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Chinese Businesses Struggle as Economy Slows

Economists are debating the possibility that China’s economy could have a “hard-landing” or lengthy recession.

For most Chinese businesses, the slowdown has become a reality. The question that concerns those businesses most is how to keep going.

In the Chinese city of Yiwu, sellers are feeling the effects of a slowing economy. But they also are finding ways to weather the storm.

Henry Kou’s family has been in the porcelain business for many years. The family business was good when China’s economy was booming. But now, the economy is growing at its slowest rate in more than 25 years. The market for dinner plates and other porcelain products is weak.

Slowing conditions have led to falling profits

Over the past two years, Henry Wou says, sales have dropped by 20 percent. To keep afloat, he has cut production and packaging costs, even his own profits.

“Our customers are really hurting too, so we’ve tried to limit our profits in the hope that we can keep business going.”

He sells porcelain products in Yiwu’s huge wholesale market. The long trade mall area is home to thousands of storefront businesses.

Yiwu is in Zhejiang province near the Chinese ports of Shanghai and Ningbo.

Many companies consider Yiwu a good place to do business because of the support and freedom the local government gives sellers. This includes reduced taxes and less interference in business.

The area has a long history of being a base for traders.

China’s Communist Party-led government tried to suppress the business activity but later let trading expand when market reforms began in the 1980s.

Today, Yiwu is known to some as the small commodities wholesale capital of the world.

Almost everything and anything that is made in China can be found and bought in the city. From Yiwu, goods are shipped overseas -- to Africa, the Middle East, Europe and America.

Specialized markets have helped

Henry Kou’s business is international. He has buyers in the Middle East and Europe. He says sellers can do little to change the overall environment they are facing. However, he is finding ways to protect his business, including making specialized products for his customers.

“With every product, you have to constantly innovate. If you can’t continually do that, the market will leave you behind,” Kou said.

The number of shoppers was low during several recent visits to the trade mall. Many shop owners just sat in their stores. Some watched Korean soap operas, while others spoke with friends.

In some stores, however, traders from Africa, Azerbaijan, Turkey and South America seemed in a hurry to place orders.

Internet selling has helped some

But increasingly, as the cost of business rises, a store front can only do so much. Creativity, however, is a sure way to keep going.

Clock designer Zong Fanzhong sells his specialty timepieces at Yiwu’s trade mall. His timepieces are also selling well in Japan, South Korea, Turkey and Iran. Getting legal protections for his products has helped his business, he said. He has also found the Internet a way to keep his business developing.

“We’re using other avenues (online) such as TMall and Taobao and that has helped to make up for some sales. Trade overseas has slipped significantly since last year, by as much as 30 to 50 percent,” Zong said.

But not everyone is willing or able to change to do business online.

Xue Yaqing is a salesman for the e-commerce company Alibaba. He tries to help shop owners sell their products through the Internet. He said that from his work, he can see the effect the slowing economy is having.

“Some shop owners are losing money, not making any profits and mounting up debt, and because of that, some are only here for a while and then have to shut down their businesses,” Xue said. He hopes to get them online, but not all are willing.

“Some have been doing business offline for many years and from their perspective, they don’t need it,” he said.

And with a growing number of stores online, competition is increasingly fierce.

Customer service is important

Many of the business owners who said they are coping had a few things in common. They owned their own factories and kept their attention narrowly on what they know best.

Having long-time customers and an ability to find ways to react to their changing needs is also important, said Bob Shu, president of Vifa Group.

“We really, really work hard with our customers. We are spending more money on product, quality and cost control as well as new product development,” Shu said. “With such close relationships with our customers, we work in a very strategic way.”

He said while his company is also feeling the pinch, China’s economic slowdown has yet to hurt his company. Over the past five years, the company’s profits have kept growing. Just recently, he was able to buy new office space because prices are so low.

In Shu’s opinion, there is and is not a crisis.

“It all depends on yourself, nothing else. It depends on how you do it (do business). Most of the people are suffering. That’s true, but the world is so big. There are so many opportunities. In every industry, there are opportunities.”

I’m Mario Ritter.

Bill Ide reported this story for Mario Ritter adapted it for Learning English. George Grow was the editor.

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Words in This Story

weather the storm idiom to get through a difficult situation

porcelain – n. a material made of baked clay that can be fragile

booming – adj. doing very well

keep afloat – v. to get through a difficult time, to avoid sinking

mall – n. a large building or group of building that hold many stores

wholesale – adj. relating to businesses that sell to other business in large amounts of products

innovate – v. to do something in a new way, to have new ideas about the way something should be done

avenues – n. ways or methods to do something

perspective – n. a way of thinking about and understanding something

feeling the pinch – idiom to be noticeably affected by some hardship or problem

cope – v. to deal with problems or difficult situations and to try to create solutions

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