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Originally published Saturday, November 24, 2012 at 7:00 PM

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Chinese manufacturing center frets as competition grows

China's ambition to build the biggest of everything is being crimped by problems its manufacturing sector is running into these days.

The Washington Post

Big ambitions

FROM AIRPORT TERMINALS to golf resorts, China is home to some record-breaking projects. Among them:

Fastest train: The bullet train from Shanghai's western suburb of Hongqiao to the lakeside resort city of Hangzhou, unveiled in fall 2010, can reach speeds of up to 260 mph. China can also boast the planet's longest high-speed rail network.

Longest sea-crossing bridge: The six-lane Hangzhou Bay Bridge, in Haiyan, is 22 miles and crosses Hangzhou Bay on China's east coast. That's about the length of the undersea portion of the Channel Tunnel between the Britain France.

Largest airport terminal: Terminal 3 at Beijing Capital International Airport, which opened in 2008, was built by 50,000 workers. It is 1.8 miles long and has floor space that is 17 percent larger than the entire London Heathrow Airport.

Largest golf resort: The Mission Hills resort, outside Shenzhen, which is across the border from Hong Kong, has 12 golf courses spanning 17 acres. It also has three spas and 3,000 caddies.

Biggest hydroelectric project: The Three Gorges Dam, which flooded archaeological and cultural sites and displaced more than 1 million people, can create as much electricity as 18 nuclear plants.

Most people: China is the world's largest nation with a population of 1.3 billion and counting. India is projected to overtake China as the world's most populous nation by 2035 because of falling birthrates in China.

The Washington Post

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DONGGUAN, CHINA — Dongguan on China's Pearl River Delta was once a manufacturing boomtown, a place that made so many different things, from toys to shoes to furniture, that it became known as "the world's factory." Migrant workers came from all over the country to work, often taking jobs that used to be in the United States.

But these days, it's Dongguan that's losing jobs and eyeing the United States with some envy.

"I'm leaving," said Frank Lin, a Taiwanese businessman who is closing his factory in Dongguan. "There's no future for this place."

Lin, 55, sat in a cavernous dining room at the Haiyatt Garden Hotel where only two tables had diners. This room used to be packed every night, Lin said.

Americans are more accustomed to hearing about Rust Belt manufacturing towns in decline because the jobs left for China. But in China there are places where factories are shuttering and the future is uncertain.

China's reliance on cheap labor has powered the country's economy to unprecedented heights and fueled its ambition to build the biggest of everything.

But China's manufacturing sector is running into problems these days, crimping such ambitions.

Donngguan's New South China Mall is the world's largest based on leasable area. But it has been 99 percent vacant since its 2005 opening.

China is being squeezed on one end by places with even lower labor costs, such as Laos and Vietnam, and is struggling to make more-advanced products because of competition from developed nations such as Germany and the United States.

"China's manufacturers are in an extremely hard situation and facing what we call 'a sandwich trap,' " said Zhang Monan, a researcher in economics at the State Information Center, a government think tank.

For China's new leadership, which completed its once-in-a-decade turnover this month, the coming years include a big test. Even as China is poised to become the world's biggest economy, it is straining to make the transition from "the world's factory" to becoming an economy on par with the United States.

During the transition, the departing leader of the Communist Party, Hu Jintao, said China's "unbalanced, uncoordinated and unsustainable development" remains a major problem for the country, according to the official Xinhua news agency.

China's model for its manufacturing sector has become the United States.

"China has to change its manufacturing strategy to be more innovative in technology and compete with a 'reviving' U.S.," wrote Zhang, the researcher, this summer in an op-ed article, "Wake-Up Call for Industry," for the China Daily. "China is expected to face fiercer-than-ever competition from the United States in the manufacturing sector, making it all the more urgent for Beijing to expedite its industrial upgrade," he wrote.

It has been clear for a few years that places such as Dongguan must adapt or risk getting wiped out. In March 2008, Wang Yang, the party secretary for Guangdong province, visited Dongguan, then a buzzing hub of activity.

"If Dongguan does not start to transform its industrial structure today," he warned, according to the South China Morning Post, "it will be transformed and lose out tomorrow."

It could already be too late for Dongguan.

Before 2009, the city was one of the fastest growing in China. Then the U.S. recession hit, which sent demand for Chinese goods plummeting. Before the city could recover, Europe's debt problems delivered another punch.

During the first three quarters of this year, Dongguan grew 3.5 percent. That would be considered strong nowadays in a developed economy such as the United States, but it is anemic by Chinese standards and much lower than the average rate of 7.9 percent in the rest of Guangdong province.

China has relied on two pillars of economic growth for the past several years: exports and construction. But many analysts say that for the country's economy to mature and stabilize, it has to find other ways to grow, beyond building airports and roads or making goods cheaply.

The country has made some progress in building more advanced products such as airplanes and cars. But Dongguan's troubles illustrate how hard it can be to reinvent overnight an economy built on cheap labor, especially as China's overall growth has slowed to its lowest rate in years.

Dongguan is sprawling, more a patchwork of townships than a centralized city with a hub. In one of its many towns, Houjie, known for its shoe factories, Chen Yunyan sat looking weary in her shop, which was filled with giant bags of zippers sold to other manufacturers.

"It's the worst," she said about the economy. "Most of my customers have gone bankrupt."

The central zipper factory for Chen's company is in Shenzhen, a major, faster-growing city to the south near Hong Kong. Chen, who manages customers in the Dongguan area, blames the government for failing to help ordinary people.

"It's the most corrupt government," said Chen, 36. "There's no money spent on ordinary people. They only spend it on building roads."

Houjie is, in fact, filled with bulldozers and half-built roads. Across the street from Chen's storefront, a building is under construction.

In a job-placement center around the corner, only a few young migrant workers milled around looking for work. Lai Rongsheng, 21, moved to Dongguan three years ago from the southeast province of Jiangxi. He worked at a toy factory for six months before quitting, and wants to go into sales — for higher wages and work that's less grueling. But he hasn't found anything.

"More people are looking for work," said Lai, who had already made two trips to the job-placement center.

Without the hope of better jobs in Dongguan, Lai and his friends said some migrant workers were beginning to return to their hometowns.

In an office across the city, Chen Shuibin, an accountant for businesses in Dongguan, said that of about 300 clients, half were losing money this year.

"It's worse than 2009," he said while drinking tea in his office. "We live day by day. We can't see any hope for tomorrow."

Liu Liu contributed to this report. Seattle Times staff contributed to this report.

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