Forbes Conrad for The New York Times
Bags of toys stored at a shop in a wholesale market in Guangzhou, a city in southeast China.
By KEITH BRADSHER
GUANGZHOU, China — After three decades of torrid growth, China is
encountering an unfamiliar problem with its newly struggling economy: a
huge buildup of unsold goods that is cluttering shop floors, clogging
car dealerships and filling factory warehouses.
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The glut of everything from steel and household appliances to cars and
apartments is hampering China’s efforts to emerge from a sharp economic
slowdown. It has also produced a series of price wars and has led
manufacturers to redouble efforts to export what they cannot sell at
home.
The severity of China’s inventory overhang has been carefully masked by
the blocking or adjusting of economic data by the Chinese government —
all part of an effort to prop up confidence in the economy among
business managers and investors.
But the main nongovernment survey of manufacturers in China showed on
Thursday that inventories of finished goods rose much faster in August
than in any month since the survey began in April 2004. The previous
record for rising inventories, according to the HSBC/Markit survey, had
been set in June. May and July also showed increases.
“Across the manufacturing industries we look at, people were expecting
more sales over the summer, and it just didn’t happen,” said Anne
Stevenson-Yang, the research director for J Capital Research, an
economic analysis firm in Hong Kong. With inventories extremely high and
factories now cutting production, she added, “Things are kind of
crawling to a halt.”
Problems in China give some economists nightmares in which, in the worst
case, the United States and much of the world slip back into recession
as the Chinese economy sputters, the European currency zone collapses
and political gridlock paralyzes the United States.
China is the world’s second-largest economy and has been the largest
engine of economic growth since the global financial crisis began in
2008. Economic weakness means that China is likely to buy fewer goods
and services from abroad when the sovereign debt crisis in Europe
is already hurting demand, raising the prospect of a global glut of
goods and falling prices and weak production around the world.
Corporate hiring has slowed, and jobs are becoming less plentiful.
Chinese exports, a mainstay of the economy for the last three decades,
have almost stopped growing. Imports have also stalled, particularly for
raw materials like iron ore for steel making, as industrialists have
lost confidence that they will be able to sell if they keep factories
running. Real estate prices have slid, although there have been hints
that they might have bottomed out in July, and money has been leaving
the country through legal and illegal channels.
Interviews with business owners and managers across a wide range of
Chinese industries presented a picture of mounting stockpiles of unsold
goods.
Business owners who manufacture or distribute products as varied as
dehumidifiers, plastic tubing for ventilation systems, solar panels,
bedsheets and steel beams for false ceilings said that sales had fallen
over the last year and showed little sign of recovering.
“Sales are down 50 percent from last year, and inventory is piled high,”
said To Liangjian, the owner of a wholesale company distributing
picture frames and cups, as he paused while playing online poker in his
deserted storefront here in southeastern China.
Wu Weiqing, the manager of a faucet and sink wholesaler, said that his
sales dropped 30 percent in the last year and he has piled up extra
merchandise. Yet the factory supplying him is still cranking out shiny
kitchen fixtures at a fast pace.
“My supplier’s inventory is huge because he cannot cut production — he
doesn’t want to miss out on sales when the demand comes back,” he said.
Part of the issue is that the Chinese government’s leaders have decided
to put quality-of-life concerns ahead of maximizing economic growth when
it comes to two of the country’s largest industries: housing and autos.
Premier Wen Jiabao has imposed a strict ban on purchases of second and
subsequent homes, in the hope that discouraging real estate speculation
will improve the affordability of homes. The ban has resulted in a steep
decline in residential real estate prices, a sharp fall in housing
construction and widespread job losses among construction workers.
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