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China is still light years ahead of all its Asian competitors
2018/6/5 15:51:31 Source: APLF Author: 点击率:
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There is little doubt that countries in South East Asia are playing a more significant role in the leather, leathergoods and footwear manufacturing market. The figures prove it especially in terms of growing footwear exports to major consumer nations such as Europe and the US.

According to the Vietnam Leather, Footwear and Handbag Association (LEFASO), the objective for 2018 is to export shoes to the value of US$20 when compared to the 2017 figure of US$14.67 billion which would be an ambitious increase of 36.3% over the year.

These figures already place Vietnam second only to China in the global footwear export rankings but China is still light years ahead of its nearest competitor exporting US$45.59 billion worth of footwear (9.56 billion pairs) compared to Vietnam’s US$14.67 billion.

The “elephant in the room”

Despite news about big name brands manufacturing more in Vietnam primarily due to lower labour costs, China is still so far ahead in the footwear manufacturing stakes that it inevitably has to import more leather to supply its tanneries and footwear manufacturing companies to be able to produce 4.48 billion pairs of leather shoes in 2017.

China, with such deep experience in globalised manufacturing, possesses the logistics, quality control, technical expertise and ability to deliver on time that is still lacking in certain competing nations whose primary advantage is lower labour costs.

There is simply not enough shoe manufacturing capacity to satisfy world demand for footwear without China. And this country’s infrastructure is unlikely to emigrate in the near future to lower wage countries!

There is no denying that ASEAN nations are contributing more to global footwear manufacturing but their combined production is still dwarfed by China and this includes Vietnam, Indonesia, Cambodia, Thailand and virtual newcomer Myanmar.

For leather footwear production all these countries need to import bovine leather to supply their production lines as does China. This includes all types of leather and in the specific case of China, this country imported US$5.68 billion worth of leather from international suppliers in 2017, according to CLIA figures.

The key lesson for western tanners is not to ignore China as a major customer for leather exports as it continues to be the “elephant in the room” in Asia and will not be displaced anytime soon when its nearest competitor is still so far behind.

Transformation of Economic Model and Internal Demand

The other factor that plays in China’s favour is the size of its internal market and the potential demand exercised by over 400 million middle-class consumers with disposable income.

It is well known that China’s economic model is being transformed from a simple economic growth model to produce higher value-added products. The aim is to be able to cope with challenges of the transition towards a new customer-oriented and services-based business model and away from the old product-centric sales model.

This, it is a move away from an economy driven by factory outsourced production and export-driven revenue to a model where the main dynamic of the economy are internal consumer demand and investment – much closer to the US model whose growth is driven by consumer demand.

Supposing that China exports less footwear, then the slack will be taken up by its internal market. So the key to gauge the success of China’s footwear industry is not its exports but the internal demand from its own citizens. Locally produced footwear still rules as China only imported 139 million pairs of shoes in 2017 according to the CLIA.

Now that China’s leather industry has undergone an environmental clean-up in the last three years, more sustainable leather will be produced improving its quality and attractiveness and marketability to foreign customers. However, raw materials and semifinished leather still need to be imported and the platform for this is definitely the All China Leather Exhibition (ACLE) that will take place at the end of August in Shanghai.

As well as more than 19,000 buyers from the main manufacturing provinces of China, ACLE also attracts buyers from ASEAN nations that must also import raw materials and leather for their manufacturing processes.

As the leather and footwear industries have spread in South East Asia, ACLE has also extended its reach and the major sourcing platform in the region where western suppliers can meet with Asian and Chinese buyers to do business and see their leather incorporated not only in Exported footwear, but also in footwear destined for the Chinese end consumer of this unparallel internal market.

Richard Smith - APLF

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