A Bumpy Road Ahead

Figures show the number of shoe making factories on the mainland increased from 20,000 to more than 30,000 between 2002 and 2006, but orders were much slower, leading to an irrational "price war", experts said.

Industry newcomers, most of them SMEs, were further hit by an unfavorable marketing environment that included the appreciation of the yuan, price hikes of raw materials, rising labor and land costs, the reduction of the export refund rate and revised policy on custom duty deposit, analysts said.

"The industrial reshuffle has just begun. More SMEs without core competitiveness will be washed out and those with better technology and sound internal governance will survive," Xinhua said.

The Unfavorable Factors Now Facing Shoe Industry

More Cost for Labors

The Uprising in RMB

Raw Material Price Keeping Rising

Foreign Anti-dumping Charges

America Sub-prime Mortgage

The "Red Sea" Competition Within Shoe Manufacturers Themselves

Shoe Export Slows Down

Guangdong, a province in south China, exported 490 million pairs of shoes in January and February 2008, valued at USD 1.59 billion, decreasing 27.5% and 0.6% from one year before, citing customs statistics.

In the meantime, the average price of the exported shoes surged 37% year on year to USD 3.2 per pair. In the first month of 2007, the Beijing authorities reduced the export rebate rate in footwear products by 2 percentage points. The move has been further weighing on shoe makers, whose profit margin are not high, especially in the country's key footwear production base in the Pearl River Delta region, part of which are located in the province.

From September 2007, Guangdong's export of shoes began to fall, 18.5% year on year in November of the year and 20.3% and 35.7% in January and February 2008. Besides, in the first two months, the number of Shoes exporters in the delta decreased 1,855 year on year to 1,512, due to a rising renminbi, the US' subprime mortgage crisis and a rise in China's labor cost.

Footwear Industry Suffers from Anti-dumping Charges

The anti-dumping investigation carried out in 2005 by EU was followed by a recommendation of Italy, France, Spain and other countries to take measures against shoes exported by China and Vietnam.

It was in October 2006, that EU began to impose 16.5 and 10 percent anti-dumping tax on Chinese and Vietnamese leather shoes respectively.

This policy will expire soon in October 2008 but Italy has already urged EU to extend the anti-dumping measure.

Statistics from China Customs show that in 2007, the country exported around 180 million pairs of leather shoes to EU, which was a decline by 8.95 percent.

On the other hand, Vito Artioli, Chairman of Associazione Nazionale Comuni Italiani (ANCI) said that in 2007, the export of the shoes made by China and Vietnam to Italy declined by 15.4 percent, while, at the same time, the export of the shoes made by Macao and Cambodia increased by 72.8 and 90.7 percent respectively.

The request made by Italy was essentially on grounds that most of the shoes from Macao and Cabodia are actually made in China and Vietnam.