China Fits Shoe Importers

LONG BEACH, Calif. -- Importers say China, facing inflationary pressures due to labor shortages and higher costs for petroleum and other raw materials, will continue to be the dominant producer of footwear for many years.

Footwear manufacturers in South China are asking themselves whether they should stay where they are, relocate their facilities to western China, where production costs are cheaper, or leave the country altogether, said Peter Mangione, president of Footwear Distributors and Retailers of America.
    
Most are deciding to stay where they are. “The new China is China,” Mangione told FDRA’s annual meeting Tuesday.

With 6,000 shoe factories and another 4,000 plants supplying soles, uppers and materials used in the manufacturing of footwear, the industry and infrastructure in South China is too extensive to be replicated elsewhere, Mangione said.

China accounts for 60 percent of the world’s shoe exports. The United States imports 99 percent of the footwear worn by Americans, and China supplies 87 percent of all U.S. footwear imports.

South China is experiencing labor shortages and inflationary wage pressure as manufacturers of a wide variety of consumer goods compete for workers. There is an estimated 20 percent to 30 percent shortage of labor in the region.

Wages for workers in footwear plants now average $1.10 an hour, up from 39 cents an hour in 2003, Mangione said. By contrast, factory wages average 48 cents an hour in Vietnam and 43 cents an hour in India. The strengthening of the yuan in relation to other currencies is making Chinese footwear exports more expensive.

China is grappling with significant environmental problems including a costly effort to reduce pollution from coal-fired power plants. Like most nations, China is paying much higher prices for oil and other raw materials.

Also, Beijing is pressuring employers to improve wages, working conditions and benefits for employees. China’s leaders fear that the lifestyle gap between the burgeoning middle- and upper-middle classes in urban regions and laborers and farmers on the opposite end of the economic spectrum could cause worker unrest.

Despite these problems, China has no intention of abandoning its footwear industry. This is true even though the government is attempting to move the country into the manufacturing of higher-value products. With the need to create 20 million new jobs each year for its massive population, China cannot give up on lower-value manufacturing such as footwear, Mangione said.

China’s footwear manufacturers will be forced to raise their prices in order to recoup some of their increased costs, but price increases will be modest. Even though manufacturing costs in South China have increased 20 percent to 30 percent from a year ago, manufacturers will absorb some of the higher costs and price increases for footwear will be much less than 30 percent, Mangione said.

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