China Faces Layoff Storm and Sharp Decline in Car Sales Due to COVID-19

[Image source=EPA Yonhap News]

[Asia Economy Beijing=Special Correspondent Park Sun-mi] As the spread of COVID-19 in China shocks the entire industrial sector, fears of large-scale job losses are growing. Many companies have already begun notifying layoffs in response to extended Spring Festival (Chinese New Year) holidays and production stoppages caused by the COVID-19 outbreak. The Chinese automotive industry is also clearly experiencing a decline in sales due to the spread of COVID-19, making it difficult to avoid the impact of a wave of layoffs.

◆Government Emphasizes "Job Stability" but Industry Says "Layoffs Already Underway"= According to a survey by Chinese employment information site Zhaopin on the 14th, 30% of Chinese companies are planning layoffs due to the impact of COVID-19. About 10% of companies reported being on the brink of closure, and 30% said they are unable to pay employees on time. This is due to people not fully returning to normal life after the Spring Festival holiday and companies and factories not resuming operations because of the COVID-19 spread.

With the prevailing view that the economic damage in China will be greater than during the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak, concerns are growing that job losses will also surpass those during SARS. According to official Chinese data, 8 million people lost their jobs in China during the 2003 SARS epidemic.

Signs of layoffs are already being detected across various industries. The Hong Kong South China Morning Post (SCMP) reported that Lvyue Group, a tourism and resort company and subsidiary of Trip.com, China’s largest online travel agency, has already notified employees this week of reduced working hours and a 30% salary cut for executives. Employing thousands and operating about 1,900 hotels worldwide, the company cited revenue declines due to the COVID-19 outbreak as the reason for these measures. Lvyue Group is also planning layoffs of about 20% depending on the situation.

China’s major advertising company Xinchao Media also notified this week that it will lay off 500 employees, equivalent to 10% of its total workforce spread across 80 cities in China. Xinchao Media CEO Zhang Zhixue explained, "Business in February dropped by 70% due to COVID-19," adding, "We decided on layoffs because the impact of COVID-19 is likely to continue into the second quarter."

The Chinese government, sensing the situation, has urged the industry to maintain as many jobs as possible. Chinese President Xi Jinping ordered at a COVID-19 response meeting on the 12th that "local governments must strive to maintain job stability."

It is uncertain whether the Chinese government can meet its target of securing 11 million new jobs this year, which was achieved last year. With the entire industrial sector hit by the COVID-19 outbreak, the number of university graduates entering the job market this year has increased by 400,000 to 8.74 million compared to last year. When unemployment rates for January and February are calculated and announced together in March, there is a possibility that the figure will exceed the official 5.2% unemployment rate recorded in December last year.

◆China’s Automotive Sales Disrupted by 1 Million Units Due to COVID-19= The Chinese automotive industry, already in an adjustment phase, is taking a direct hit from COVID-19.

On the 14th, China’s Global Times cited the China Association of Automobile Manufacturers, reporting that the expected sales decline due to the COVID-19 outbreak this year will exceed 1 million units. The association expressed concern, saying, "The impact of COVID-19 on China’s automotive industry will be greater than during the 2003 SARS outbreak," adding, "It will cause more serious damage to an industry already undergoing adjustment." They further noted, "Demand has decreased and production is delayed. Some mid-sized automakers are also facing capital crises."

The fact that many automobile manufacturing plants are located in regions heavily affected by the COVID-19 outbreak also suggests the potential for significant disruption.

The Global Times reported that Hubei Province, which has the highest number of confirmed COVID-19 cases and deaths, accounts for about 8-9% of China’s total automobile production. Guangdong and Zhejiang provinces, also heavily affected by confirmed cases, are important automotive manufacturing hubs. These regions’ impacts have caused disruptions in nationwide automobile assembly and parts supply.

Already in January this year, China’s automobile sales showed a clear downward trend. The number of vehicles delivered to dealerships last month was 1.61 million, a 20% decrease compared to the same month last year. This is the largest monthly decline since January 2012. Electric vehicle sales in particular plummeted by 54%, leading the overall decline in automobile sales.

This content was produced with the assistance of AI translation services.