Trade: China Faces Loss of Firms Over Olympic Hurdles for Visa-seekers

Beijing's crackdown on visas in the run-up to the Olympics is hindering trade and could result in manufacturing shifting to other locations in Asia.

Buyers, quality-assurance staff and factory inspectors are all finding it harder to enter the country and business people based in China say they face new hurdles in renewing their documentation. Though the government says that multiple-entry visas are still available, few people seem able to acquire them.

Five of the six Olympic cities, including Beijing and Shanghai, announced last week that they were "blocking" entry visas for business purposes until after the Olympics and the Paralympics.

"It's a security measure," said Guy Dru Drury, the Confederation of British Industry's chief representative in China. "They don't want people slipping into the country on a business visa and then being a threat. The absolute bottom line for city authorities is social stability and security for the Olympics. The only exception is if you are coming into the country to sign a deal."

Chinese producers are already suffering from the economic slowdown in the United States and Europe, wage inflation, the appreciation of the yuan, and rising energy prices.

Figures released by the national bureau of statistics on Thursday showed that producer price inflation reached 8.8% in June - the highest for almost a decade. Some production appears to have shifted from the Pearl river delta to cheaper areas inland and foreign companies are already mooting the possibility of moving manufacturing to countries such as Bangladesh and Cambodia.

The textile industry is particularly badly hit because it is highly dependent on overseas sales, making up almost 13% of the country's total exports and employing almost 20 million people.

Paul French, chief China analyst at the research firm Access Asia, said: "With a lot of big international brands you have to do independent, external factory inspections for quality assurance and ethical issues because there's been too much trouble over issues like corruption. But at the moment factory inspectors can't get in to check orders.

"The government is saying in September everything will be back to normal, but that's too late for Christmas because everything has to be out by mid-October at the latest and for America even earlier, otherwise there'll be no glad rags on the high street. That may mean some factories go under.

"Smaller manufacturers are bitching that the Olympics are killing them. Two-thirds of textile firms operate on margins of less than 1%, so there's not much wriggle room."