Dongguan furniture industry frequently heard the "closed door" sound factory boss changed the mobile phone number to hide the debt

In the face of a macroeconomic downturn and a slump in the real estate market, furniture manufacturers closely tied to the construction sector have been closing down frequently. Dongguan, a major hub for furniture production in Guangdong Province, has seen small and medium-sized manufacturers struggling with a sharp decline in domestic orders and increasing losses, intensifying industry consolidation. Furniture stores in hypermarkets are experiencing reduced foot traffic, with many merchants leaving. Some stores in Dongguan have started diversifying into side businesses like restaurants and hotels in an attempt to adapt. However, industry experts warn that such transformations carry risks. Two days after going missing, Zeng Guangming changed his phone number, temporarily escaping the relentless calls from suppliers and employees. Yet, unavoidable debts forced him to confront the crisis head-on. At the end of May, he announced the closure of two long-standing furniture factories in Dongguan. By June 1st, another factory in Chashan Town had also shut down. At least three factories closed within a single week. Zeng Guangming told reporters from *Daily Economic News* that "the employees were unaware they were insolvent at the end of last year." Meanwhile, the furniture industry in Foshan is also struggling, with companies that faced tough times last year now facing even greater challenges. “Last year was hard, this year is harder,” is a common sentiment among industry players. One furniture factory with over 40 years of operation went bankrupt. On May 25th, Du Jie, manager of Yujian Furniture Factory, held a weekly meeting to assign tasks. Employees believed it was just a normal Monday, but after lunch, they received a verbal notice from the village committee: “Your boss said nothing.” The two factories, Yujian and Guansheng, belong to Zeng Guangming, and at that point, employees discovered he could not be reached. Yujian, established in 2002, focused on domestic sales, while Guansheng, founded in 2006, handled exports. Employees reported that shipments continued normally until the 25th, with orders still coming in. “We were working in the morning and were told the boss left after lunch,” one employee said. According to internal reports, the two factories carried over 18 million yuan in debt last year, and this year still had more than 6 million yuan in goods. Two months ago, the company could no longer afford the rent at the Expo Park in Houjie Town, and the operations department had already withdrawn. Du Jie noted that the furniture industry has been declining annually. “Last year, we had monthly output of 2 to 3 million yuan, but this year, it’s only around 1.6 million,” he said. According to staff, Zeng Guangming owed a total of 18.8 million yuan in debts, including supplier arrears, rent, utilities, and salaries. Zeng admitted that this year’s monthly output was 40% lower than last year. “This factory has been running for over ten years, like my child. No one wants to take this step, but I can’t do anything—things are too difficult.” Guansheng Furniture was sold for 2 million yuan to a sports equipment company. Zeng told reporters that the factory was handed over to the village committee, which then sold it to pay workers’ wages and cover utility costs. “I didn’t receive a penny,” he said. Fan, a former employee of Guansheng, confirmed that 2 million yuan was used to pay about 1.3 million yuan to 180 employees, with the rest covering rent and utilities. “It’s estimated the boss didn’t get any money,” Fan added. The economic slowdown has made this year particularly challenging for the Dongguan furniture industry. On June 3rd, when reporters visited Guansheng, the factory name had been changed overnight, and workers were finishing up removals. Meanwhile, Yujian Furniture struggled to find buyers due to debt issues. Zeng said Yujian was also up for sale, with 6 to 7 million yuan in inventory. “I want to clear worker wages first, but I can’t get rid of the factory quickly—it’s hard to sell.” The situation at Yujian hasn’t resolved yet. On June 1st, the owner of Yalai Te Furniture Factory also disappeared. Personnel manager Zhong revealed that the boss owed over 800,000 yuan in salaries, while production manager Tong said there were nearly 2 million yuan in unpaid supplier bills. Zhong explained that many factories in Dongguan are suffering from reduced orders and low wages this year, a trend linked to broader industry challenges. “Dongguan is a furniture hub. Factories are closing daily. Yesterday, two more closed in Houjie, and the day before, two more fell,” he said. According to the Ministry of Industry and Information Technology, China’s furniture manufacturing enterprises generated 718.74 billion yuan in revenue in 2014, a 10.9% annual increase—the lowest in five years. In Dongguan, large-scale furniture manufacturers saw a 0.34% drop in revenue in 2014, signaling a deepening crisis. The Dongguan SME Bureau reported that the local furniture industry faced plummeting domestic orders, expanding losses, and stagnant growth in 2014, with pressure expected to continue in 2015. Downstream stores are also struggling. Passenger flow has dropped, and many merchants are evacuating. Some stores have begun selling off inventory, while others are considering changing products or leaving the market altogether. In Dongguan, Yingfeng Home Plaza introduced food and entertainment formats like Haidilao, KTV, and tea houses as part of a transformation strategy. However, industry experts caution that such moves may dilute the core business of home furnishing stores. Sales at key stores like Fantasia Home Furnishings Plaza and Guanghui Home have declined significantly. Chen Jiao, a store manager, said her business has been in loss except for May, with few customers and weak sales. Feng Kunkun, director of Fantasia, admitted that passenger traffic has dropped since March, and sales have fallen sharply. While Guanghui Home saw slight improvements, overall trends remain bleak. Many merchants attribute the decline to poor real estate conditions and a weak economy. “Most of our sales depend on old customers or industry referrals,” one said. Stores across Dongguan are displaying “clearing goods” signs, with some relocating or withdrawing. Li Ting, a salesperson at Yingfeng, said her store is considering product changes or exiting the market. In Guanghui Home, brands often change, and many contracts expire without renewal. Salespeople admit that this year’s sales have dropped by 20-30%. The furniture retail sector is saturated, with over 40 million square meters of home store space in China, half of which is surplus. Stores in Houjie have expanded rapidly, leading to fierce competition. Some stores have turned to “side jobs,” like introducing seafood restaurants. Yingfeng Home signed a contract with Haidilao last year, and is now renovating its sea fishing area. However, industry opinions vary. Feng Kunkun warned that expanding beyond home furnishings could dilute the core business, risking large-scale vacancies. Guanghui Home believes professional stores should focus on their core competencies. The furniture industry is showing a Matthew effect, with larger brands gaining market share. Zhu Changling, chairman of the China Furniture Association, noted that demand is still growing, but SMEs face rising labor costs, taxes, and environmental pressures. With the economy entering a new normal, many furniture factories in Foshan and Dongguan have closed. Labor costs have risen sharply, with some estimates showing a 20% increase in recent years. Zhu Changling also pointed out that environmental regulations and taxation are contributing to closures. Beijing and Shenzhen have imposed strict rules on furniture factories. Despite the struggles of SMEs, listed furniture companies are performing better. Meike Home, Hao Laike, and Sophia all saw revenue and profit growth in Q1 2024, highlighting the industry's growing concentration. While the market remains fragmented, Zhu Changling believes that poorly managed SMEs will continue to be eliminated. The furniture industry is undergoing a reshuffle driven by automation, customization, and industry standards. For more information on China’s furniture industry, visit the official website of Xianghe Furniture City.

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