Market and Trade Data
China, Where U.S. Hides Get Their Shine
See also …
FAS Report CH7623
China’s position as the world’s largest
leather products manufacturer, robust economy, and
growing middle class are fueling the country’s demand
for and manufacturing of quality leather products.
According to the World Trade Atlas (from which the data
in this article are taken), China exported $14.2 billion
worth of leather products in calendar year 2007, 14.7
percent more than the previous year.
China needs hides in a big way, and the
United States is its biggest supplier.
produces more than half of the world’s shoes, and leads
in the production of various leather garments and
fashion accessories. Although domestic leather
production is significant, it often is in poor
condition, so China must import half of its raw hide and
skin needs to meet its industry’s requirements for
quantity and quality.
demand for U.S. hides (which account for nearly all U.S.
hide and skin exports to China) is growing along with
its general demand. In 2007, Chinese imports of U.S.
hides reached $1.16 billion, up 10 percent from the
previous year and more than half the total value of U.S.
hide exports. Driving this trend is strong demand for
luxury leather products, such as leather bags, jackets,
shoes, gloves, and wallets for China’s export and
Leather made from top-quality U.S. hides
Photos courtesy of the FAS Agricultural
Trade Office, Guangzhou, China
of the Chinese Leather Industry
According to the China Leather Industry Association, in
2006 (the latest full year for which data are
available), China’s 2,900 manufacturers produced 7.5
billion square feet of leather, 20 percent of the world
major leather products manufacturing bases are
Guangzhou, Dongguan, and Nanhai in Guangdong Province;
Jinjiang, in Fujian Province; Wenzhou, in Zhejiang
Province; and Xinji, in Hebei Province. Wenzhou (near
Shanghai) and Haining (a smaller manufacturing center)
focus on shoe uppers. South China produces leather for
handbags, belts, and furniture. Guangdong manufacturers
concentrate on leather shoe and handbag production.
than 20 years of development, Guangdong leather
manufacturers have acquired experience and a reputation
for producing export-quality products. They keep a sharp
eye on international fashion trends and use modern
production technology and management, practices that
give them the edge over their local rivals in export
Costs of Doing Business Challenge China’s Leather
However, rising concerns about the environmental impacts
of tanneries, particularly discharged waste water, limit
development of the industry. Waste-water treatment
facilities require substantial capital investment and
adherence to strict regulatory practices, adding to
costs and reducing profit margins. Bigger tanneries can
afford their own facilities, but smaller tanneries
cannot, thereby contributing to industry consolidation.
and developed areas have curtailed or prohibited
tanneries. In response, the industry has started
relocating tanning facilities to less developed areas,
where centralized tanning industry production zones have
been established, such as Qingyuan and Huizhou in
Guangdong, Zhaoyuan in Heilongjiang, Baicheng in Jilin,
and Quanzhou in Fujian. Tanneries once located in
Shenzhen have moved to Dongguan in Guangdong or Huidong
manufacturers have begun importing semi-processed skins.
One Guangdong-based leather shoe manufacturer moved his
tanning factory to Vietnam and brings in the finished
leather to Guangdong for shoe production.
A leather tanning drum
leather industry also faces keener competition from
other countries, such as Vietnam and India. Industry
insiders say that while India has not picked up any
Chinese tanneries, it is looking into expanding its
prices for raw hides have risen because of increased
demand. In 2004, a U.S. branded-steer hide cost $55; by
the end of 2007, it cost $59. For manufacturers, labor
costs are also rising rapidly, further squeezing
operating margins. Skilled worker salaries doubled in
the past two years, from $100 to $200 per month.
issue impacting the Chinese leather industry is the
latest VAT (value-added tax) policy. In March 2007, the
central government in Beijing announced that tariffs for
wet blues (a type of semi-processed skin) are subject to
a 7-percent regular import duty and an additional
17-percent VAT, if they are converted into finished
leather and re-exported. However, if the imported skins
are used in valued-added products (such as footwear or
other finished goods) and re-exported, the tariff and
VAT do not apply.
2007, bowing to international pressure to lower
governmental support, and to spur the shift from
processing raw materials to value-added products, China
reduced manufacturers’ tax rebates for certain leather
products. The rebate for footwear and bags was lowered
from 13 to 11 percent, that for leather apparel from 13
to 5 percent, and that for exported finished leather
from 13 to zero percent.
challenges for manufacturers include the appreciation of
the Chinese yuan, European trade barriers, anti-dumping
taxes, and strict quota systems imposed by many
countries against Chinese exports.
U.S. Hides Have Advantages, But Also Face Challenges
U.S. hides are well-known for their superior quality
because of their thickness, strength, larger usable
area, consistent quality, and smoothness, properties
that help to ensure higher-quality leather products.
Prices for U.S. hides therefore tend to be higher than
those of their competitors. However, U.S. hides will
help manufacturers of top-quality leather goods achieve
premium prices. One major importer of U.S. hides noted
that consistent and sufficient supplies keep him coming
back for more.
could be impacted by contraction in the Chinese tanning
industry. Some 20 percent of U.S. hide exports could
shift from China to other countries in five years as
tanneries relocate. U.S. industry representatives are
therefore assessing markets in India, Turkey, and
Industry Associations Boost Demand for U.S. Hides
The United States Hide, Skin & Leather Association helps
to explore market opportunities and expand market share
for U.S. suppliers. The association regularly organizes
industry events such as the All China Leather Exhibition
in Shanghai and the Asia Pacific Leather Fair in Hong
Kong, which enable exporters to meet prospective buyers
and maintain existing business relationships.
A local exhibitor’s innovative display at
the All China Leather Exhibition
association recently translated its manual, Standards
Governing the Export of North American Cattle Hides,
into Chinese. This initiative helps manufacturers and
traders better understand U.S. standards, thereby
mitigating misunderstandings that can lead to trade
Industries of America provides various services for the
U.S. industry, including environmental, technical, and
marketing support. However, Chinese demand for finished
U.S. leather is limited by its comparatively higher
price. Both the United States Hide, Skin & Leather
Association and the Leather Industries of America are
cooperators in the Foreign Market Development Program,
administered by FAS.
seminars organized by the associations would help
further educate the Chinese industry about the merits of
using U.S. leather. Initiatives that promote U.S.
leather’s image would help to cultivate consumer
preference for products made from U.S. hides. By
approaching the Chinese leather industry in a unified
way, associations and producers build a solid platform
for promoting U.S. hides as the product of choice.
Vivian Xian is an agricultural marketing specialist
in the FAS Agricultural Trade Office in Guangzhou,