The Dongguan Slowdown

A Japanese view on the slowdown in Dongguan: Dongguan's troubles portend tough times

Even today, around 40 major Japanese electronics makers that are listed on the Tokyo Stock Exchange have operations in Dongguan. They include copying machine makers, such as Kyocera and Konica Minolta, as well as TDK and Mabuchi Motor. But these companies are increasingly hard-pressed to eke out profits amid soaring wages in China.

Grim figures

China's gross domestic product rose 7.0% from a year earlier in the January to March quarter on a seasonally-adjusted basis. Meanwhile, Dongguan's GDP increased 6.7% in the same period, falling below Beijing's 7% threshold and much lower than the 7.8% rise for 2014.

The number of migrant workers has also decreased by about 30% this year compared with 12 months ago. "There were 550 Japanese companies operating here up until four or five years ago; that number has dropped to around 450," said Kazutaka Takeuchi, secretary general of a Japanese business association in Dongguan.

Repercussions of the Dongguan slowdown are being felt elsewhere. In late April, Chinese real estate developer Kaisa Group defaulted on its U.S. dollar-denominated corporate bonds. It was the first such default in the Chinese real estate industry. The Shenzhen-based company has a number of properties in Dongguan.

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From 2012: Cash crunch for local governments in China: Dongguan is Greece