Cancan Chu, Getty Images
Industryweek 10056 010416chinafactorycancanchu
Industryweek 10056 010416chinafactorycancanchu
Industryweek 10056 010416chinafactorycancanchu
Industryweek 10056 010416chinafactorycancanchu
Industryweek 10056 010416chinafactorycancanchu

Chinese Factories Cut Prices, Lay Off Workers in Trade War

Dec. 17, 2018
Some 86% of companies affected by U.S. tariffs reported a decline in orders.

Chinese factories are responding to threats of a trade war by reducing prices, workers and investment, according to UBS Group AG.

Some 86% of companies affected by U.S. tariffs reported a decline in orders, according to a survey of 200 chief financial officers in manufacturing firms with significant export business. While most have plans to diversify into less trade-heavy sectors, they don’t expect to fully offset weaker demand. Of the 125 companies saying business has already been hurt:

  • 68% cut prices on products subject to levies
  • 23% laid off staff
  • 27% slashed capital expenditures
  • 18% cut wages

A squeeze on corporate margins and employment threatens to deepen a slowdown in the world’s second-largest economy. UBS predicts a 90-day truce agreed between U.S. President Donald Trump and China’s leader Xi Jinping is only a temporary respite, putting the probability of a lasting agreement before March at less than 15 percent.

“Most companies expect the trade war to escalate,” analysts led by Wang Tao wrote, predicting that export growth will slow to 4% in 2019 from 11% this year. With that will come more price cuts and more layoffs in the next six months, according to the report.

The Chinese government has rolled out measures including tax breaks and subsidies to cushion the impact of tariffs on exporters, a strategy UBS expects will continue in 2019.

“We see the government easing macro policies to support growth, and provide some subsidies and tax cuts to support employment,” the analysts wrote.

Popular Sponsored Recommendations

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

3 Best Practices to Create a Product-Centric Competitive Advantage with PRO.FILE PLM

Jan. 25, 2024
Gain insight on best practices and strategies you need to accelerate engineering change management and reduce time to market. Register now for your opportunity to accelerate your...

How Manufacturers Can Optimize Operations with Weather Intelligence

Nov. 2, 2023
The bad news? Severe weather has emerged as one of the biggest threats to continuity and safety in manufacturing. The good news? The intelligence solutions that build weather ...

Transformative Capabilities for XaaS Models in Manufacturing

Feb. 14, 2024
The manufacturing sector is undergoing a pivotal shift toward "servitization," or enhancing product offerings with services and embracing a subscription model. This transition...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!