China Footwear Industry

China’s eventually needs to shift away from low-cost production of footwear, where countries like Vietnam are slowly overtaking its advantage in the industry. Vietnam’s economy is developing rapidly on the same low-cost, labor-intensive export-based model that has empowered China and other Asian states. Shoes have been one of the most profitable goods for Vietnam and it produces more leather shoes than any other country, including India and Brazil. (read more on Vietnam footwear).

China and EU Dispute on Footwear:

Europe and China had a dispute over intellectual property rights earlier,  then, this sparked a new dispute concerning an EU decision in December to extend trade charges on Chinese and Vietnamese leather shoes by 15 months to protect European shoemakers and its domestic producers in the troubled Mediterranean economies of Spain, Portugal and Italy.

The charges add between 9.7 and 16.5% to the import price of Chinese shoes and 10% to Vietnamese shoes. EU officials say China is guilty of uncompetitive behavior, causing significant harm to EU manufacturers, which employ 260,000 people in Europe, reported China Daily newspaper.

Then, on February 4, 2010, China filed a complaint at the World Trade Organization (WTO) against the European Union’s duties on the import of Chinese footwear. The World Trade Organisation (WTO) said China launched a case alleging unfair trade against the European Union accusing the 27-nation bloc of imposing illegal duties on Chinese shoes.

What Next?

Generally, shoes made in Vietnam cost 10% more on average than those made in China. However, with the EU restriction, China is subject to 16.5% duties, while Vietnam only suffer 9.7% duties. It could help Vietnam catch up with China on footwear export. If Vietnamese shoemakers cannot solve its current problem about finding workers and reduce or control input costs because of smaller economies of scale and fewer natural resources, Vietnam will have less change to surge the export volume to exceed that of China.

Vietnam also is a contender to take some of the foreign investment that gave rise to foreign-owned shoe factories in China.

For China, it is either maintain its dominance in low-end production while smaller producers like Vietnam are gaining its ground in the industry, or come up with better quality and branding, which will still leave China in tough competition with foreign high-end manufacturers, such as Europeans.



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