The performance of China’s leather and footwear industries overall maintained a growth trend in the period from January to May of this year.
The sales revenue generated by medium and large-sized tanneries, footwear and finished leather products manufacturing reached 63.2 billion yuan, an increase of 2.7% from the same period the previous year.
Exports of leather, footwear and finished leather products in the aforementioned period were $29.6 billion, an increase of 1.1% from last year. Among them, leather goods contributed 0.64 percentage points, followed by shoes with 0.03.
The imports of the leather and footwear industry reached $4.8 billion, an increase of 8.1% compared with the previous year, in which footwear contributed 8.09 percentage points to the growth of imports, followed by handbags with 5.48.
In the first quarter of this year, the sales revenue was 280 million yuan, up 6.2% from 2018. Exports achieved $16.7 billion, an increase of 2.9% compared with last year – of which handbags and suitcases contributed the most – while imports were $2.6 billion, up 16.7% from the same period last year, with a 7.7 percentage point increase in terms of growth rate.
Tanning industry
The statistics showed that the sales revenue generated by medium and large-sized tanneries was 159.16 billion yuan last year, decreasing by 1.57% from 2018.
Imports of raw hides and skins were 1.25 million tonnes in quantity and $2.2 billion in value, up 0.4% and down 0.3% respectively.
Imports of semi-finished leather totalled 706,200 tonnes in quantity and $1.46 billion in value, an increase of 5.5% and a decrease of 0.4% from the previous year respectively.
Imports of finished leather amounted to 116,800 tonnes in quantity and $1.99 billion in terms of value, down respectively by 12% and 4.7% from 2018.
In the first three months of this year, sales revenue increased by 5.5% over last year. The volume of light leather reached 155 million square metres, up 9.3% from last year. Imports of semifinished leather totalled $370 million, down by 3.1%, and finished leather $410 million, a decrease of 7.0% from 2018.
The volume of auto leather has been increasing year by year as well, reaching 503 million square feet in 2017, up 4.5% from the previous year.
Footwear industry
In 2017, China produced 13.1 billion pairs of shoes, and the sales revenue generated by medium and large-sized footwear manufacturers was 773.8 billion yuan, up 4.4% from the previous year. In the first quarter of this year, sales revenue achieved a 7.1% increase compared with 2018.
Exports of footwear totalled 9.62 billion pairs and $45.59 billion in value in 2017, up 3.7% and 1.7% from 2016 respectively. At the same time, China imported 139 million pairs of shoes valued at $3.20 billion, up, respectively, 23.8% and 18% from the previous year.
In the first quarter of this year, exports of shoes reached 2.34 billion pairs worth $10.4 billion, an increase of 2.8% and 0.9%, respectively, compared with last year, while imports were 45.8 million pairs and $980 million in terms of value, an increase of 27% and 28% respectively from last year.
Among them, exports of leather shoes in 2017 were 680 million pairs and $9.30 billion in value, down by 1.2% and 3.4% respectively, while imports totalled 37.48 million pairs and $1.41 billion, a decrease, respectively, of 10% and 6.5%.
In the first quarter of this year, exports of leather shoes reached 148 million pairs by volume and $1.9 billion in terms of value, up 3.4% and 0.7% on last year respectively, while imports were $340 million, an increase of 23.3% compared with 2018.
The trade war between China and the US
In April, the US gave notice of its intention to impose additional tariffs of 25% on an initial list of more than 1,300 products it brings in from China, products with an estimated annual value to Chinese exporters of $50 billion. These measures came into force on 6 July.
By then, China had announced a series of retaliatory measures, imposing increased duties on a series of products shipped to China from the US, calculating a total value of $50 billion, matching the trade values targeted by the US; hides and leather trade remained unaffected.
However, the US is now examining the possibility of imposing 10% tariffs on a further list of 6,000 products it imports from China with a total trade value of $200 billion per annum.
