China Faces Economic Crisis as Companies Shut Down, Sparking Panic

Amidst China’s economic downturn, major brands are feeling the squeeze. For instance, Adidas recently shuttered its flagship store in Shenzhen’s Futian district, spanning three floors and over 3,200 square meters. This mirrors the broader economic challenges across China, as businesses and stores shut down nationwide

The economic downturn has severely impacted Shenzhen, often referred to as China’s Silicon Valley. Numerous businesses in the city have shuttered, leaving empty streets and unemployed workers. For instance, the Fang Industrial Park, once bustling with face-to-face stores, now stands deserted due to a lack of customers. Similarly, stores near the passenger Transportation Center at Shenzhen station have closed before the traditional New Year. Even established companies like the Electronics Factory of Elco Electronics have succumbed to the crisis.

This factory, founded 36 years ago and employing thousands, has gone bankrupt, along with 49 other companies owned by a woman who was once worth over 100 million Yuan (approximately 15 million USD). The harsh reality faced by Shenzhen residents contrasts with the city’s global reputation.

Amidst China’s economic downturn, major brands are feeling the squeeze. For instance, Adidas recently shuttered its flagship store in Shenzhen’s Futian district, spanning three floors and over 3,200 square meters. This mirrors the broader economic challenges across China, as businesses and stores shut down nationwide. Workers bear the brunt, grappling with unemployment and financial strain. In Shenzhen’s streets, job seekers compete fiercely for manual labor positions.

Meanwhile, in Wuhan, cold and destitute migrant workers huddle together in a parking garage at Wu Chong station, unable to afford the journey home. The numbers are staggering: 460,000 businesses and 320,000 stores have vanished, surpassing the pandemic’s impact from 2020 to 2022. Even successful business owners now face bankruptcy, and over 780 million people are in debt. Wall Street banks predict China’s economic growth will slow from 5.3% in 2023 to 4.6% in 2024.
The economic slowdown in China results from a confluence of internal and external factors. As the world’s second-largest economy, China grapples with several domestic challenges:

1. COVID-19 Pandemic: The ongoing pandemic disrupted production, trade, and consumer behavior.
2. Unstable Governance Policy: The Communist Party of China (CPC) faces governance uncertainties, impacting economic stability.
3. Consumer Confidence: A lack of confidence among consumers affects spending and investment.
4. Real Estate Crisis: Property market fluctuations contribute to economic uncertainty.
5. Ageing Population: Demographic shifts strain social services and labor markets.
   Externally, China’s reliance on exports and imports faces challenges due to severed supply chains with Japan, South Korea, and Western countries. Notably, the Ding Ye Fang Scandal shook the Chinese financial market. Ding Yi Feng International Asset Management Group, listed in Hong Kong, intends to list its Shenzhen subsidiary on a foreign digital exchange while halting asset trading. With debts exceeding 1,030 billion yuan (about 18.2 billion USD), founder Sui Guangyi’s alleged embezzlement of 3 billion yuan ($420 million) jeopardizes investors. This crisis exemplifies China’s economic woes and reverberates globally.

Amidst the economic downturn, a significant group of investors confronted Ding Ye Feng’s office building in Shenzhen multiple times this week. Their demand: answers regarding the repayment of their financial products. The revelation was shocking: Mashao Q, one of the founders, had been arrested for transferring funds overseas. Meanwhile, the person in charge remained under border control, unable to leave the country. The company’s predicament was dire: debt exceeding 130 billion yuan (about 18.2 billion USD), impacting up to 500,000 investors. Xie Tian, a professor at the Icons School of Business in the University of South Carolina, asserted that the company’s intent was asset seizure, not legitimate financial investment, predicting its inevitable collapse. As China grapples with economic woes and a worsening epidemic, similar cases may emerge. Experts caution that this crisis could trigger a domino effect, exacerbating China’s economic decline and potentially leading to social unrest. Investors, unable to recover their funds, harbor resentment toward the CCP and local governments, heightening the risk of unrest.

On January 22nd, the Chinese stock market experienced a significant crash, impacting all sectors. It marked the worst day for Chinese shares since April 25th, 2022, during the second wave of the COVID-19 pandemic. Key indices reflected the turmoil. Shanghai Composite Index: Fell below the critical 2800-point level, reaching a new four-year low.Hong Kong’s Hang Seng Index: Plunged by 2.3%, dropping below 15,000 points for the first time since 2009.Shenzhen Component Index: Representing smaller, innovative firms, it dropped by 4.06%, hitting a low of 8,430 points.
Investors across sectors faced losses as fears of a slowing economy and regulatory tightening led to widespread stock dumping. The media and entertainment sector suffered the most, losing over 6% of its value. Other sectors, including steel, chemicals, petroleum, basic metals, real estate, and cement, also saw significant declines. Financial stocks, typically stable, dropped by more than 1%. Analysts attribute the crash to a combination of factors, including the pandemic’s impact, Evergrande’s debt crisis, insufficient government stimulus, and increased scrutiny of tech and education sectors.

Investors across sectors faced losses as fears of a slowing economy and regulatory tightening led to widespread stock dumping. The media and entertainment sector suffered the most, losing over 6% of its value. Other sectors, including steel, chemicals, petroleum, basic metals, real estate, and cement, also saw significant declines. Financial stocks, typically stable, dropped by more than 1%. Analysts attribute the crash to a combination of factors, including the pandemic’s impact, Evergrande’s debt crisis, insufficient government stimulus, and increased scrutiny of tech and education sectors.

Electric vehicles (EVs) are often hailed as greener and safer alternatives to traditional cars. However, some EVs have proven dangerous, even deadly. Concerns arise from incidents where Chinese electric vehicles exploded while charging or driving, as documented in social media videos and local news. Recently, a red EV exploded at a charging station in southern China, resembling the popular Bake X360 model. Despite firefighters’ efforts, the car detonated violently, sending debris in all directions, even piercing a nearby toll booth’s roof. Experts recommend using water to extinguish EV fires, as it’s more effective than foam or dry chemicals. To prevent such incidents, cautious selection of EVs, especially those made in China, is crucial. Researching safety standards can safeguard both property and lives.