Guangdong Nearly Thousand Small And Medium-Sized Shoe Enterprises Take The Initiative To Go Out Of Business

The less profitable companies chose to go out of business and close down before the end of December.

The new labor contract law will soon be implemented, and the new labor contract law, which is about to be implemented, is becoming the last straw to crush the small and medium sized shoemaking enterprises.

According to a survey conducted by the footwear association of Asia, about 500 shoe manufacturers in Guangdong have closed down in the past three months.

This statement was confirmed yesterday by a number of large shoe companies in Guangdong. They said that the unprofitable situation led weaker companies to choose to close down and close down before the end of December.

In three months, Li Peng, Secretary General of the shoe industry association of four hundred or five hundred shoe factories, said in an interview with the media that the survey results showed that in the first three quarters of this year, there were about 1000 shoe factories and supporting enterprises in Guangdong, which were closed down by various factors or actively closed up, or sealed up by the courts, or moved to other regions for further development.

He said that in the last two or three months, four hundred or five hundred small and medium-sized factories in Guangdong have been closed, and 200-300 of the 1000 shoemaking enterprises in Dongguan alone have been closed.

Liu Kun, general manager of Guangdong Golden Shoe industry, said yesterday that many shoe factories that he had contacted had already announced that they would close before December 31st. This initiative was different from the previous passive failure due to debt problems. "Enterprises can not see future profits and can only make this choice".

20% of the new cost in the past two years, many factors, such as RMB appreciation, raw material prices, labor costs, labor shortage and electricity shortage, are squeezing the profit margins of enterprises. At the policy level, export tax rebates and processing trade are constantly being adjusted, including foreign trade enterprises including shoe making enterprises.

"The new labor contract law, which is about to be implemented in January 1, 2008 and the combination of two taxes, is becoming the last straw to crush the camel".

Liu Kun said, initially estimated that the cost brought to enterprises by these factors increased by more than 20%, while overseas purchasers such as the US and Europe did not accept new quotations after rising costs.

Unable to raise prices, enterprises can only reduce their own profit margins, but the reality is that the average level of the shoe industry's net profit is only 5%-8%.

If we can't raise the price, then the order will mean loss.

Because of this, many small and medium-sized shoe-making enterprises choose to go out of business and close down.

Liu Kun, whose low value-added industries are gradually dropping out of Guangdong, is expected to be the industry reshuffle year in the next two years. It is estimated that more than half of the enterprises will take the initiative to close down and withdraw from the footwear industry. The remaining enterprises will need to find new outlets, or move to Southeast Asia, or upgrade and increase the added value of products.

A large shoemaking enterprise in Guangdong said yesterday that enterprises with a small scale and strength are looking for new processing bases, and many business owners have gone to Vietnam, Indonesia and other places to investigate.

He said that the local labor technology capability is not as good as that of the mainland of China, but the overall cost is lower than the mainland by more than 10%.

In fact, relocation is not confined to the footwear industry.

With the approaching of the implementation schedule of the labor contract law, many foreign-funded enterprises are taking inventory of the total amount of human resources and the length of service of the employees, and analyzing the cost that will be added to the enterprises after the implementation of the new law.

Previously, UNIQLO, one of Japan's largest clothing retailers, announced that the ratio of products to be produced in China will be reduced from 90% to 60% by 2009, and that the proportion of production in Vietnam and Kampuchea will increase to more than 30%.

A MATTEL toy supplier also introduced yesterday that the toy industry has not yet seen a large-scale closure of the footwear industry.

This is mainly due to the fact that Christmas toys have been shipped in early November, and the toy industry is in the off-season. "The market situation for next year is still uncertain."

He said that the market will not be very optimistic next year. It is expected that by next year, around 4 and May, the trend of the whole industry will be clearer.

An official of the foreign trade and economic cooperation system said yesterday that the low value added industries represented by shoemaking gradually withdrew from Guangdong. It is a trend that Guangdong has such a large plate. There are so many resources. If the labor-intensive industries such as shoes, textiles, furniture and toys are stuffed, then the capital intensive industries such as automobiles, electronics and other high-tech industries will not have room to enter.