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China – leather industry with reduced output

Published: 27 Apr, 2022

The whole leather industry within China has been described by one commentator as a complete mess. Even tanneries that are not in lockdown zones are running at reduced capacity because of labour shortages, caused by restrictions on the movement of workers. There are real concerns in the footwear sector of the market, as tanneries see brands moving their operations away from China following two years of disruptions. Rising freight charges are also adding to the problem. The U.S. shoe market which pre-pandemic sourced over 70% from China now looks to other Far Eastern countries to add to Mexican and Latin countries for supply.

The number of vessels awaiting unloading in Chinese ports is growing by the day, with reports stating the number has grown as high as 500 vessels. The delays are all caused directly or indirectly by imposed government lockdowns around Covid.

Banking facilities which are generally run via Shanghai are running a severely reduced service which is hampering payments for deposits and the opening of letters of credit. There has already been cancelled and renegotiated contracts as a consequence.

According to the BBC, Shanghai, contributes over 3% of China’s GDP and made up over 10% of China’s total trade since 2018. The Chinese government set a target of GDP growth of 5.5% for 2022, but analysts feel that this number may be almost 50% overstated. There are those who feel a mini recession could take place if lockdown measures continue.

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