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April 23rd, 2008:

Earth Day’s Token Efforts Show Need For More Awareness

Stephen Chen – Updated on Apr 23, 2008 – SCMP

International Earth Day passed without much fanfare on the mainland yesterday, with environmentalists saying much still needed to be done to raise public awareness.

The event is usually marked clearly on the mainland’s political calendar, but it did not make even a brief story on China Central Television’s evening news – compared with the minute the programme gave to the Beijing car show.

But mainland leaders still say they are devoted to improving environmental protection. They have set the goal of doubling the amount of energy coming from renewable sources such as water, wind, solar and biomass by 2020.

With environmental awareness rising slowly, various public activities and events were held in cities around the nation. But few of these activities concerned global warming, and environmental activists had to admit that there was still a way to go to promote public awareness of the dangers greenhouse gases pose to the mainland – the world’s biggest emitter of the pollutants.

In the northeastern city of Dalian , the Women’s Association launched a Save Chopsticks campaign to encourage households not to use disposable chopsticks, which consume more than 25 million mature trees a year on the mainland. Trees absorb carbon dioxide, the main greenhouse gas.

More than 1,000 volunteers put half a million young fish into a river in Nanning , Guangxi , in the hope of restoring some ecological balance and improving water quality.

Supermarkets, developers and car makers have sponsored environment-friendly-bag campaigns in big cities such as Beijing, Guangzhou, Shanghai and Hangzhou , Zhejiang , urging consumers to stop using plastic bags and choose more sustainable products.

At a primary school in Shenyang , Liaoning , a pupil painted a picture of an ailing Earth with a thermometer sticking out of its mouth.

“The Earth has a fever, and we must cure it,” the 11-year-old told the China Business Morning Post.

Yang Ailun , climate and energy campaign manager for Greenpeace on the mainland, said the group had noticed that most mainland citizens failed to recognise global warming as an imminent threat.

“Most people don’t know what an ordinary person can do in the face of such a big issue,” she said. “You can ask them to stop using plastic bags because it could make them feel rewarded instantly. But global warming is more distant and indirect.

“Air quality, water pollution and food safety are probably more imminent issues in China.”

Guangdong Keeps Value In Clear-Out

By Olivia Chung – Apr 23, 2008 – Asia Times Online

HONG KONG – The Chinese government appears to be gaining ground in its efforts to clear out low-value, high-polluting, industry from Guangdong province, one of the country’s most important industrial areas, and replace it with higher-quality manufacturing.

The volume of shoe exports from Guangdong plunged about 30% to 490 million pairs in the first two months of this year as factories closed, yet the value of the sector’s overseas sales slipped only 0.6% in the period.

China is the world’s largest shoe manufacturer and exporter. Last year, Guangdong exported 42.4% of the 8.2 billion pairs of shoes made in the country, worth US$24.1 billion, and sold to overseas markets. In 2007, the value of the exports jumped 14.9% while volume rose at less than half the rate, at 6.8%.

The central government last year introduced regulations aimed at cutting pollution in the province’s Pearl Delta area by encouraging factories to move elsewhere in the country. Under the policy, implemented in July, manufacturers have to pay as a deposit half the amount they spend importing 1,853 raw materials while export limits were imposed on a wide range of low-value goods. The move ties up exporters’ funds, hurting their cash flow and profitability.

Wang Qinhua, head of the Ministry of Commerce’s mechanical, electronics and high-tech industries department, said the government wanted to curb highly polluting manufacturing, according to a report in the South China Morning Post.

“The new policy will raise costs and affect the cash flow of exporters, especially those engaged in the labor-intensive parts of industry,” the report quoted Wang as saying. “Exporters will be forced to add value to their products and upgrade their technology.”

The mainland posted a record trade surplus of $112.5 billion in the first half of the year before implementation of the policy, as countries such as the US bought its low-cost goods, adding to international trade frictions. Processed goods represented 45% of the first-half trade surplus, the Post report said.

Simon Shi Kai-biu, president of the 1,000-member Hong Kong Small and Medium Business Association, said last July he would not be surprised to see 2,000 or 3,000 factories failing in 12 months, according to a separate South China Morning Post report.

The campaign was also aimed at releasing land, in short supply after 30 years of intense industrialization, for more productive uses. Relocation of factories to more remote and cheaper provinces would also improve employment prospects there and reduce the need for cheap immigrant labor in Guangdong.

Shoe manufacturers are having to contend with more than government policies. Their material and labor costs are increasing, while exporters have to compete against an anti-dumping tariff imposed by the European Union. Some export-oriented manufacturers producing for foreign brands are trying to compete by creating their own brands, increasing their own research and development.

