In recent days, the economic situation in mainland China has deteriorated, especially for small and micro enterprises. It has been reported online that in just one month, 26 clothing factory owners in Xu Village, Zhejiang Province, have fled. Industry insiders lament that businesses see no future, and the situation is dire.
On December 2nd, multiple villages in Xu Village, Haining, Jiaxing, Zhejiang were exposed to clothing factories closing down, owners absconding, and employees being owed wages.
According to netizens, 26 clothing factory owners in Xu Village, Zhejiang, have absconded. The clothing factory market is not doing well right now; some factories were operating just last night, and today the owners have vanished. Some clothing factory partners also stated that many factories have closed down, owners cannot pay wages and have fled, and some employees have been driven to the brink.
Data shows that in the first half of 2023, the number of closures in various brand stores in China reached as high as 1,831 in the clothing industry alone. In just the first half of 2023, a total of 1.233 million clothing-related enterprises in China were deregistered, marking a 41.5% increase compared to the previous year.
Mr. Shao, who previously operated a clothing factory in Jiaxing, Zhejiang, expressed to the media, “Maintaining a small factory is extremely costly, especially with low profits in the manufacturing industry. During winter and summer, the government restricts electricity, forcing us to shut down; if orders come in and we can’t fulfill them, it’s a direct loss. Paying wages each year becomes a worry; we can only rely on managing loans to stay afloat. Rent is projected to increase next year; companies simply cannot see a way forward.”
“Some owners run out of money to pay wages and flee, while many others have developed depression,” he said. “When owners flee without paying salaries, workers take unfinished products back home, hoping to process them for some money. Some factories have had their production machines seized by local labor bureaus; maybe selling them at an auction could bring in some money, but it’s all uncertain and unable to compensate for workers’ wages. Some factories remain closed until workers come for their pay and find the premises empty.”
The “Double Eleven” shopping festival is typically an opportunity for businesses to boost sales. However, shortly after this year’s event, it was reported online that a clothing factory owner in Xiangdong Village, Haining, Zhejiang, fled overnight, sealing the factory’s gates, leaving employees uninformed. An informant claimed that on the day before the owner’s escape, factory employees were working overtime at night.
Dong Zhentao (pseudonym) who used to operate a clothing business in Yiwu, Zhejiang, told the media, “Previously, we processed materials for foreign companies, and they paid timely. After the pandemic, many foreign investments moved their factories to Southeast Asian countries like Vietnam and Malaysia. Coupled with increased tariffs from the United States, Chinese products faced significant export constraints, leading to most being sold domestically.”
“With reduced incomes, people are more cautious in spending,” Dong Zhentao said. “Slow sales and unsold products result in a cash flow bottleneck, causing the chain of funds to break. Some factories, to keep operations running, even used their own funds, but when businesses failed to reimburse them, leading to capital loss, the owners were unable to pay workers and had to flee. A friend’s boss took all the company’s money and went to the United States with his family.”
“Companies have run out of money, owing not just to banks but also to employees’ wages. Some owners have been pushed to suicide, and employees have even chosen to take their own lives due to unpaid hard-earned wages,” remarked Dong Zhentao. “There have been instances where a group of Henan migrant workers killed their contractor over an unpaid $600, showcasing the severity of these events.”
“With the Lunar New Year approaching, many of these incidents are unfolding, making life extremely challenging for the common people in China. The situation is truly severe!” he lamented.
When contacted by a reporter, the Labor Bureau in Jiaxing declined to comment on the string of clothing factory closures and wage delays, stating that specific matters would be addressed through official announcements.