Hong Kong-owned electronics factory shuts down in Shenzhen and lays off workers as economic downturn bites

South China Morning Post
Fri, August 18, 2023

A Hong Kong-owned electronics company has closed a decades-old factory in Shenzhen, throwing hundreds of workers out of work, as China's economic downturn and export weakness continue to erode the country's manufacturing base, according to local media reports and an employee.

Xin An Electrical (Shenzhen) Co, which has a factory in the Bao'an District of Shenzhen, told workers that it will cease operations on Friday due to a deteriorating business situation, lower orders after the Covid-19 pandemic and the global economic downturn, according to a notice published by local Chinese media.

According to the notice, Xin An Electrical said that it will pay employees compensation in accordance with the country's labour laws.

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An employee at the factory, who answered a phone call from the Post on Thursday but declined to give their name, said that the notice was authentic.

The small manufacturer has been downsizing in the last two years, and according to China Business News, it currently has over 900 workers. Its Hong Kong-based owner, Simatelex, did not immediately reply to a request for comment.

Simatelex makes household appliances, such as coffee makers and food processors, for international brands like Keurig, Cuisinart and Philips, according to its website.

Simatelex established its first factory in Shenzhen in 1985 to take advantage of "China's abundant labour resources" after China adopted its open-door policy in the late 1970s, according to information on the company's website. Simatelex currently has four production plants in the country and one production plant in Batam, Indonesia, employing a total of 20,000 workers.

While Xin An Electrical is small, with a registered capital at 76 million yuan (US$10.4 million), its closure has hit a nerve among Chinese netizens amid concerns that the world's second-largest economy is losing its edge in low-end manufacturing.

While Shenzhen has transformed itself from a labour-intensive manufacturing base to a hi-tech hub, factories like Xin An still provide essential jobs for the country's blue-collar workforce.

The closure of the factory is one example of how the supply chain for Shenzhen's electronics industry continues to be affected by geopolitical tensions and the after-effects of China's tough pandemic lockdown measures. But it also reflects the long term trend of Shenzhen shifting itself from a labour-intensive OEM (original equipment manufacturing) hub to a high-end manufacturing and innovation centre

The business closure comes about three months after a hundred workers from Xin An Electrical reportedly went on strike for unpaid wages and social benefits after reports that the business would close in May this year, according to China Labour Bulletin, a labour rights monitor in Hong Kong.

Additional reporting by Iris Deng

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