China's slowdown takes its toll

Karishma Vaswani Asia business correspondent

It is an almost Dickensian scene. Workers hunched over their benches, the glow

from the sparks of their metal-cutters throwing their faces into sharp relief.

This isn't 19th Century Victorian England though. It's just outside the city of

Dalian, in north-east China.

These workers were once the engine of China's two decades-long economic

miracle. But on factory floors across the country these days, there is an

increasing uneasiness about the future.

Qiao Ao has worked at this factory for the last four years making parts for

bigger machines that are sold overseas to Europe and Japan.

He is a migrant worker, like many of his friends here.

Just a few months ago, he was constantly busy, but that's not the case anymore.

"Our orders have been falling from the beginning of this year," he told me.

"I'm not doing as much overtime these days as I used to when business was good,

so I don't make as much money as I used to."

That is a story you hear across China more and more these days.

'Worse than 2008'

The economic slowdown in China has hit small manufacturers particularly hard -

factory activity has declined to its lowest level since 2009 this year.

Image caption Factory boss Zhang Wenhe says he's never seen business this slow

Exports have slumped too - this week figures for August showed further

weakness.

Zhang Wenhe, the boss of this factory, told me he's seen orders fall by 30%-40%

since June, and, if things continue like this, he will be forced to let some of

his staff go.

"I've been in this business for eight or nine years, and I've never seen it

this bad," he told me as we walked through the industrial district around his

factory. "A lot of factories in this area have had to shut down, and are

letting go of their staff. This is the toughest I've ever seen it - even worse

than 2008 during the last crisis."

The current slowdown in China is being felt across the globe - it is, after

all, the second largest economy in the world, and what happens here is being

felt elsewhere.

So as the great and good of the global business community gather in Dalian on

Wednesday for the World Economic Forum, at the top of their minds will be how

China plans to manage this economic transition.

World Economic Forum

Describes itself as "the international institution for public-private

co-operation to shape the global, regional, national and industry agendas"

Set up in 1971 by Prof Klaus Schwab as a not-for-profit foundation

Holds an annual meeting in January at the Swiss ski resort of Davos, which is

essentially a talking shop for business and political leaders to discuss

possible solutions to global problems, though it is increasingly attended by

celebrities, activists, academics and think tanks too

Since 2007, has also put on the Annual Meeting of the New Champions (sometimes

called the Summer Davos) in China, alternating between Dalian and Tianjin

Holds various other regional forums around the world

China managed to borrow and spend its way out of the last crisis, building

massive property developments across the country, pushing workers from the

factory floors into construction projects.

But now even that pillar of the Chinese economy is suffering.

Ghost town

I drove into the Changxing Island township - just 50 miles (80km) out of Dalian

- a satellite city built on the expectation of future growth.

But all I found were miles and miles of brand new, but empty buildings.

Image caption Freshly built but no-one's home

An eerie, end-of-the-world feeling descends upon you as you walk around the

town.

Freshly painted pedestrian crossings and traffic lights line the pavements but

there is barely anyone on the streets.

One block of flats is aptly called Fairyland, a name its developer would never

have dreamed could have the negative connotations it now does.

Tens of thousands of flats here lie uninhabited, part of the estimated 70

million unsold homes that have been built across the country, for a

middle-class population that never showed up.

The Chinese government says this is all part of the plan to move from an

export-led economy to a modern one based on services.

It is textbook economics and part of the often painful cycle maturing economies

need to go through.

But as China's economy changes, it has to create jobs for the next generation.

'Obsessed with money'

Zoey Ye is 21 years old. Fresh-faced and an English and American literature

enthusiast, she is nervous about her job prospects because of the slowdown.

Image caption Zoey Ye has high expectations for the future

"I think the economy has become a little slow, so companies don't hire new

people," she told me as we walked around her university lake.

"But I am educated, and I want to make money so my children can have everything

they want."

You just have to take a look around Zoey's university to see the challenge that

China faces as its economy changes.

An estimated eight million Chinese graduates enter the workforce every year

and, like Zoey, they all have rising expectations about their future.

As we stroll around the green campus, Zoey and I share stories of our favourite

books, and chance upon a common one - The Great Gatsby by F Scott Fitzgerald.

"I think there's a lot of parallels with modern China and that book," she tells

me. "Everyone here is obsessed with money too."

Managing these expectations will be one of the government's key challenges

ahead.