From World’s Factory to Economic Ruins: Is China Breaking Down?

I must emphasize this again to everyone. This so-called trade war is, in essence, a real war. And what is the nature of war? It's that ordinary people will always suffer, no matter who wins or loses. You are the price that's paid. In the phrase, at all costs, you are that cost. That's the basic idea. Do you understand? That's always the fate of regular people. Oh no, things are a mess now. We've been hit squarely by this trade war. The factories have completely lost morale. Look, goods are piling up here, everything's come to a halt. It's not just that we can't sell to the US, but now we can't sell to other countries either. The only option left is domestic sales, but even the leftover materials can't be cleared. What can we do now? We're totally stuck. Look at the containers at the port, stacked up like mountains, not a single truck in sight. In this trade war, has your industry been affected? It's over. It's over. There's no work left to do. This year, export factories are really having a tough time. Starting today, we're taking time off. I heard there are no orders at all right now. When we asked the boss, they said at least a three-month break. What do we do now? Are we supposed to eat dirt for the next three months? We've got elderly parents to care for and young children to raise. The biggest loser in this tariff war may very well be the world's factory, Dongguan. There are over 14,000 sizable businesses here, and 60% rely on exports. Now, with orders dropping sharply, life has become truly difficult. A few days ago, I visited an old customer, a Taiwanese company. Normally, they only close for one day during the festival, but this year they extended it to five full days. What's the worst part? These big factories, just to survive, have turned to the domestic market and are now competing with smaller local factories, turning the whole industry into a brutal battlefield, a fight to the death. Even though I support the government's countermeasures, I just can't stay silent when I see people shouting online at all costs. I want to push back and say, stop shouting already. You might be the one paying that cost. The US-China tariff war has dealt a massive blow to China's manufacturing industry. Many factories have lost orders, inventory can't be sold, production has been halted, workers are returning to their hometowns, and traders as well as cross-border e-commerce companies are now facing an existential crisis. Ma Linhai, chairman of a garment company in Shenzhen, openly declared at the port that they would shift from exporting to domestic sales, live-streaming to sell-off inventory at discounts of up to 80 percent, leaving prices at just 20 percent of the original. People kept telling us today, stop the live-stream, come back tomorrow. But by then, there might not be anything left. These are all high-quality export goods. We might have to stop live-streaming at any moment. One container can hold over 30,000 garments, and right now our containers are burdened with a massive stockpile of unsold goods. Shipping them out only means losing money. So now we're trying to make a decisive call. Clear everything out. Doing foreign trade now feels like the sky has fallen. Workers are being forced to stop working. And once again, it's the people at the bottom who suffer most. On the other side, physical stores have closed down and aren't selling anything either. There's a batch of linen pants. If anyone doesn't mind, just take them and wear them. The quality is excellent. All were export orders for major global brands. Only three days, everything is being cleared out for just a few dozen yuan. Lately, in the Pearl River Delta and the Greater Bay Area, many workers have gone back to their hometowns. Export goods bound for the U.S. are piling up at China's major ports, stacked into mountains. Online, countless videos show the grim reality faced by Chinese businesses and workers. Factories on the verge of shutting down. Workers being laid off and forced to go home. One netizen, currently working in a factory, shared, It really feels like the financial crisis has arrived. All the orders in the workshop have been cancelled, and we're taking turns working and resting. If this keeps going, I guess we'll have to survive by drinking the northwest wind. The sky is about to fall, everyone. I heard that, after May, more than half of the factories will have to shut down for an extended period. Is this news reliable? Does anyone have any inside information to share? It seems like many long-term employees are being called in by management and told to finish up this month and then take leave. This year, every factory is struggling more than the next. How's your factory doing? Got any orders? This year, many factories hire people and then let them go again on and off, much more than in previous years. True or not, we'll find out after the May 1st holiday when we see who comes back. A lot of people slipped away today. Even after calling three ride-hailing cars, we still couldn't fit everyone. It's just too hard. See that? They called cars and ran off already. If you still have a job, hold on to it. Don't go running around blindly. Look at that. Even after booking three cars, they still escaped. Brothers over 50, please stop going out to look for work. I mean it. Really don't. Look how many people showed up at the factory today. The paper box factory only needed 20 people, but nearly 100 showed up. That should tell you clearly what the situation is like in Guangdong right now. So if you're older, don't waste time going around job hunting. The economic environment is truly bad now. If you're already getting on in years, I sincerely advise you to stay in your hometown and find something local. Don't go out and waste effort for nothing. Brother Deng here is just telling it like it is. I don't want you wasting money on travel and time for nothing. Got it? The current situation in Foshan, you might not even believe it if I told you. Large companies are laying off workers and cutting salaries. Smaller ones, especially OEM garment factories, are having an even tougher time. Even the owners are barely hanging on. Many companies still haven't paid last month's wages. Along the streets, lots of shops are putting up signs saying, for rent or looking to transfer. Right now in Foshan, people who are actually making money are extremely rare. Most regular office workers are living off debt, working like crazy but barely saving