leather garments industry in China is in the process
of consolidation. Many small companies are expected
to stop operations in the next few years as various
industry challenges are making it more difficult for
them to compete against midsize and large suppliers.
In addition, exports are expected to continue their
To survive, a number of leather garment
manufacturers in China are expanding their markets
and diversifying product lines.
China is said to be the largest volume
manufacturer of leather garments in the world. It is
difficult to obtain the exact number of leather
garment makers in the country, but industry
estimates reach up to 10,000. The majority of these
suppliers are small companies, some of which have
only 40 to 50 sewing machines at their workshops.
The fickle nature of the fashion industry has hit
makers hard. Demand for leather garments,
particularly coats and jackets, peaked a few years
back, encouraging many suppliers to join the line.
But with fur now leading fashion forecasts this
season, a number of these companies are experiencing
dwindling sales. Low demand for leather coats and
jackets is intensifying competition in an industry
with a large supplier base.
In 2005, the industry suffered an 8 percent drop
in export volume sales. Exports have continued to
fall, going down 21 percent in the first eight
months of 2005 compared with the previous
Apart from the large supplier base, Russia's
strengthened crackdown on illegal tax and customs
practices is another reason for China's dwindling
exports. Most leather garment enterprises,
particularly those in north China, export to Russia.
Many of them ship to the country via Russian
companies that charge foreign businessmen certain
fees so that the latter do not need to pay high
import taxes. This practice has been causing Russia
large tax revenue losses.
The majority of companies that used to focus on
Russia are now expanding to the US and the EU, which
they believe are more lucrative markets for their
businesses. Exports to these markets, however, are
also slowing, with consumers preferring fur to
Further, in 2006, the China government reduced
the export rebate for finished leather from 13
percent to 8 percent and textiles from 13 percent to
11 percent. Companies engaged in low-value finished
leather and textile products now have to speed up
their technical innovation to boost their
Because the industry is experiencing such a
fluctuating business environment, China's leather
garment exports are estimated to continue decreasing
though 2007, by at least 10 percent.
Suppliers are diversifying into other product
lines in response. More than 50 percent of companies
interviewed for this report now have a secondary
line to leather garments. A number of these
suppliers used to stop production during the
off-season. Some of them even close their factories
and go on vacation for up to a month.
Some large makers have ventured into the
manufacture of other product lines, including
leather bags. For instance, Nanhai Yashan, one of
the profiled suppliers, began producing leather bags
in early 2006. It is now planning to focus on
increasing capacity and output of the product in