Is This China's 'New Deal'?

BEIJING, Nov. 11, 2008 -- Look to southern China to provide a stark illustration of how the global economic downturn and America's recession is playing out across the world.

The Pearl River Delta has been the manufacturing capital of the world, motherland of the "made in China" brand. But in the first nine months of this year, 1,300 companies in the region shut down, suspended business or moved their factories out of southern China.

Only 20 percent of foreign-invested firms in the region are seeing a profit, down from 90 percent when the boom was at its peak, according to provincial trade authorities.

Tens of thousands of factory workers are now out of work and social unrest is becoming a real threat with which the central government must contend. There have been several reports of workers protesting after their companies shut down. Local governments have stepped in and started paying the workers back wages.

Qin Wei is an 18-year-old migrant worker who was laid off from BEP in Shenzhen, a factory that produced home appliances for the American brand Cuisinart. It was his first job, one that he traveled more than 500 miles from his hometown to find. Now, he has no idea what to do. The company owes him $300 and he is having trouble finding another job as more and more factories close and low-skilled workers flood the market.

"I want to find another job. I have no money," Qin told ABC News. "I cannot even feed myself."

It's a story heard over and over in southern China.

Wu Xiu Feng is a mother of two who has spent the last 11 years making irons for a factory that just shut down. She and her husband are desperately looking for work and are worried about having enough money to feed their two children. Like most factory workers, she is a migrant worker.

"I can't even afford to go home," she told ABC News. "I feel miserable."

The central government is listening and trying to respond both to rising unemployment and pressure from abroad to take action. A stimulus package has been rolled out. An estimated $580 billion will be spent over the next two years to finance programs in 10 major areas, such as low-income housing, rural infrastructure, water, electricity, transportation, the environment, technological innovation and rebuilding from disasters, notably the May 12 earthquake in Sichuan that killed 70,000 and left millions homeless. Analysts have likened the plan to China's version of FDR's New Deal.