About 55% of the 3,367 shoemakers operating in Guangdong’s nine cities last year had closed by this February, according to statistics from customs in Guangzhou, the provincial capital, leaving only 1,512 footwear companies.

Of the 1,855 shoe companies going out of business in the past year, the vast majority were privately owned. Of the rest, 92 were foreign-invested and 23 state-owned.

The decline in factories meant that the volume of the province’s shoe exports plunged 27.5% year-on-year to 490 million pairs in the first two months of 2008. The decline by value was a mere 0.6% to $1.59 billion, according to Guangzhou customs.

Li Pang, chairman of the Asia Footwear Association, said the average unit price of shoes exported from Guangdong increased by 37% to about $3.20 a pair in the first two months compared with the same period last year.

Analysts said the total drop in export value in terms of US dollars was the result of increased production cost, the yuan appreciation against the dollar, and increased exports to Europe and other non-US dollar regions with currencies that also strengthened against the US dollar. With international buyers pricing their orders in US dollars and local costs set in a strengthening yuan, shoemakers face reduced margins as they compete against non-Chinese competitors.

Of the total shoe exports by quantity in January and February, those from privately owned shoemakers plunged the most, by 41.1%, with foreign-invested enterprises hit less, at 8.9% year-on-year.

The province’s shoe exports to the US, still the biggest market for Guangdong’s footwear makers, dropped 12% by volume in the first two months of 2008 compared with a year earlier, compared with a 3.4% decline for the full year 2007.

Shoe exports to the EU tumbled 17.5% in the first two months this year to 13.3 million pairs, compared with a 6.5% decline to 77.8 million pairs in all of 2007, after the EU imposed a 16.5% anti-dumping tariff on Chinese-made shoes from October, 2006.

Xu Jianrong, the boss of a low-cost shoemaker in the Pear Delta city of Dongguan that exports all its products to the United States, said his company was close to closure.

“Thank God my factory is still here … but I am afraid all the profits I earned in the past are going to be spent to cover possible losses this year. I now am struggling to survive day by day,” Xu told Asia Times Online.

Xu attributed the economic hardship facing his company to the appreciation of yuan and the increasing costs of raw materials and labor. His shoe plant on average received orders for 800,000 pairs a month since it began operation a few years ago, but in April it received orders for only 400,000 pairs.

“Low-cost shoemakers like us have no bargaining power, which is now possessed by the buyers,” Xu said. “We have no choice but to accept the prices offered. For instance, a pair of shoes previously cost us $3.60 and we had to take the purchase order of $4.00 each. Now the cost is more than $4, but the buyers still offer $4 each in their purchase orders. You have to take it or leave it.”

Li of the Asia Footwear Association said the “cruel” reality will be a positive for the country’s shoe industry as the tightened marketing environment could increase fair competition and nurture industry leaders in the country.

The number of shoemaking factories in the whole of China surged by about 50% at the start of this decade to more than 30,000 in 2006 from 20,000 four years earlier, but orders grew at a slower pace, leading to vicious price competition, according to the China Daily.

Zheng Xiaobo, supervisor of sales department of Yin Sheng Shoe Company in Dongguan, one of the top 10 women’s leather shoemakers in Guangdong, said the company is taking steps to reduce cost pressure. It expanded by buying another shoemaker in Dongguan, then turned to developing the domestic market, which now accounts for 20% of its total sales, to reduce pressure from yuan appreciation.

“The company is also going to add value to its production chain through brand building and now we are aiming at the high-end market,” he said.

Footwear companies are upgrading their products, building up their own brands, says Ding Zhizhong, president of the Jinjiang Shoemaking Industry Association in east Fujian province, which produces 1 billion pairs of shoes each year.

Wang Zhentao, president of Aokang Group, one of China’s leading shoemakers, which has three plants in eastern China’s Wenzhou city and southwest Chongqing municipality, said most of the shoe companies, including Aokang, were affected by rising material costs and labor shortages.

“The new workers we recruit are not only producing goods not up to the standard, but also with lower efficiency,” he said.

To raise profits, Wang said his company has improved its technology and built its brands by setting up a research and development center. Input was sought from designers from Italy and Germany. Aokang also signed agreement with Shiling township of Huadu district in Guangzhou last August to jointly develop an international fashion and leather goods center.

Shiling, recognized as China’s leather goods capital, “produces more than 50% of leather products available in the European market and our cooperation aims at building more Chinese brands and raise our quality levels,” Wang said.

Some shoemakers, such as Anta (China) Company, are selling shares to the public to raise money for technological development. Established in 1991 in Fujian province, home to more than 3,000 footwear producers and more than 1,000 supporting companies, Anta was listed last July in Hong Kong, raising HK$3.16 billion (US$405 million).

Olivia Chung is a senior Asia Times Online reporter.