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    From Shoe Industry "Earthquake" To Wenchuan Earthquake

    2008/6/4 13:56:00 6

    From Shoe Industry "Earthquake" To Wenchuan Earthquake

    As an important province in the Midwest of China to undertake coastal industrial pfer, will Sichuan be passive in undertaking the gradient pfer of eastern industry due to the earthquake.

    The people said that the earthquake might magnify the enterprises' concern about whether Sichuan is safe or not, and then cause Sichuan and the five central provinces of Anhui, Hunan, Hubei, Jiangxi and Henan to be passively involved in the competition of eastern coastal enterprises' industrial gradient pfer.

    Disputes under the earthquake

    As an important province in the Midwest of China to undertake coastal industrial pfer, is Sichuan being one of the focal topics of the industry because of the delay in undertaking the pace of industrial gradient pfer in the eastern region or being passive in undertaking.

    The collapse and damage of some factory buildings in the West during the earthquake, the destruction of infrastructure and logistics system, the casualties and the stoppage of factories caused by water cut and power failure obviously indicate that the eastern coastal enterprises are moving westward and the risk of "siting" in Sichuan.

    In addition, under the constant panic of persistent aftershocks in Chengdu and Chongqing, concerns about the potential safety hazards of investment enterprises in Sichuan and Chongqing are being unconsciously magnified.

    The pessimistic argument is that under the shadow of the devastating force of the strong earthquake, people have clearly remembered the underground insecurity in Sichuan area. Not far from Chengdu is the active area of the earth's crust. Whether there will be a next earthquake or other worries may become an obstacle for the eastern coastal enterprises to pfer the main industrial gradient to Sichuan and Chongqing.

    Jiang Yuanwu, general manager of AOKANG Chongqing Real Estate Co., Ltd, did not have to worry too much about these. He made a simple comparison with Hebei Tangshan. He thought Tangshan did not stagnate after the great earthquake. Therefore, the earthquake did not cause long-term and fundamental impact on the local economy. "For AOKANG, our confidence in investing in the West has not wavered, and speculation about the possibility of natural disasters such as earthquakes is not the key factor to decide whether we invest or not. We are not too frightened by the destructive force of the earthquake."

    A shoe industry "earthquake"

    At the same time, a shoe industry "earthquake" is taking place, the epicenter is in the East.

    Since the second half of 2007, a large number of small and medium-sized shoe enterprises have closed down in Dongguan and Wenzhou, the two largest shoe industry in China.

    "Nowadays, enterprises talk about cost is no longer a question of how much profits are related, but whether they can continue to live."

    A shoe enterprise boss's heart tells the East shoe enterprises are facing the life and death torment.

    "Under the global background of industrial pfer, today, the eastern region where manufacturing is over saturated is suffering from multiple problems such as rising cost of raw materials and labor, appreciation of the renminbi, processing trade and adjustment of export tax rebate policy."

    Zhang Shuhua, director of the China Leather Association, spoke of the worries of the shoe owners in the East.

    But at the same time, Bishan, Chongqing, which has the reputation of the western footwear capital, is in a big way to welcome this opportunity of industrial adjustment.

    The head of AOKANG group, the largest private shoe making enterprise in China, said: "the overall cost of shoemaking this year has increased by 20% compared with that of last year. Under the situation that the retail price of leather shoes has not risen, the cost pressure of enterprises has been increasing."

    AOKANG set up a cost team this year to set up a full-time post to further refine the cost control.

    Quantitative utilization of raw materials, further integration of human resources, and even energy conservation in offices and living quarters are all being considered.

    In the Wenzhou Ouhai Industrial Zone, which is known as the Chinese shoes capital, it was busy season at this time of the year, but this year it seems a lot of cold and cheerless.

    The rise of cost makes the enterprise's ability to resist risks weaken, so enterprises are careful to make orders.

