BEIJING — Zhang Hanzhong, who supplies locks for auto manufacturers, is part of a swath of China’s economy that is lagging in a two-speed recovery.
Business for retailers, hotels, photo studios and other service industries is picking up as China limps out of its deepest slump since the 2008 global crisis. But exporters and manufacturers who drove its boom over the past decade are struggling.
Zhang’s sales are down 20 percent with no rebound in sight, while labor costs are up.
“The second half of the year is even harder than the first half,” said Zhang, who employs 60 people at his factory in Meizhou in Guangdong province near Hong Kong.
China is recovering but the days of double-digit growth are gone. Faced with falling returns from a three-decade-old growth model fueled by exports and investment, Beijing is trying to rebalance the economy by promoting consumer spending, service industries and technology. It is a strategy that promises smaller but more sustainable gains. That could have global repercussions by dampening voracious demand for iron ore, industrial equipment and other imports that drove growth for suppliers from Australia to Africa to Germany.
“The world has to get used to the idea that China will grow at a 7 or 8 percent pace, and growth will be far less investment-intensive over the next decade,” said Mark Williams of Capital Economics. “So the projections for Chinese demand for commodities, capital goods, construction equipment and so on have to be revised down.’”
The Communist Party has committed in broad strokes to growth based on consumer spending and innovation in its five-year development plan that runs through 2015. A report in February by the World Bank and a Chinese Cabinet think tank said that to achieve that, the government will need to make politically daunting changes including curbing the dominance of state companies.