China, increasing costs to affect the leather industry business: “China pledges cuts, yet meanwhile Adidas move to Vietnam”

Due to high costs, fashion players are heading out towards other Far East countries; in addition, several Chinese small and mid-sized enterprises are about to face a heavy crisis. At the beginning of March, during the joint meetings of the Consultative Political Conference of Chinese people (CPPCC) and the people’s national assembly (NPC), China’s political authorities reassured Chinese manufacturing industry. Pension provision companies must pay, is bound to decrease from 19% down to 16%, while the value added tax is going to drop from 16% down to 13%. Yet, many companies consider this solution ineffective at this point, since the problem has already broken out. The editors of CGTN, a Chinese television that broadcasts in English, decided to talk about it to Liu Qiang, a leather industry professional from Tientsin city. After running his business for 20 years, as a supplier of materials to footwear manufacturers based in Guangdong, he is about to shut down: in fact, in the meantime some top players, such as Adidas, have relocated their value chains to Vietnam. “Over the years, the strong point of Chinese manufacturing industry was the abundance of manpower”- he remarked about a cluster that, despite its potential investments in innovation and machinery, still relies on manual work, “as to selection of hides for example”. Surely, the pledge to reduce the VAT might have remarkable effects: “For each box of leather, for which I currently pay 4,700 US dollars, I could save up to 900 dollars – he wrapped up –. That would be indeed a great benefit for my business”.

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