There are several hide, skins and leather products on the list with a trade value of $6.8 billion per year, including leather handbags, trunks and suitcases, small leather goods, leather garments, gloves, belts and leather shoelaces, accounting for 30.7% of the total value exported to the US from China last year.
The hides and skins imported from the US to China in 2017 were valued at $920 million, ranked first among all countries, accounting for 41.7% of the total value of imported hides and skins.
It is believed that the tariff tit for tat will seriously affect the leather production chain of both countries.
Look forward
Now, China’s economic development has entered into the third year of the 13th Five-Year Plan. The economy has been in transition and undergoing supply side reform, which has achieved initial success. China’s GDP growth in 2017 was 6.9%. In the new period, China’s leather industry faces new challenges as well as opportunities, mainly in the following aspects:
- Due to the slow recovery of the global economy, the rise in trade protectionism and increasing geopolitical uncertainty, China’s leather industry exports are facing significant pressure.
- With stricter requirements for pollution control, especially in tanning and footwear making, much more upgraded cleaning and pollution control technologies and equipment are needed.
- The labour cost has been rising year by year, reaching an estimated average of 4,500– 6,000 yuan per month, which brought more burden to the operation of companies.
- Although there is some turbulence in the economy, the fundamentals for economic development remain sound. The country has recognised the important role of mass entrepreneurship and innovation for its future growth.
As for leather industry itself, positive factors are increasing. Many companies have already invested a lot – or are preparing to invest more – in innovation, and to introduce upgraded technologies and machinery, while making effort to deal with industrial pollution and overcapacity. The aim is to change the economic growth model and produce higher-value-added products in order to cope with these challenges.
Many enterprises are also making an effort to fully utilise the internet as an effective tool to transform from the old product-centric sales model to a new customer-oriented and services-based model.
For the tanning industry, in the next few years, automobile leather and furniture leather will still be the growth point, while the demand for shoe upper leather will remain relatively stable. However, the demand for garment leather has reached the bottom. Obviously, the output of garment leather can hardly be improved because of the large stock of leather garments.
In footwear, the development of the industry will recover slowly. The retail market for leather footwear is warming up and the market of sports shoes will continue to maintain rapid growth. The same trend will also happen to fashion shoes made of synthetic materials.
Region-specific
Regarding the current situation in the Hebei region, one of the most important tanning clusters in China, imports of raw hides from January to March of this year have dropped by 8% in volume and 15% in value, according to statistics. This is mostly due to the drop in demand from the Hebei region; however, all the other four top clusters have increased their imports by 13%.
This is because the tanning clusters in Wuji and Xinji in Hebei province are undergoing a second round of restructuring that will shrink the number of tanneries even further through merger and acquisition. It is expected that the production in this region will be back to normal by the end of this year.
Statistics also show that the volume of light leather produced by medium and large-sized tanneries from January to March achieved 9.3% growth compared with the same period last year, reaching 155 million square metres. This is a positive sign that the industry is consolidating, and imports will receive a further boost when the restructuring in Hebei region is completed.
China’s economy: a long story short
- China is now entering a transition period.
- The economy is shifting from export-led, investment-fuelled growth to innovation and consumption-driven growth, which has brought new challenges and opportunities for China’s leather industry.
- Shifting from a quantity-oriented to a technology and innovation-driven model requires a lot of investment.
- China is dealing with stricter requirements for pollution control, where much more investment is needed for the adoption of upgraded cleaner technologies and equipment.
- Labour costs are going up rapidly, and this has brought great pressure for tanneries and footwear producers. Automatic, digital and intelligent machines are much needed by enterprises to replace labour and improve production efficiency.
- China’s younger generations have moved their purchasing behaviour to online consumption, forcing manufacturers to quickly develop new sales and promotional channels.
The Chinese Government will publish the ‘List of Chemicals under Priority Control’ by the end of this year, which will set a strict limitation for chemicals to be used in leather and footwear manufacturing. This will bring a new challenge for the tanning and footwear industries.
Source: ‘Chronic Disease and Self-Injection: Ethnographic Investigations into the Patient Experience During Treatment’
