Nathan Blecharczyk informs CNBC that stays by people in China on the company’s platform have only accounted for about 1% of revenue over the last few years. Airbnb will keep an office in China to cater to those looking for international stays.

The company’s decision came after a series of Covid-related lockdowns in China that harmed both foreign-invested companies and domestic businesses.

As the Korea Times reported, South Korea’s retail behemoth Lotte has officially exited China. The company shifts its attention to the Southeast Asia market, which includes Indonesia and Vietnam.

Lotte announced that it would close its China headquarters in the first half of this year on Sunday, May 22. They are processing the paperwork to cancel the business license. 

Lotte had 130 stores in China before making this decision to pull out. 

The EU Chamber of Commerce in China recently conducted a flash survey with 372 European companies operating in China. 

Nearly 23% of them were considering a move out of China. This is the highest proportion in a decade. Meanwhile, 78% don’t find China appealing for investment. 

According to the survey, only 7% of companies were considering shifting investment away from China due to the war.

 Jorge Wuttke, President of the EU Chamber of Commerce in China, said, “We are trying to tell the Chinese government that if you don’t change, we will vote with our feet.”

In an article, Frédéric Lemaître, a Beijing correspondent for the French newspaper Le Monde, said that “China is struggling.” 

Frédéric cited Shan Weijian, CEO at private equity firm PAG, that China is currently undergoing “a deep economic crisis.” 

Weijian said that China’s economy is in the worst shape in 30 years.

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