anything, while dealing with monthly loan repayments. Especially those who bought homes at peak prices a few years ago. They're suffering even more now, working non-stop just to pay off their mortgages. If we want to say it nicely, it's reduced spending. But to be real, people just don't have money left. Young people in Foshan, forget about saving. Just not being in debt is already a huge achievement. That's the reality for the younger generation here. A woman who had long collaborated with a domestic logistics company revealed to foreign media that, to her knowledge, many factories currently have no orders, because foreign-invested companies have stopped placing them. If this situation continues, the domestic economy will undoubtedly face difficulties, and people will be left without jobs. Right now, all we can do is take it as it comes. If tariffs are lifted, ocean freight rates might drop immediately. But if prices keep rising, small logistics companies likely won't survive. It's really tough now. There are simply no jobs left in Guangzhou. Truly, there's nothing to do. Every day, large numbers of people are returning at the transit station, all preparing to head back to the countryside to farm. It's time to return home. More and more people are going back to their hometowns now, and the transit stations are filled with people waiting for rides. This year, garment processing rates in Guangzhou are especially low, so many people have chosen to go home and start their own small businesses. Honestly, going back home isn't a bad idea. It helps boost the local GDP and allows people to take care of their elderly and children. Here's something painful to admit. Currently, 70 percent of business owners in Shenzhen are unable to pay their employees' salaries. It sounds unbelievable, but it's true. Big companies are all looking for ways to cut wages and lay off staff. As for small businesses, there's no need to even mention them. Many don't even know if they'll survive this season. Look around. Commercial office buildings in Shenzhen are constantly changing tenants. It feels like there's a new wave every month. I talk to business owners from different industries every day, and nearly all of them are buried under online loans and microcredit debt. You can imagine how hard real-life business has become. But who wants to be drowning in debt? Every day is just patching things together to keep the business barely alive. I don't even dare to think further. If the business owners are living like this, what about the workers? Will your salary still be paid in full? It feels like I can't hold on any longer. I've been sitting in this spot for a long time, found a quiet corner and just stayed there. The tuition for our two kids, food, clothing, household expenses. My husband currently has no income and even has to ask me for money. But I'm still in vocational training and also have no income. On top of that, my husband still has to pay two types of insurance. It all just feels incredibly difficult. I don't know what to do anymore. Why does life keep getting harder? When I was little, I used to tell my mom, mom, when I grow up, I'll earn money to buy you all sorts of things. She just laughed and said, you think making money is that easy? I didn't take it seriously back then. But now that I'm grown up, I've realized making money is really not easy at all. So where is all the money going? I honestly don't even know how much longer I can keep going. A young woman surnamed Huang, who works in foreign trade, shared, the unemployment rate in China is already very high, with many estimating it to be over 30 to 40 percent. Now, with high tariffs, everyone is groaning under the pressure. People in foreign trade have higher skills and more specialized experience than those in domestic business because they've handled a lot of high-quality export orders. But after losing their jobs, they're now forced to compete with domestic workers for employment. For just one position, there are countless applicants. The competition is brutal and downright miserable. Ms. Huang added, unemployment among university graduates has long been a serious issue. So many students want to get into foreign trade, but even people with years of experience in supply chains can't keep their jobs anymore. So what hope do the students have? In July and August, another 10 million-plus graduates will hit the job market. With today's unemployment rates, Xi Jinping really is the supreme accelerator, accelerating everything, even the crisis. Exodus of Manufacturing Supply Chains from China Would 245% tariffs be a knockout? For the Chinese Communist Party and Xi Jinping, U.S. President Donald Trump's second term in is nothing more than history repeating itself, only this time taking a new turn toward the eventual collapse of the world's second-largest economy. The manufacturing supply chain is accelerating its migration from China, the world's factory is rapidly fading away, and today we'll dive into the details to get a full picture of it. Trump's Tariffs in 2018 People may recall that the first Trump administration's $250 billion in tariffs on China in 2018 were almost immediate, with U.S. imports from China falling sharply in the months that followed. As expected, the decline in U.S. imports from China was largely offset by growth in imports from other countries with low-cost manufacturing. However, the trend of manufacturers moving away from China continued even under the next Biden administration, which is also notable for largely retaining Trump's tariff policies against China. Trump 2.0 Tariffs in 2025 Hit China Even Harder Currently, we see the second Trump administration's greatly expanded tariffs changing global trade relations. We are also seeing strong resistance from Beijing. Where will the new round of tariff escalation go? All sorts of confrontational and trade scenarios are possible, but one thing is certain. China's golden age as the world's factory is fading fast. As mentioned above, the shift of manufacturing away from China has been going on for years and is not a short-term phenomenon but a long-term trend. Moreover, the shift of manufacturing away from China is not entirely the result of the Trump administration's tariff policies. American companies are leading the way out of China. For example, according to a survey by the American Chamber of Commerce in China, as many as 30% of American companies are either moving their supply chains out of China or are considering doing so. This proportion