Chinese factories have reopened but experienced a plunge of overseas orders. Hence, despite the resumption of work in these factories, employees were laid off caused by the decrease in demand for its products and services. The decline led businesses to fire their employees due to the lack of funding for employee compensations.
According to Reuters, the pandemic has disrupted economies of China's key trading partners that led to a significant decline in market demand. Although factories have reopened and resumed business activity, some companies laid off employees due to a lack of financing for their compensation.
The report revealed that requests to cancel orders or delayed shipments have been experienced by many factories in China. The demand for goods and services from the US and Europe has declined and the loss of customers adversely affected the finances of these factories.
Earlier this year, China imposed travel restrictions and factory suspensions to alleviate the public health crisis. As a consequence, labor supplies and the demand of exporters increased, but the companies were unable to meet the supply with demand. At present, a reverse condition happened. There is a lack of demand and a greater capacity to supply goods and services. The lack of the former ended with financial losses of domestic factories in terms of finances.
According to a senior analyst at research firm Gavekal Dragonomics Thomas Gately, the shutdowns of normal economic activity in Europe and the US have caused a dramatic contraction in Chinese exports. He revealed that a 20 to 45 percent yearly drop is to be expected by the second quarter of 2020. He then claimed that the growing number of emerging markets would be greatly affected by this decline.
It was also announced that the slowing production of factories might lead to the suspension of all outputs or lead to factory closures if business activity in China would not improve. He also said that there is an uncertain number of factories that show the capacity to withstand the adverse effects of the pandemic and lead their businesses to survive another year.
Economists allegedly anticipated the imposition of a V-shaped economic recovery in China. The strategy was first seen during the SARS epidemic in 2003. However, it was shown that analysts' forecasts were not met by current markets and that the Chinese economy has underperformed, its worse yields since the Cultural Revolution in 1976.
According to the chairman of Hangzhou Hongli Food Zhu Hongping, the last overseas orders on exports were for April. These were from restaurants in countries such as South Korea, Japan, Australia, and New Zealand.