Businesses struggle as cracks appear in China’s economy

28 January, 2019 12:00 AM printer

BEIJING: Cracks are opening in China’s mighty economy: investors are backing away from deals, factories are moving abroad and companies are shedding jobs.

The world’s second-largest economy is losing steam, hitting its slowest growth in almost three decades last year, and flagging further in recent months, reports AFP.

While gross domestic product grew at 6.6 percent in 2018 — a rate that would be the envy of most nations — China’s efforts to cut its debt mountain have weighed on the economy.

Private businesses in particular face new hurdles as costs rise and financing becomes harder to come by, while the trade war with the United States has not helped. Here is a look at some of the struggles faced by Chinese companies and people: Feeding China’s addiction to video games seemed an easy bet for Beijing Yixin Technology, a tech startup behind the mobile game Farm Take Home.

The game allows players to harvest wheat, raise chickens and plant apple trees — a bucolic refuge from the pressures of urban China. But in real life, the tech firm has struggled to find investors.

“In December our company’s funding ran out, we had an investment lined up, but the money never came through,” said chairman Cui Yi.

“This month I arranged another investor, then he backed out too. I think we can’t hold out.”

His company is not alone.

Venture capital funding dried up at the end of last year. Total investment in the fourth quarter fell 13 percent from a year earlier, according to data from Preqin market research.

Policymakers are partly to blame, pushing a war on debt and financial risk that has cut the funding flowing into investment firms, industry insiders say.

Another government diktat halted new video game approvals for months —officially due to youth gaming addiction concerns — sending firms like Beijing Yixin into a deep freeze.

Other companies are facing the fallout from the trade war with the United States. More than a handful of exporters have sought to get around US tariffs by building factories outside China, according to a review of public stock filings.

Others are sending workers home early for Chinese New Year or cutting overtime.

Last month China’s exports fell.

“It has hit our profits,” Harry Shih, manager of Runfine Bearings in eastern Zhejiang province, said of the trade war.