Xi Xiaoming, who previously exported thousands of suits and blazers to South Korea, the Netherlands and the United States, is now facing tough times.

When its factory in the eastern city of Wenzhou reopens last month after a long halt due to the spread of the coronavirus, local authorities provide a bus to move workers. However, Xi’s optimism is short-lived.

Over the past week, he has received numerous requests for canceled orders or for delayed shipments from his European and American clients.

At the start of the epidemic, China imposed strict travel restrictions and forced businesses to temporarily close doors to limit the spread of the virus.

Now the opposite is happening – overseas purchasing is being ignored as the pandemic devastates the economies of China’s trading partners.

“The unprecedented halt in normal economic activity across Europe, the US and the growing number of emerging markets are sure to cause a dramatic contraction in Chinese exports, probably in the range of 20-45% YoY in the second quarter”, said Thomas Gatley, Senior Analyst at Gavekal Research.

Entrepreneur Xi Xiaoming points out, however, that the fabric provider from the heavily affected Italy, which he works with, ceased operations on Sunday, meaning there is no fresh raw material since May. Its fabric stocks will not reach the end of April.

Xi Xiaoming says it will slow down production and may soon halt all production if the business does not improve. His 50 workers, who have not yet returned from Hubei province, have already been warned to find work elsewhere.

“We know this year is bad and next year will be better, but the question is how many factories can withstand next year?”, said Xi Xiaoming.

Economists initially expected recovery of the Chinese economy in V-shaped recovery similar to that seen after the outbreak of SARS in 2003. But after analysts lowered their forecasts to levels that have not been reached by the time of the Cultural Revolution in 1976.

China’s net exports accounted for 11% of last year’s economic growth.

Usually, at this time of the year, orders can extend to June and July, but it might have to cease production after three months.

Even when they have orders, exporters are wary of ever-changing restrictions that countries adopt to limit the spread of COVID-19.

Chinese Unemployment

China’s manufacturing sector, which accounts for about 40% of the country’s gross domestic product (GDP) and more than 20% of its jobs, has already suffered severely from the US-China trade war.

Larger cuts would create serious concerns for the ruling Communist Party and its focus on social cohesion and economic stability, especially in the year Beijing aims to complete the process of doubling its GDP and disposable income over the previous decade.

The share of urban unemployment reached 6.2% in February, up by one percentage point more than in 2019, setting a separate record since the statistics bureau began publishing the data in 2018

Some analysts predict that unemployment will increase by another 5 percentage points this year, equivalent to an additional 22 million people left unemployed in cities.

Another 103 million workers could be affected by wage cuts of 30% to 50%.

A 23-year-old entrepreneur who runs a mirror factory in Zhejiang Province said his US customers canceled orders for more than 500,000 USD on Saturday (March 21st) alone.

Many of the factory’s more than 1,000 workers are out of work, while others get more days off a week.