China's economy is still growing at an enviable rate: It expanded 9 percent in the quarter through September. But that was the slowest in 5 years and down from 11.9 percent last year. Forecasts for next year range as low as 7.5 percent.
"The Golden Years have shuddered to a dramatic halt and much tougher times are upon us," Stephen Green, economist at Standard Chartered Bank in Shanghai says, pointing to slowing exports and investment.
The suddenness and severity of the chill from the global slowdown prompted leaders to announce late Sunday a $586 billion economic stimulus package aimed at boosting growth in China's own markets.
"This broad-based fiscal stimulus program will emerge as the government's front line of defense against an excessive economic slowdown," Jing Ulrich, J.P. Morgan & Co.'s chairwoman for China, said in a note to clients.
But it's unclear whether the package will be enough to salvage exporters left high and dry by overseas customers who are either canceling or abandoning orders as they face what might be one of the bleakest Christmas shopping seasons in decades.
For apparel maker Yiwu Bangjie, the first sign of trouble came with the failure of a longtime American customer to pick up and pay for its latest shipment of seamless underwear, says Tao Jianwei, the company's general manager.
"After the shipment arrived at the U.S. port, when we notified our customer to take delivery and finish paying, their reply was that they had no money to pay for the goods," said Tao, whose company is based in eastern China's Zhejiang province.
Yiwu Bangjie is one of the luckier casualties of the slowdown. Tao, who would not identify his U.S. customer, said he expects to get 90 percent of the $100,000 due back through export credit insurance.
"We're lucky to have that insurance," he said. "Everyone knows the global economy is headed for recession, so it's best to be cautious."
Others have suffered far more.
Thousands of factories have closed, especially those in labor-intensive industries such as toys and shoes. Official statistics on bankruptcies and factory closures are sketchy. However, the economic planning agency reports that 67,000 small- and medium-sized companies closed down in the first half of the year.
In the months since, conditions have deteriorated, with nearly daily reports of factory closings and layoffs.
Among the most recent, BEP International Holdings, a home appliance maker that employed about 1,700 people, according to its Web site, suddenly stopped operations Oct. 20 in the southern city of Shenzhen.
"It is difficult for the company to obtain bank financing and other sources of financing," the company said in an announcement to the Hong Kong Stock Exchange.
As growing numbers of companies close or slash production due to sinking sales, that in turn affects shippers who bring in raw materials and export finished goods.
The Baltic Dry Index, which measures drybulk shipping rates on 40 routes across the world and is a key indicator of demand, has declined more than 11-fold, to 891 in early November from 11,793 points in May.
"The reality we have to face is that the slowdown of the global economy is hitting us hard," said Ken Wong, manager of a Shanghai-based shipping agency whose profit has shrunk 30 percent this year.
Since many overseas customers are now unable or unwilling to pay as promised, factories have to be doubly cautious about whom they do business with, said Chen Tong, general manager of Fuzhou Xinrong Trading Co., a maker of carved wooden boxes.
"If the order exceeds 100,000 yuan ($14,600), we're going to be checking a company's background and market," she said recently, surrounded by boxes decorated with images of Santa Claus, Christian saints and the Virgin Mary at her booth at a trade fair in Guangzhou. "You've got to do that now to be safe."
China's Ministry of Commerce estimates that cash-strapped U.S. businesses alone owe Chinese exporters $100 billion on unpaid orders. The problem, which first cropped up in construction related areas, has spread to consumer products, clothing, shoes and appliances, it says.
As the world's appetite for China's products wanes, the effects are reverberating through the economy — and beyond its borders.
Increasingly, Chinese orders for iron ore, scrap metal and other commodities are being abandoned as buyers find themselves unable to get letters of credit or other financing to pay for the shipments, which end up sitting on the docks of Chinese ports.
Meanwhile, the losses are trickling down to white collar workers who are cutting back on spending as they fret over job security, and to migrant workers, who have begun heading back to rural areas as factories and construction projects shut down.
To boost growth, Beijing has slashed interest rates three times in two months in addition to the hundreds of billions of dollars it has promised in tax breaks, credit guarantees, new construction projects and other measures.
Still, the abrupt slowdown, just weeks after Beijing staged a triumphant Olympic Games, has left many Chinese wondering if their country's economic "miracle" was perhaps more a mirage.
"The good times seem to be over," said Pan Henfei, a tall, robust man in his 30s who gathers paper and bottles for recycling in Shanghai, China's bustling financial capital.
As offices cut back on newspaper subscriptions and supplies, there's less for him to scavenge. And, he complains, the price he gets for paper has dropped 40 percent to 1 yuan a kilogram, or about 6 cents a pound.
"I'm just a poor migrant trying to make it in the big city so that my child might be able to get out of the village," said Pan, the paper recycler. "Now some of my friends from the countryside are thinking of giving up this work and going back home. At least we can still do some farming."
