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There is a lot of hidden dangers in the export of footwear in Guangdong
With the evolving structure of international trade, the growth rate of exports for traditional labor-intensive products has slowed down. For the shoe industry, it's crucial to reflect on how companies are navigating challenges such as export blockages and rising raw material costs. By building their own brands and tapping into the emerging markets in county-level and rural areas, shoe manufacturers can seize new opportunities and ensure long-term sustainability.
Trade barriers have become a major obstacle for footwear exports. According to reports, the decline in Guangdong’s shoe exports is largely attributed to the rise in trade protectionism and the rapid appreciation of the Chinese yuan. The European Union continues to impose technical barriers, including environmental standards, safety certifications, and corporate social responsibility reviews, which create additional hurdles for Chinese footwear. In Spain, for instance, imported shoes face heavy fines if they are priced too low, effectively increasing import tariffs and eroding China's price advantage. Similar measures have been taken by countries like Argentina, Brazil, and Turkey, with anti-dumping duties or safeguard taxes imposed on Chinese footwear.
The Canadian government also recently raised anti-dumping duties on waterproof footwear and soles from China, with some companies facing up to 49% in tariffs. These policies have had a significant impact on Chinese exporters, forcing them to rethink their strategies. As one official from Guangzhou Customs noted, many countries have introduced stricter trade policies post-financial crisis, and this trend is likely to continue. In response, shoe manufacturers are advised to explore new markets and diversify their customer base.
The appreciation of the yuan has further squeezed profit margins. Since the second exchange reform in 2010, the yuan has appreciated rapidly. As most footwear exports are settled in U.S. dollars, the depreciation of the dollar against the yuan has directly reduced profit margins. Analysts estimate that a 3% appreciation could cut export profits by about 50%. For example, a $1 million order could see a profit loss of around 200,000 yuan due to exchange rate fluctuations, making it harder for small and medium-sized enterprises to stay competitive.
In addition to currency risks, rising raw material costs have also placed pressure on the industry. Cotton prices surged to 28,891 yuan per ton by mid-November 2010, while PVC and rubber prices reached high levels. These increases have forced many companies to reconsider their strategies. Some are shifting focus to the domestic market to reduce reliance on overseas sales. One company owner in Guangzhou explained that they are now targeting the domestic market, where they believe they can achieve better profit margins and support long-term growth.
Labor costs have also risen significantly, with Guangdong’s average monthly wage reaching 3,090 yuan in 2010—a 10.1% increase from the previous year. This has made it more challenging for labor-intensive industries like shoe manufacturing. Meanwhile, competitors such as India and Vietnam are leveraging their lower labor costs to gain a competitive edge. India, for example, has introduced tax rebates and preferential policies to boost its footwear exports, which now account for 16% of global production.
As the domestic market becomes more attractive, many shoe companies are turning their attention to county and township areas. With rising rural incomes and growing consumer demand, these markets offer untapped potential. Companies are no longer focusing solely on big cities but are instead exploring smaller towns and rural regions, where competition is less intense and market positioning can be more effective.
Consumer preferences are also evolving, with different segments catering to various income levels. While high-end shoes remain popular among a small group, mid-range and budget-friendly options dominate the market. Many consumers prefer affordable shoes that offer good value, even if profit margins are slim. Companies are adapting by focusing on efficient turnover and maintaining a strong presence in key markets.
To succeed in the domestic market, companies are increasingly investing in branding. Establishing a strong brand identity helps build trust and differentiate products in a competitive landscape. Some manufacturers are also shifting from simple assembly to core manufacturing, aiming to add more value and improve product quality.
Overall, the post-crisis environment presents both challenges and opportunities. By embracing innovation, strengthening brand identity, and exploring new markets, Chinese shoe companies can navigate the current landscape and position themselves for future success.