Manufacturing faces structural change: China teeters on edge of 7% growth target

Manufacturing faces structural change: China teeters on edge of 7% growth target

TOKYO — China’s prospects of meeting the government’s goal for economic growth of roughly 7% are shaky, imperiled by structural change in the manufacturing sector sparked by sinking demand.

     An executive at a steelmaker was startled when Chinese construction equipment manufacturer Sany Heavy Industry asked in July to pay for a delivered steel shipment in kind, with excavators and other machinery rather than cash. Sany’s January-June net profit plunged more than 70% on the year amid a demand slump, leaving the company in a money crunch.

     State-owned Wuhan Iron and Steel reassigned 45 welders and lathe workers in September to Wuhan Chemical Industrial Park to serve as “auxiliary police officers.” With output down, the company might reassign over 300 more employees.

     China’s real economic growth for the January-June half clocked in at 7%, just within the government’s target range. Premier Li Keqiang has repeatedly expressed confidence that China can meet the goal. But economic conditions are tougher than the statistics indicate.

     Some 750 million people, more than half of China’s population, traveled during the National Day holiday week that began Oct. 1, Chinese media reported. The middle class, whose disposable income is growing 8% a year, is helping but still lacks the power to bolster the overall economy.

     A major privately owned steelmaker in Shanxi Province that went bankrupt last autumn decided in September to rebuild under the umbrella of another manufacturer. A manufacturing sector suffering from a double whammy of falling demand and a capacity glut has just begun to realign. China faces a test of whether it can achieve 7% growth amid structural adjustment.

(Nikkei)

Manufacturing faces structural change: China teeters on edge of 7% growth target