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Chininese Shoe Exporters Facing Pricing Pressures, Losing Money
Update: 9/11/2009 5:50:00 PM Source: Dongguan Hotels

While Chinese exporters are waiting for the recovery in European and American markets---the Back to School season is over but Christmas and spring orders are coming up---they are also seeking share in emerging markets. But the prices some of those markets are willing to pay are so low that any supply from Made in China risks losses and trade friction.

Guangdong's shoe manufacturers, for instance, have recently received orders from African clients, who offer only one dollar or less for a pair of rubber or plastic fabric shoes. To keep production levels up, shoe makers must take these low-price orders from emerging markets, even at the risks of losing money, buyers refusing to pay, and anti-dumping action from local producers.

Since the onset of the global slowdown, orders for high-priced shoes have fallen significantly while low-priced shoe orders have increased.

From January to July, turnover of China's footwear exports totaled USD15.71 billion, down 5.2%, the first decline in over ten years. Zhang Shuhua, director of the China Leather Association, said 2009 has been the most difficult year for the whole industry, and the outlook for 2010 depends on the overall world economy.

In short, the industry faces a difficult period for the next two or three years.

Guangzhou Customs data show that, from January to July, the average price for shoe export in Guangdong was USD2.90/pair, down 6.4%. Due to the price decline, total earnings fell by 5.7%, reaching USD5.74 billion in the first seven months, despite 1.99 billion exported pairs, up 0.7%.

Rubber or plastic fabric shoes sell well in emerging markets. In the first seven months, Guangdong's exported rubber or plastic shoes totaled 1.27 billion pairs, up 14.9%, accounting for 63.8% of its total shoe export, up 7.9 percentage points, year-on-year, due mainly to a high export growth in ASEAN, African, Latin American and the Middle East markets, up 45.2%, 80.7%, 26.9%, and 41.4%, respectively. The export price, however, is not satisfactory, averaging USD1.80/pair, down 12.8%. Exports of leather footwear fell by 25.6%, but the average price jumped 14.2% to USD9/pair.

The price for marketing shoes has been on the rise recently. In Dongguan, selling a pair of shoes costs more than one dollar, but the average price for African export is USD0.90/pair, so shoemakers must sell at a loss. Thanks to an increased export tax rebate from 11% to 15% since last year, many low-end manufacturing firms are still earning small profits.

Low-price exports face great trade risk. In recent years, Chinese shoe firms have frequently encountered friction in international markets. The EU has carried on anti-dumping action against Chinese leather shoes for four years, to the tune of up to USD700 million, and will decide in the near future whether to continue levying the 16.5% anti-dumping duty. Elsewhere industrial protection has strengthened, with Canada, Peru, and Argentina also taking anti-dumping measures against Chinese shoes.

China's annual output of shoes totals more than 10 billion pairs. 2008 exports reached 8.12 billion pairs, earning USD28.8 billion, with domestic consumption of over 2 billion pairs.

Editor: canton fair

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