"Chinese Shoes" Constantly Moving Inward?

Zhang Huarong, chairman of the Asia Footwear Association, said rising costs in the past year had forced about 15% of shoe-making companies in a major industrial center in southern China to close or relocate. When interviewed by the financial times, Zhang pointed out that the key factor in the relocation was the rising wages. Dongguan is located in Guangdong Province in southern China, where there are about 1000 shoe-making enterprises. The problems in the footwear industry reflect the broader problems affecting manufacturing in the Pearl River Delta region of China. The tightening of labor law and the continuous appreciation of RMB also make the situation of manufacturing enterprises more difficult. The Pearl River Delta is the industrial center of China. The problem of large-scale factory closures is basically limited to small businesses, which are being squeezed by bigger, more efficient competitors. The closure of these enterprises does not seem to pose a threat to the overall advantages of China's manufacturing industry. The most important advantage of Guangdong's footwear industry is that many of its exporters are reluctant to give up their skilled labor and infrastructure, despite the rising cost of labor. Last year, Guangdong's exports increased by 22.3% to US $369.3 billion, accounting for 30% of China's total exports. But rising costs in China could mean that the world's factory will soon become a major exporter of inflation. After several years of falling export prices, the so-called "China price" - once an unparalleled benchmark purchase price for us, European and Japanese retailers - began to rise in late 2005. But so far, year-on-year growth has been moderate. Compared with last month's CPI (1.7%), China's consumer price index reached a new high of 11.0%. Zhang Huarong is also the founder and chairman of Huajian group, one of the largest shoe-making enterprises in China. According to Mr. Zhang, the average price of a pair of shoes produced by his company will rise by $1 this year. Last year, Huajian exported more than 7 million pairs of shoes. "The monthly wages of the moderately skilled workers in our Dongguan factory have risen from $100 in 2006 to $200," says Mr Zhang. As wages and other costs continue to rise, Huajian has abandoned plans to double the total number of workers in its Dongguan plant to 40000 and will instead expand a sister factory in the inland province of Jiangxi. Jiangxi Province is the hometown of Zhang Huarong. In the late 1980s, Taiwan and South Korea were famous for their free shoe industry. Zhang Huarong's estimate of the number of shoe-making enterprises in Dongguan is based on the number of its members provided by the local government. This may indicate that the shoe industry in Southeast Asia or other provinces will start to shift to China.