China chemical industry to see more layoffs amid slowdown

11 February 2009 08:45  [Source: ICIS news]

SHANGHAI (ICIS news)--The Chinese chemical industry is likely see more layoffs this year, especially for small- and medium-sized companies, if it cannot escape the global financial slowdown effectively, analysts said on Wednesday.

"Nobody knows if the economy has touched the bottom despite some indexes showing signs of recovery. Many uncertain factors will still impact the economy," Fang Lei, an analyst from the Shanghai-based brokerage firm Industrial Securities, said in Mandarin.

"If the economy slips further, companies which could not get a good performance, of course, will choose to retrench workers to reduce labour cost," he said.

Wang Xixin, an analyst with Guolian Securities, said some small chemical plants that cannot survive the global economic crisis due to losses will close down their plants.

"I was told to have a holiday at home before the Chinese Lunar New Year holidays. But now the holidays have ended, the company still has not informed me to return to work. I could not afford to wait any longer and I plan to change to another job," said a worker with a melamine producer in northern China.

"Around 60 workers were laid off before the Lunar New Year and the salaries of other workers were cut, I heard," said the worker.

Weak demand from the overseas market amid the global financial turmoil had trimmed export orders, leading many textile factories in eastern China and toy companies in southern China to lay off thousands of workers in tandem from last year, analysts said.

In early February, a government official said the number of jobless migrant workers was estimated at 20m, 15.3% of the 130m total, which was based on an earlier survey by the Ministry of Agriculture.

In addition, the number of domestic toy exporters fell by 49% to 4,388 from 8,610 in 2008, according to a report from China Customs, released last weekend.

Under this scenario, the central government State Council has required local governments to spare no efforts to expand employment in a bid to maintain social stability and drive the economy up, according to a statement issued on its official website on 10 February.

"If a company plans to lay off over 20 employees, or over 10% of the total staff, it must inform the local trade union or all the staff 30 days prior to the action, and then submit written reports to the local labour and social security departments," the statement said.

"From the recent economic policies, we could see the government has beefed up the investment on infrastructure construction, which could create jobs and absorb the idled workforce," Li Hongrong, an analyst with Shenzhen-based Ping An Securities, said in Mandarin.

"However, the policies still need a long period to take effect," she said.

China’s economy expanded 9% to yuan (CNY) 30,067bn ($4,402bn) in 2008, the first year of a single-digit growth since 2003.

($1 = CNY6.83)

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By: Judith Wang
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