DANGCHENG, China | Fri Dec 9, 2011 9:40am EST

China's stone workshops are silenced by European crisis

(Reuters) - Mournful ancient Roman lovers, a boy Mozart and half a dozen angels lie in weeds behind the padlocked gates of an abandoned sculpture workshop in Dangcheng town, victims of economic waves rippling across the world to this corner of northern China.

Dangcheng applied the traditional stone-carving skills of this rocky part of Hebei province to boom as an exporter of ornate statues, busts, reliefs and fountains to Europe and North America. Now the town is struggling with the deep slump in once vibrant markets, especially Italy and other euro zone countries.

"The boss ran away, they say. He went broke a year or two ago. Don't know where he went," said Lu Jiguang, a brawny mason from a nearby workshop who stopped by the locked gate.

"There haven't been that many bankruptcies here. Most people find a way to get by, but business is certainly hard going," continued Lu, with the same stone dust-covered features and gnarled hands as nearly most other residents of the town.

"I've seen reports about the financial crisis in Europe on television," he said. "It's also had a bad effect here."

Dangcheng, a town of 20,000 people 240 km (150 miles) southwest of Beijing, is a microcosm of the risks that slowing exports pose for China -- risks that a commerce official laid out this week.

Reuters visited Dangcheng in 2009, when the downturn was beginning to bite. A return this week showed that the extended euro crisis and U.S. doldrums have mauled business, forcing some workshops to shut and many more to scale back or move.

And all surviving ones to court customers at home.

DEITIES, SAINTS AND HEROES

The stone workshops -- many still crowded with statues of Jesus Christ, the Virgin Mary, Cupid, Zeus and legions of deities, saints and heroes from antiquity -- also reflect the challenges testing growth potential across China.

Asked about their deepest worries, sculpture workshop bosses here almost always named rising wages, the growing cost of stone and transport charges.

"I'm more worried about labour costs than about the euro," said Lu Xuhui, a 34-year-old owner of a sculpture company that has relied on orders from Italy, France and the United States.

"The European market is very, very tough. Prices we can charge are very low, but wages keep going up, and prices for stone are way up too, so our profits are tiny," said Lu, as he sat in a stuffed leather sofa bought in better times.

"We're trying to turn more to domestic buyers, but they're feeling the rising costs as well."

STATUES OF JESUS -- BUT NOT FOR EUROPE

Lu Shaolei, a cousin of Lu Xuhui, watched as several masons in his workshop carved and polished dozens of statues of Jesus, which illustrated the economic changes coursing through China.

He started his business a decade ago, specialising in religious statues for churches in southern Europe and the United States. But this order for 40 Jesus figures was, he said, a sign of the times: they were for Chinese customers.

Growing domestic prosperity and some loosening of Communist Party controls on churches have offered an escape route from disappearing foreign orders, Lu said, above a din of electric grinding and chiseling.

"We haven't had a foreign order since summer. Europe was our biggest buyer, but not now," said Lu, who like nearly everyone in the Dangcheng sculpture trade is a local.

"We used to focus on exports, but they're no good now, so now we're focusing on domestic buyers," he added.

"I've paid attention to the European crisis. That means we'll have even fewer exports, but domestic orders keep us going."

Other workshop bosses along Dangcheng's unpaved main street said sales to Europe and North America had picked up a little this year, after a grim slide two years ago. But many feared the latest euro crisis would again sap demand for carvings.

Quyang county, where Dangcheng lies, traces masonry skills back to the Han Dynasty (202 BC-220 AD), and that tradition survived war and revolution until traders from Italy arrived in the 1990s, hunting for cut-price copies of antiquity.

Dangcheng's carvers set themselves to mastering foreign tastes, cribbing from sculpture books to recreate Renaissance and classical figures. Their skills, increasingly rare and costly in Europe, and the ease of the Internet brought plenty of orders from Europe and North America.

By 2008, exports accounted for over 90 percent of sculpture sales from Dangcheng, a county official told Reuters in 2009.

"Italy is dead for us now," said Wu Huanzhen, a co-owner of the Shuangfei Sculpture Workshop in the town. "When business was good, we exported about 900,000 yuan a year," she said, adding those most of those orders went to Italy.

"This year we might clear 300,000 yuan, if we get some more orders soon," she said in a yard strewn with statues.

GO DOMESTIC OR GO BROKE

Wang Shixiong, a deputy director of the Quyang county office for the sculpture industry, said he could not give recent statistics for exports. They had fallen so far that his office had given up trying to collect numbers, he said.

"The financial crisis has been a huge blow here," said Wang.

"The impact has been so bad that the businesses won't tell us their export numbers anymore, because they could look too bad in front of their competition. So we can't collect them."

Exports now account for only a few percent of the county's sculpture trade, Wang guessed.

"Now it's basically all domestic," he said.

A dozen business owners interviewed in Dangcheng, however, also said their biggest worries have more to do with domestic pressures in the hands of Beijing, not Brussels.

"Our biggest pressure is rising wages and rising costs for materials," said Lu, the sculpture businessman making the 40 statues of Christ. "It's just hard to find and keep workers."

Masons and stone workers in the town mostly said their incomes had risen from 3,000-4,000 yuan ($472-$629) three years ago to 5,000 to 6,000 yuan or more now, depending on their level of skill.

A cubic metre of white marble hauled from Hunan province in southern China now costs about 3,700 yuan, compared with 2,000 yuan three years ago, largely due to rising transport costs, said Lu Xuhui, the sculpture trader.

But workers, too, said they were feeling economic chills.

"Wages have gone down again, because orders are down," said Li Erhu, a 35-year-old mason taking a short break from carving a bust of an ancient Roman soldier. He explained that workers are paid piece-rate, reflecting how much work they finish.

"When business was good, I'd easily make 4,000 yuan a month. Now I'm lucky to make 3,000, even with higher piece rates."

The works sell for hundreds to hundreds of thousands of dollars, depending on their size, intricacy and quality of stone.

For now, domestic sales and a trickle of export sales have helped offset rising costs, but profit margins are dangerously thin, said the trader Lu.

"I'd guess about 10 to 20 percent of the workshops here have gone out of business in the past three years," he said, then running through the names of neighbouring businesses who had shut their doors. "The pressure is tremendous."

Those pressures could worsen if, as some economists believe, torpid growth in rich nations reinforces slowing growth in China. Many Dangcheng sculpture traders voiced confidence that the country's growth and middle class love of European style would keep up business. But some saw gathering clouds too, as government stimulus spending and real estate markets cool.

"In 2009 we switched our focus to domestic customers, but that's starting to fall off too," said Peng Xuefeng, as he supervised workers grinding away at seven statues of Jesus Christ. He wasn't sure if the order, made through a trading agent, was destined for home or abroad."

Before, local (Chinese) governments and real estate developers were ordering lots, but domestic orders have been falling off too," Peng said above the screech of grinders.

But not even the latest euro crisis will end orders from Europe, insisted Lu Xuhui, the trader.

"Churches will always have orders, even if there is a financial crisis," he said. "They will always need Jesus and Mary statues."