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LISA MULLINS: I'm Lisa Mullins, and this is The World. The head of China's Central Bank says China's recovery has begun, but it's going to be a long road back. In the meantime, southern China's factory belt is taking an especially hard hit. The World's Mary Kay Magistad offers a snapshot now from one town in Guangdong Province. It was once known as “Little Hong Kong”, because of all the Hong Kong residents who bought property there. But now some of the outsiders are leaving the town, and it's struggling.

MARY KAY MAGISTAD: This train station, Zhangmutou, was expected in the early ‘90s to become a stop on a through train route from Hong Kong to mainland China.

ANTHONY SHAO: So Hong Kong people thought this was going to be a good place, because all the property goes along with the railway station. It all goes up.

MAGISTAD: Anthony Shao is a Hong Kong native who runs a real estate agency in Zhangmutou.

SHAO: So a lot of people bought because of that – and unfortunately, that through station goes to Changping.

MAGISTAD: In other words, the train route ended up going through another town, Changping, bypassing Zhangmutou. So property prices crashed, and a lot of Hong Kong buyers sold. But others hung onto their properties – which are now worth about half what they were in the early ‘90s. Some rent them out, some travel the short distance from Hong Kong to visit them on weekends. This whole process has made Zhangmutou's population swell from 23,000 before the property boom to ten times that now. Half of the outsiders coming from Hong Kong , and half are migrant laborers often working in factories run by Hong Kong residents. At least they were working those factories before the economic downturn, which has hit this place hard and has caused many of the outsiders to leave. Walk along a street, where a scrap metal collector taps out his signature call, and you'll see whole rows of shops shut down. One of the few shops still open in this dingy stretch sells lighting fixtures to factories and shopping malls. But manager Zhang Ai Rong says times are tough for her, too. She says, “Sales are down about 40 percent from last summer – and that's after she's slashed her prices. She says the factories and shopping malls that are still buying are buying cheaper products. She doesn't know how long this is going to last, but she thinks it will be years – maybe three, maybe more. At a job center in Zhangmutou's factory district, the staff agree it's been a rough few months. Yi Xiao Xia is one of them.

XIA: There are still people coming to look for jobs, but it's less likely for them to find good jobs.

MAGISTAD: For instance, she says, a technician might have to settle for getting paid half what he made before. Yi says there have been fewer people coming to this center over the past couple of months. She thinks it's because those who lost jobs when factories shut down here went home to their villages and farms. But her colleague, Wang Gao Yun, says he's starting to see some hopeful signs. He says, “Last month, there were almost no new jobs posted. But this month, more companies have been looking to hire people and at slightly higher pay than what's been offered in recent months.” “Perhaps,” he says, “this is the start of a recovery.” Hong Kong realtor Anthony Shao is not convinced. He says a lot of Hong Kong people are selling their property here, because they think Zhangmutou's time has come and gone – he's planning to do the same.

SHAO: I actually have two places. Last year, I just sold the other one. I just told everybody, “This year it's going to be really bad.” Actually, I want to close the business. I have two shops, okay, and I don't think it's going to be good in the next two or three years. It's going to be really bad.
MAGISTAD: The Zhangmutou government is saying not so fast. It has secured $100 million in bank loans to help foreign-invested enterprises in town, and it says it's working hard to move Zhangmutou's economy up the value chain to promote innovation and bring in new investment. All of these are goals that the central government has set for the whole country -- but here, in this gritty little town that made its name and its wealth from outsiders, it's personal and it's urgent. For The World, I'm Mary Kay Magistad, Zhangmutou, Guangdong Province, China.

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