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Fujian shoemakers find their feet

By Lu Haoting and Hu Meidong (China Daily)
Updated: 2009-04-24 07:48

It is probably the worst of times and also the best of times in Fujian province.

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Ding Jinhuang recently turned off a production line at his sneaker factory in Hui'an, a small town in Fujian, due to falling overseas orders. "I don't know when we can work on full capacity again. My wife is burning incense every day to pray for a recovery," Ding said.

But his fellow villager, Ding Shuibo, plans to hire 2,000 more workers this year as he has just started a new factory in Jinjiang, another town in Fujian. He even plans to open 800 to 1,000 new stores in the country's second- and third-tier cities this year.

What creates the contrast is the fact that Ding Jinhuang's company is an OEM (original equipment manufacturer) factory for foreign companies while Ding Shuibo owns Xtep, one of the leading Chinese fashion sportswear brands.

"The financial crisis is a serious blow to companies doing OEM work for overseas markets. But we focus on the domestic market, which is less affected," said Ding Shuibo, president, Xtep (China) Co Ltd.

"With urbanization speeding up, there is huge potential in the Chinese domestic shoe market, especially in the second- and third-tier cities."

Jinjiang, a three-hour drive from Fuzhou, has more than 3,000 shoemakers and produces 40 percent of China's sports shoes.

Despite the financial crisis, the output value of shoemakers in the city still grew 19.2 percent year-on-year in the first quarter of this year, according to figures from the local commerce bureau.

A major reason for the relative stability is the fact that 35 percent of the city's shoemakers sell shoes to the domestic market.

The city is also home to 46 shoe brands, the biggest among the major shoe manufacturing bases such as Guangdong and Zhejiang provinces. It is also home to leading Chinese sportswear brands, such as Anta, Xtep and 361.

As demand in overseas markets weakens, some local OEM companies have turned to large local enterprises with higher brand recognition in China and manufactures shoes for them, while the larger companies focus on R&D and marketing.

"Some of the large companies used to outsource part of their manufacturing to Guangdong and Zhejiang. We try to encourage them to return to Jinjiang because it can not only save costs but also allows small companies to stay on in the business," said Yang Yimin, Jinjiang Party secretary.

Latest figures from Fujian's statistics bureau showed that the entrepreneur confidence index of the province rose 1.3 percentage points in the first three months of this year over the fourth quarter of last year, the first quarterly rise since the middle of 2008.