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Domino effect takes hold in Pearl River Delta region

By Zhan Lisheng (China Daily)
Updated: 2008-10-22 07:15

GUANGZHOU: The domino effect seems to have taken hold in the Pearl River Delta region following the closure of two factories of Smart Union, a major manufacturer of toys.

A girl amuses herself with abandoned materials used for toys on Saturday at the Smart Union factory in Guangdong. [China Daily]

A handful of companies in the region has already closed with many more facing a similar fate, China News Service (CNS) reported Tuesday.

In just a week, several Hong Kong-funded and listed companies including BEP International Holding Ltd, a household appliance maker; Gangsheng Electronic (Shenzhen) Co Ltd, an electronics supplier; and Peace Mark Holdings Ltd, a watch supplier, have all announced they will close their production facilities in Shenzhen.

Their announcements have caused great anxiety to thousands of workers and business partners. Most are worried about receiving their wages or payments.

The local government is also worried about possible social problems arising from their closure, CNS said.

The spike in the prices of raw materials, operating costs, heavy dependence on the US and EU markets, and the deprecation of the US dollar, all contributed to the closures, it said.

Many other labor-intensive companies in the delta region have been laying-off workers, and adjusting production and marketing strategies in an attempt to survive, CNS said.

Hong Kong-listed Sewco International Holdings Ltd in Zhongshan, also a major toy maker, is reported to be one such company.

It has laid-off about 6,000 workers, or about two-thirds of its total work force in the past few months, National Business Daily reported yesterday.

A Sewco employee told China Daily yesterday the employer had become stricter with them and they now faced a greater risk of being dismissed.

China Daily tried to contact the company's management yesterday but failed.

A Sewco interim report said the company suffered pre-tax losses of HK$31.04 million in the first half of this year, while operating costs for the same period increased by HK$19 million.