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Christmas, Inc: Will China's manufacturing get a boost?

Santa probably won't pull the industry out of its slump, but he just may bring a little holiday cheer.

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(Sean Gallup/Antler/AFP/Getty Images)

Editor's note: When it comes to the economy, the holidays really do bring us together. Coal mined in South Africa heads to China, where it fuels the plants desperately in need of a little pick-me-up in this economic climate. The stubborn flow of goods persists from there, and even during the dismal European debt crisis, people in France stuff themselves full of Christmas cheer this time of year. Take the full tour of GlobalPost's "Christmas, Inc.," a series about how your holidays get made.

BEIJING, China — As Americans spend with renewed gusto this holiday season, China’s manufacturers are feeling a bit less gloomy about the celebrations.

Across the country’s manufacturing zones, many agree that the rush for orders is probably just a blip, and that Christmas spending won’t save China’s industry from the serious slump it’s fallen into.

In Yiwu, known as the Christmas decoration center of China, several factories are reporting that the lines have cranked up beyond what they expected, to meet customer demand.

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China, which doesn’t celebrate Christmas in a big way, makes the vast majority of holiday decorations and gifts that will be under Americans trees. So for now, many companies that make artificial trees, lights, electronics, toys and the gadgets given this time of year are experiencing a slight bump over the past few years, especially compared with the downturn in demand that began with the 2008 world financial crisis.

In November, China’s main measure of production showed that manufacturing output had decreased for the first time in almost three years. As a result, thousands of factories around the country have shut down or scaled back production to bare-bones levels. Several factory managers interviewed said they thought the holiday rush would just be a seasonal blip on their year.

Chen Jinlin, secretary-general of the Yiwu Christmas Products Industry Association, said there has been a 10 percent increase this year in orders and exports of holiday decorations, a big bump for a sluggish industry. Yiwu, a small city on the east coast, has seen a particular rise in demand, and Cheng said the bump could actually make a big difference for business there this year.

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“No matter how bad the economy is, (Westerners) are still going to celebrate Christmas,” said Chen. “With a tighter budget due to the recession, businesses from the West now can no longer afford the high-end products made in Guangzhou. They shifted their attention to Yiwu, which produces mostly low to medium-priced products,” he explained.

Still, no one believes Christmas can return China’s manufacturing to its pre-crisis glory days. And higher costs from labor and raw materials means that producing consumer goods is tougher for many factories.

“The Christmas manufacturing industry is relatively stable as demand from the overseas markets has been quite stable so far,” said Wang Lin, manager of the Xuyang arts and crafts factory in Shandong province. “I don't think it can produce a rebound in the whole manufacturing industry in China.”

Wang said his company has raised prices for clients by 5 percent, but even that doesn’t cover the additional costs, so the company’s profit margin is still shrinking,

“What's more, we are actually losing our competitive advantage as the cost of production has increased significantly,” Wang added.

Further south, in Guangdong province, electronics and toy makers say their business has boomed in recent months, but they don’t expect it to last past Christmas or make up for months of declining orders.

“We’re getting more orders than we can fill now and had to turn some business away,” said Qing Lianfu, a marketing director at a toy factory in Dongguan. “It is likely to stop after December, so we need to make plans than about how to manage the business.”

“We’ll try to keep workers on until Chinese New Year (at the end of January), and then decide what to do next,” Qing said.

China’s factories have tried to bridge the gap between decreased demand from the United States and Europe by attracting domestic buyers, but they don’t pay as much and the demand hasn’t emerged as much as hoped. This Christmas may just be a small salve for the battered Chinese economy.

http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/111216/christmas-inc-china-manufacturing-economy-shopping