Recently, many long-established companies in the Pearl River Delta region, with over twenty years of history, have been closing down one after another. They survived the first round of tariffs imposed by the Trump administration and endured the three-year COVID-19 pandemic in China, but ultimately succumbed to the current economic downturn in China.
According to closure announcements, these companies made efforts to save themselves before shutting down, but continued to incur losses. The new social security regulations implemented by the Chinese Communist Party starting on September 1, as well as stringent environmental requirements, became the final straw that broke the camel’s back for some companies.
One of the companies that recently announced closure is Xunda Electric Appliance Parts (Shenzhen) Co., Ltd., a Hong Kong-funded electrical appliance manufacturer with a 21-year history. The company announced that it would cease operations and production starting from August 12 and terminate labor contracts with employees. Despite multiple efforts, the company remained in a state of continuous losses, which led to its inability to continue operations.
Public records show that Xunda Electric Appliance Parts (Shenzhen) Co., Ltd. was established on November 30, 2004, with a registered capital of $3.6 million (approximately RMB 23.59 million). The company primarily engaged in the production and sales of hardware and plastic components such as AC/DC plugs and sockets.
Huaxun Electronics Co., Ltd., with a 27-year history, announced on July 29 that due to operational difficulties, the board of directors decided to officially cease operations as of August 31, 2025, and enter the liquidation and deregistration process.
In addition, there have been several other companies in the Pearl River Delta region that have ceased operations recently. ASMPT, a semiconductor and electronics manufacturer headquartered in Singapore, announced on August 11 that it would close its semiconductor plant in Shenzhen, affecting around 950 employees. Starting on August 4, Shenzhen Chuangfuyuan Electronics Co., Ltd. began phased suspension of operations.
Wanlida Vacuum Hardware Heat Treatment (Dongguan) Co., Ltd., with a 19-year history, officially closed on July 31, with the factory completely ceasing operations. Foshan Gain Electrical Appliance Co., Ltd. also officially ceased operations on the same day, with the factory stopping production altogether.
The closure of Huaxun Electronics has sparked widespread attention and discussion on internet platforms. An analysis by a blogger “Chen Market Observation” points out that the closure of Huaxun Electronics is not just an isolated case but a reflection of the overall plight facing the traditional electronics industry.
In recent years, intensified geopolitical conflicts, trade wars, industrial shifts, and underwhelming economic recovery have led to a contraction in the electronics consumer sector. This has resulted in a significant decline in shipments, continued underutilization of production capacity, and some companies operating at a loss.
Another blogger, “Unemployed Manager,” believes that the new social security regulations were the last straw that overwhelmed these companies.
Industries such as electronics manufacturing, garment processing, and food services, which rely heavily on labor, are at the forefront of the impact of the new social security policy. With labor costs accounting for 30% – 40% of total costs in these industries, compliance with social security regulations would directly consume meager profits of these enterprises.
The head of Huaxun Electronics admitted, “Our factory operates on thin margins, and we fear we won’t be able to recover the social security contributions. The monthly social security costs could amount to hundreds of thousands, directly consuming our profits.”
On August 1, the Supreme People’s Court of China issued a judicial interpretation declaring that “any form of ‘voluntary waiver of social security contributions’ agreements shall be invalid” starting from September 1, and companies must pay social security for their employees.
The social security requirements were the final straw that broke Huaxun Electronics, while environmental regulations were the last straw that broke Wanlida in Dongguan.
Wanlida Vacuum Hardware Heat Treatment (Dongguan) Co., Ltd., founded on April 7, 2006, provided heat treatment services for water heater components to major home appliance giants like Midea and Gree, with a peak daily production of 80,000 parts, holding a 35% market share in South China.
In November 2024, the owner of Wanlida, Gan Ping, mortgaged two properties in Shenzhen to raise 3 million yuan, attempting to upgrade environmental equipment to comply with the new “Energy Saving and Carbon Reduction Action Plan” in Guangdong Province. However, upon completion of installing a waste gas purification tower worth 1.8 million yuan, the environmental department informed them that they belonged to the metal surface treatment industry and needed to install an additional VOCs online monitoring system. This meant an additional investment of 1.2 million yuan, while the company had only 270,000 yuan left in its account.
The company’s electricity bill in 2024 showed a monthly consumption of 420,000 kWh, with electricity costs accounting for 28% of total costs, while product prices only increased by 3% due to intense industry competition. This situation of “rising costs and shrinking profits” is common in the heat treatment industry in Dongguan. Data from Zhiyouji shows that the average salary in the industry in 2025 decreased by 12% compared to 2023, and job postings in the sector reduced by 60%.