China’s manufacturing sector is facing mounting pressure as small and medium-sized businesses in major industrial provinces report declining orders, shrinking profits, delayed payments, intensified tax inspections, and growing uncertainty over their ability to survive.
Business owners in Zhejiang and Jiangsu provinces, two of China’s manufacturing hubs,
The Epoch Times that the challenges go beyond a temporary slowdown. Many factories are still operating, but some entrepreneurs are already calculating how long they can continue under worsening market conditions. They spoke on condition of anonymity out of fear of reprisal.
The difficulties come as China’s domestic consumption remains weak and traditional manufacturing industries struggle with
, forcing some companies to seek overseas markets at increasingly lower prices.
Low-Cost Exports
A hardware manufacturer in Zhejiang Province, surnamed Chen, told The Epoch Times that his company is facing two major problems: declining orders and intensified tax inspections.
“Foreign orders are no longer what they used to be. Domestic consumption is weak, so we have had to shift toward exports,” Chen said. “Right now, only export businesses can still make money.”
However, he said the shift has created another problem, which is fierce competition among Chinese manufacturers entering overseas markets.
“Many companies that used to focus on domestic sales have switched to exports, creating a vicious cycle,” he said. “Factories are selling all kinds of products overseas at extremely low prices, damaging the market and causing many companies to lose money.”
Chen’s company produces hardware and construction materials, an industry heavily affected by China’s property downturn. He said he had largely abandoned the domestic market since last year.
“It’s not just me. Many factories have given up on the domestic market,” he said. “I think many factories in Zhejiang can survive for no more than another year.”
China’s official data showed further signs of weakness. The National Bureau of Statistics
on July 31 that the official manufacturing purchasing managers’ index (PMI) fell to 49.2 percent in July from 50.3 in June, returning to contraction territory and missing market expectations.
The official data—which is often distorted in the direction of appearing better than reality—also showed that manufacturing new orders declined, with the new orders index falling to 48.5 percent. The non-manufacturing business activity index dropped to 49 percent, while the construction sector index fell to 47 percent.
Domestic Market Weakness
A businessman in machinery parts manufacturing in Jiangsu Province told The Epoch Times that conditions in the domestic market are much worse than many people realize.
“The more products China exports, the more it shows that domestic demand is shrinking,” the businessman said.
He said his company has faced increasingly aggressive price cuts from customers.
“The biggest problem now is that customers renegotiate prices every three months. Payments are delayed for two or three months, and sometimes four months,” he said.
The delays have created severe cash-flow problems for manufacturers, according to the businessman, while companies are also facing more frequent tax inspections.
“Tax authorities are trying to meet revenue targets by investigating businesses,” he said. “Even when they cannot find problems, they keep investigating.”
The businessman, who has worked in manufacturing for more than 30 years, said he has never seen conditions like the current downturn.
“Except for tech industries supported by the Chinese Communist Party and government subsidies, there are almost no industries that can truly make money,” he said. “Many people are thinking about shutting down and moving to Thailand for retirement. Continuing to operate may only lead to greater losses.”
China’s official statistics
that the economy expanded 4.3 percent year-on-year in the second quarter, one of the weakest growth rates in more than three years.
Increased Tax Inspections
Beyond weak demand, increased government inspections and penalties are adding to financial pressure.
An accountant at a company in Jiangsu Province, surnamed Liu, told The Epoch Times many businesses are struggling under inspections from tax authorities, fire departments, and other government agencies.
“Companies can no longer evade taxes. The inspections are mainly aimed at finding reasons to fine businesses,” Liu said.
She said some companies have also faced pressure from local authorities over compliance requirements.
“Authorities require companies to purchase designated fire safety products. If they refuse, they may be accused of violating fire regulations, fined, or even forced to shut down,” she said.
According to Liu, some business owners are no longer focused on expansion but simply on survival.
“The first thing companies consider now is how long their cash can last and what procedures are needed to close the business,” she said. “But even when companies want to shut down, they are not always allowed to complete the process unless they pay additional fees.”
Traditional Industries Left Behind
A Chinese scholar based in Zhejiang Province told The Epoch Times that China’s economy is increasingly supported by exports, government investment, and state-backed high-tech industries, while traditional manufacturing, small businesses, real estate-related industries, and local services continue to weaken.
He said Beijing has limited ability to launch large-scale economic stimulus measures, creating a widening gap between official economic figures and the experiences of private businesses.
“The real situation cannot be understood by looking only at the regime’s statistics,” the scholar said. “You have to look at how long private companies can continue operating and how many businesses are already looking for a way out.”
He argued that the Chinese regime has concentrated resources on a small number of strategic industries while leaving many traditional manufacturers without sufficient market demand, financing, or policy support.
He said that as local governments face worsening fiscal pressure, some have increasingly relied on tax inspections, fines, and administrative enforcement to raise revenue from private companies.
“The key question is not just how fast the economy is growing on paper,” the scholar said. “It is how many companies can continue to survive.”
Zhou Yu contributed to this report.