    "In fact, enterprises do not have no single list to do so, but they are afraid to accept it. They are not affected by the instability of the RMB exchange rate. Some of the bills in July and August are afraid to pick up. They can only pick up some recent ones."

    A 500 person shoemaking business owner said, "the overall cost of the enterprise has increased by about 26% over last year. After the implementation of the new labor contract law, the increase in staff salaries alone is 2 million yuan. Most of the other costs are raw materials, export tax rebates, RMB exchange rate and so on. Now the enterprises are basically in the dilemma of keeping capital and running the business."

    The same situation, the Pearl River Delta seems to be more serious: according to the November 2007 statistics report of the Asian footwear industry association, there are 5000~6000 factories in shoe factories in Guangdong, and more than 1000 large and medium-sized shoe factories have been closed. Of them, four hundred or five hundred small and medium-sized shoe factories in Huidong have been closed down in more than 3000 months in two or three months.

    Industry westward under the "earthquake"

    Facing the "earthquake", the migratory birds in the East are moving westward.

    "In the process of moving eastward to the East, the most powerful promoter is not the government but an invisible hand - cost."

    Zhang Shuhua, chairman of the China Leather Association, believes that the footwear industry is a "migratory bird economy" and is always pferred to countries and regions where labor costs are low.

    Nowadays, the shoe center is pferring to the central and western parts of China. The low cost advantage of the west is like a huge depression, attracting the capital inflow into the East.

    "The reason why AOKANG chose to invest in Bishan should be AOKANG moving directly to the trend of China's footwear industry moving from east to west, and welcoming the result of strategic adjustment from domestic and international competition."

    Wang Zhentao, President of AOKANG group, said so.

    Driven by AOKANG, the shoemaking enterprises in the western shoe market have developed rapidly, and enterprises in the coastal areas have shifted to the West.

    Recently, more than 20 shoe factories supporting the processing of Brazil's shoe giant, Dongguan, have been unable to bear the pressure of cost. They have quietly moved to Bishan, the western shoe market, to prepare for the two venture.

    "Moving east shoes to the west" also provides convenience for the development of the western market.

    At present, due to the blocked foreign trade, many shoe companies are turning to domestic sales. The three giants of Dongguan shoe industry, Yuyuan, Xing ang and Huajian, are now forging ahead with their own brands to rush to the mainland market.

    Recently, the largest leather trade and trading center in Western China will be put into operation. The leather city integrates wholesale, retail and display of leather goods, bags, leather shoes and leather products. Based on Chongqing, it will radiate the surrounding areas such as Sichuan, Guizhou, Yunnan and so on, which will facilitate the development of the footwear industry in the western market.

    In the process of "shifting East shoes to the west", the government's strength should not be ignored.

    If the shortage of energy and labor has sowed the "fire" of the shoemaking enterprises in the eastern coastal areas, then the government's policy guidance is a catalyst for the shoe industry to escape.

    Insiders said, "the movement of the East shoe to the west is like migrating birds to avoid the cold winter. The Chinese shoe industry has come to the cold winter. The slow flying enterprise is likely to become the victim of this winter."

    Western superiority still exists

    "Sichuan and Chongqing undertake the eastern industry gradient pfer advantage is still obvious".

    For some of the industry's concerns and doubts, Zhu Zhaoyang, the deputy governor of Bishan County of Chongqing, is clearly saying "no".

    "The best place for Sichuan and Chongqing to undertake the gradient pfer of textile industry is because the investment environment is the most competitive, the energy is relatively abundant, the land cost and labor cost are lower than the eastern coastal areas, and has a certain foundation in supporting production in the textile industry. With the continuous improvement of infrastructure such as highways and pportation, these are the favorable conditions for the pfer of the Eastern Textile Industry."

    According to Jiang Yuanwu, general manager of AOKANG Chongqing Real Estate Co., Ltd., compared with the eastern coast, AOKANG produces at least one pair of shoes in Chongqing, at least 20% of the cost savings. "This is not a case of AOKANG family, in fact, it can be regarded as industry data."


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