China's export engine shows signs of life

By James Pomfret - Analysis

SHENZHEN, China (Reuters) - Over the past half year, the global financial crisis has wrenched asunder the gritty factory towns in China's Pearl River Delta, but some signs on the ground suggest the workshop of the world is cranking up again.

The slump is not over for the area that churns out a third of China's exports. Many executives estimate that a collapse in orders, mainly from the United States and Europe, has wiped out 20-40 percent of their business. Thousands of factories in low-margin sectors have closed, and the government's latest guess is that 23 million migrant workers have lost their jobs.

But at least the nightmare scenario of widespread social unrest now looks increasingly unlikely. And industrial Darwinism has left leaner factories poised to take up the slack when the West rediscovers its appetite for cheaply made Chinese goods.

"Generally we believe that we're probably at the bottom and that it's stabilized," said Steve Smith, general manager of Measurement Specialties (MEAS.O), which makes sensors for an array of automobile, industrial and medical applications.

Empty workbenches at Measurement Specialties' gleaming new Asian headquarters in the Shenzhen High-Tech Park testify to a slump in the auto market that is a big reason why the firm has cut its workforce to 1,300 from a peak of 1,750 in September.

But Smith is keeping his fingers crossed that the worst is over. "We have some indication that demand's starting to pick up," he told Reuters.

CLEAR AS MUD

Getting a clear picture of Guangdong, the province north of Hong Kong that serves as the world's factory floor, is not easy: as one European businessman put it, sowing confusion is a competitive advantage in the free-wheeling, free-market Delta.