is more than double that of 2020, when Beijing overreacted to the COVID-19 pandemic and imposed lockdown measures. Due to the CCP's comprehensive and prolonged lockdown, tens of thousands if not millions of China's manufacturing customers have suffered long-term disruptions and significant losses. The pandemic has made countries around the world realize that it is unwise to rely entirely on China for all their manufacturing needs. As a result, supply chain diversification has suddenly become a very important business consideration. Another factor is the rising cost of doing business in China, whose labor force is no longer as economically attractive as it once was. China's growing middle-class and aging population mean that the price and reliability advantages it once enjoyed are not what they once were, and that is unlikely to change as long as the CCP is in power. China's behavior on the international stage is a cause for concern. Another compelling reason is the rise in geopolitical tensions in the region, which goes far beyond the competition between China and the United States. Many Chinese customers are concerned about China's global ambitions and aggressive behavior toward neighboring countries and the Asia-Pacific region as a whole. Chinese military exercises near Taiwan and provocative moves against the Philippines, Vietnam, and Japan have made customers sour on doing business with China. European companies are at least as pessimistic as American companies and may even be more pessimistic. In a 2024 survey, nearly half, 44 percent of members of the European Union Chamber of Commerce said they saw a bleak future business outlook and profitability in China. They expressed similar concerns to their American counterparts and pointed to China's restrictions on access to the Chinese market. The survey was conducted before the second Trump administration took office in 2025 and the latest round of tariffs was introduced. Other countries attract manufacturers. Companies that once had all their factories in China have now opened factories in Vietnam, India, Turkey, Mexico, and other places closer to the markets where their products are sold, which have other competitive advantages, including lower labor costs, market access, and infrastructure. This trend is unlikely to turn back in China's favor in the short term. In fact, as the business and regulatory environment continues to improve, the United States may usher in a trend of reshoring manufacturing. Indeed, many foreign companies have announced plans to move manufacturing back to the United States to avoid tariffs. Recently, Japan's SoftBank, Taiwan's TSMC chip manufacturing company, South Korea's Hyundai Motor Company, which has pledged to invest $21 billion in steel and car factories, and some international companies in wealthy Gulf countries, have all taken action. China is in a dilemma. Today, China is in a dilemma. It faces a United States led by President Trump, which is determined to challenge China in every area of influence and use its advantages in regulation, legal traceability, financial leadership, and technological innovation to achieve this goal. So China is trying to make up for its losses and seek breakthroughs by deepening economic ties with countries such as Argentina, Brazil, and Russia. China has placed its greatest economic hopes on the EU, but the EU is not enthusiastic about this and is unwilling to bear the additional economic risks that come with it. Can the CCP effectively cope with the fundamental changes that are taking place in the global manufacturing and trade system? Let us wait and see what the future holds. Beijing Doesn't want Xi to confront Trump, but it's too late. On April 16, the Chinese Communist Party officially issued an appointment announcement, appointing former WTO representative Li Chenggang to replace Wang Shou'en as international trade negotiator and vice minister of commerce. This appointment comes at a time when the US-China trade conflict is heating up and the outside world is paying close attention. Li Chenggang, 58, has a law degree from Peking University and a master's degree in law and economics from the University of Hamburg, Germany. He has served as WTO representative, assistant minister of commerce, and participated in Sino-US economic and trade negotiations during Trump's first term. Reuters called this replacement unexpected. Wang Shou'en's whereabouts have not yet been announced, and the Ministry of Commerce has not explained it, but his name has been removed from the Ministry of Commerce's official website. Reuters pointed out that this change occurred at a critical time when the US continued to impose tariffs and expressed its willingness to negotiate. Alfredo Montefiore Helu, senior advisor to the China Center of the World Conference Board, said that Wang Shou'en is experienced, but the replacement at this time is very sudden and may cause interference. A source in Beijing's Foreign Business Circle said that Wang Shou'en has a tough style, like a bulldog, and has a clear attitude in the confrontation with the United States. The change of personnel also coincided with Xi Jinping's visit to Vietnam, Malaysia, and Cambodia. He was accompanied by Commerce Minister Wang Wentao, and the trip was considered an attempt to use the visit to ease the pressure of US tariffs. Bloomberg quoted Chinese people familiar with the matter as saying that Beijing is willing to resume trade negotiations with the United States but has put forward a series of preconditions. These include requiring the Trump administration to appoint a negotiator with presidential authorization and reduce officials' derogatory remarks against the CCP to create an atmosphere of mutual respect. People familiar with the matter revealed that the CCP does not want Trump to participate directly in the negotiations but prefers that the two heads of state each appoint representatives to negotiate. It is believed that this will be more conducive to promoting the signing of the final agreement. In the past, Li Chenggang criticized the US tariff policy at the WTO meeting and emphasized the importance of the multilateral trading system. He also recently attended an entrepreneur meeting, which is considered a transitional arrangement before taking office. There is no sign yet whether the CCP is ready to restart negotiations immediately. Washington has repeatedly reiterated its willingness to reach an agreement but stressed that the Chinese Communist Party must take the first step.