Iran conflict: The ongoing conflict in the Middle East is exerting significant pressure on China’s export-driven economy, affecting factory orders, costs, and jobs. While China managed to withstand the tariffs imposed by former President Trump, the current situation is presenting new challenges.
Iran conflict: what to know
Impact on Manufacturing and Employment
In Foshan, a major manufacturing hub in southern China, workers are expressing their frustrations. Many are struggling to find stable employment and are resorting to temporary factory jobs that pay between 18 to 20 yuan an hour. Workers in this region are feeling the effects of a shift in Chinese manufacturing, moving from cheap, mass-produced goods to more automated, advanced technologies.
The conflict has compounded existing issues in China’s economy, which was already experiencing slower growth and rising unemployment. Despite reporting a GDP growth of around 5%, discontent among workers has been growing. The war in the Middle East is now adding to the economic strain, leading to increased costs and fewer factory orders.
Rising Costs and Supply Chain Challenges
Traders in Guangzhou, the world’s largest fabric market, report that costs have risen by approximately 20%. Many are facing difficulties as higher oil prices impact the supply of petrochemicals essential for fabric production. Some traders are unable to pass these costs onto customers, leading to excess inventory and financial strain.
While the Canton Fair showcases China’s advancements in technology and electric vehicles (EVs), the rising costs of production are evident. Despite a significant increase in EV exports, traders are struggling to fulfill orders, particularly to the Middle East, due to the ongoing conflict. Some shipments are reportedly delayed at Chinese ports.
China’s Diplomatic Efforts
In response to the conflict, China is calling for a ceasefire and is actively engaging in diplomatic discussions with regional leaders. Beijing aims to demonstrate its commitment to stability in the region while navigating its relationship with the United States. Analysts suggest that while China is seeking to strengthen its position, the current geopolitical climate presents complexities that could affect its economic ambitions.
As the situation evolves, the impact on workers in manufacturing hubs like Foshan remains a pressing concern, highlighting the disconnect between global economic strategies and local realities.