A Light Christmas for China's Factories

A worker makes a helmet in Philip Cheng's factory. He's been forced to invest more this year to keep his company running.
It's been a hectic year for Edward Kang. The head of one of China's biggest textile manufacturers relied on American customers like Eddie Bauer and The Gap to fuel his $70 million business. But now, CBS News correspondent Celia Hatton reports, flat-lining U.S. orders mean he's hustling to keep his sewing machines humming.

"We had to reorganize ourselves to adapt to this situation," Kang said through a translator.

Normally, these workers would be rushing to finish clothes that would fill American stores this coming holiday season. But instead, they're working overtime on jackets that will be sold in China. A 25 percent drop in U.S. retail orders means this company is switching more of its business to Chinese labels. Other manufacturers are following suit.

Kang's also opened LaGogo - a chain of stores across China that's breaking the company's dependence on foreign exports.

It is something toy manufacturer Peter Lee wishes he'd done earlier. His factory was busy with U.S. orders last December, but now it's on the verge of closing.

"We already finished Christmas items for America," Lee said through a translator. "I only have a third of my workers left, just waiting to make things for Easter and Valentine's Day."

It's the same all over China. U.S. shoppers used to be the Chinese economy's salvation. Now, after years of double-digit growth, exports to America dropped almost 17 percent, compared to the first nine months of 2008 -- almost a $32 billion difference.

Even factories with solid order sheets are affected. Philip Cheng makes half the world's sports helmets, but he's been forced to invest more to keep his company running.

"Lots of our suppliers have closed," Cheng said through a translator. "We have to hire more workers and get more materials to cover for them."

And how will these changes impact U.S. Christmas shoppers this season? If China's any indication, the malls won't stock more than the basics, since store buyers are only ordering the bare minimum.

"The quantities that we saw a year ago, or two years ago, or three years ago are not there," said David Dayton, the CEO of Silk Road International. "I would guess they are about half."

So Chinese factories continue to adapt or close down while they wait to see if, come Christmas time, Americans will reopen their wallets.