Entering the second half of 2025, the economic challenges facing China are becoming more apparent. On July 1st, the SAIC Volkswagen Nanjing plant officially closed, Shenzhen Zhongshun Semiconductor announced a two-month halt in operations starting from July 2nd, and the Japanese retail brand Ito-Yokado in Chengdu ended its business at the end of June. This series of factory closures and production halts reflects the current reality of weak domestic demand, overcapacity in the manufacturing industry, and the continuing decline in foreign investment confidence.
SAIC Volkswagen Nanjing plant, formerly known as Nanqi Assets, was taken over by SAIC Volkswagen in 2008, with an annual production capacity of up to 360,000 vehicles. It was once an important production base for popular models like the Passat and Skoda Superb, providing over three thousand job opportunities at its peak. Now, the plant sits empty, deserted by its workforce.
Mr. He, a retired employee who worked at SAIC Volkswagen in the early 1990s, shared with a reporter from Dajiyuan that foreign companies have always been known for their competitive salaries and generous employee benefits. His son also worked at the SAIC Volkswagen Nanjing plant for many years. “In fact, news of the Nanjing plant closing has been circulating since last year. My son has worked this job for over a decade. With the current poor economic environment and fierce competition in the automotive industry, SAIC can only sustain its operations by scaling back.”
Public records show that SAIC Volkswagen was established in October 1983 as a joint venture between SAIC Group and Volkswagen in Shanghai Anting, with production facilities in Nanjing, Yizheng, Urumqi, Ningbo, Changsha, and other locations. In July 2023, SAIC Volkswagen’s first plant in Anting, Shanghai, was permanently closed.
Mr. Zhong, an automobile salesperson from Jiangsu, stated on July 7th, “The closure of the Nanjing plant is just the beginning. Electric vehicles are becoming more competitive in terms of performance and price, causing a continuous shrinkage in the gasoline car market, where many gasoline cars sitting in warehouses cannot be sold. Joint venture brands are having their market space squeezed by domestic new energy car manufacturers. Toyota from Japan is planning a new plant in Shanghai, expected to start producing electric vehicles in 2027.”
In addition to the automotive industry, the Chinese electronics manufacturing sector is facing unprecedented challenges. Shenzhen Zhongshun Semiconductor Lighting Co., Ltd., established in 2019, announced on July 2nd that due to operational difficulties, it would halt production for two months and notify the resumption of work separately. Following the announcement, some employees gathered in protest on the factory premises, questioning the company for suddenly halting work without paying basic salaries. An employee expressed, “This isn’t a break; it’s basically forcing people to resign voluntarily.”
Ms. Chen, a lighting industry professional from Guangdong, mentioned, “Zhongshun’s situation is similar to that of Zhongshan, a major lighting manufacturing town, both impacted by significant reductions in European and American orders. If companies attempt to export to the U.S. through countries like Vietnam, once the U.S. deems the products are not substantially processed and still of Chinese origin, they could face punitive tariffs that they simply cannot afford. More companies may follow suit and shut down in the near future.”
Additionally, the Chengdu Ito Yokado Financial City store, a Japanese-funded enterprise with nearly 30 years of history, officially closed on June 30th. Scenes of employees bowing to bid farewell to customers on the last day circulated widely on social media. Ito-Yokado was once a benchmark in China’s urban retail industry, but in recent years, the number of stores in Beijing and Chengdu has been steadily decreasing.
Chengdu Ito Yokado Co., Ltd. was registered in Chengdu in January 1996 and officially opened on November 21, 1997, as a representative Japanese department store brand in Chengdu. It is understood that Ito-Yokado has significantly reduced its management team in mainland China and is internally assessing whether to completely withdraw from the Chinese market.
A Chengdu resident, Ms. Peng, commented, “After the pandemic, people’s purchasing power has noticeably decreased. Coupled with the increased sanctions from the U.S. against China, many foreign enterprises are leaving one after another. People are more cautious in their consumption, shifting towards online shopping, and physical stores simply can’t survive. Even some state-owned supermarkets are struggling to stay operational.”
With over 12 million Chinese college graduates this year and a large number of factory workers losing their jobs, the job market is under unprecedented pressure. Hong Xiang, a representative from the Guangdong Foreign Trade Association, said, “After frontline factory workers become unemployed, their ability to transition to new jobs is low, resources for retraining are scarce, making it a structural problem in China’s economic downturn. Industries like low-end semiconductors, lighting, LED, and electronic toys are quietly exiting the Chinese market.”
Hong Xiang also pointed out, “What people notice are the large foreign or private enterprises closing down, but in reality, many small businesses come and go silently, disappearing even faster.”
Faced with a large number of business closures, continuous contraction of foreign investment, and youth employment challenges, Hong Xiang believes that without stronger economic stimulus policies, the “wave of closures” in 2025 may just be the beginning.