By Chen Hong (China Daily)
Updated: 2008-02-20 08:51

China's position as the world's top shoemaker will not be shaken by the closure last year of a fifth of the manufacturers in Guangdong province, experts have said.

Shoemaking companies have been forced out of business amid industrial upgrading, the Xinhua News Agency reported.

China supplies at least 60 percent of all kinds of footwear to the global market, official figures show.

Guangdong's shoemaking firms include mainly small- to medium-sized enterprises (SMEs) such as shoemaking factories, material processors, machinery manufacturers and traders, Li Peng, general secretary of the Asian Footwear Association, said.

The association said more than 1,000 of the 5,000-6,000 city's shoemaking firms closed in the first three-quarters of last year.

Their manufacturing capacity accounted for 10-15 percent of the total industry in Guangdong, and about 150,000 to 200,000 employees were laid off, Li said.

However, many industrial players, including Li, believe the recent trend is a positive sign for the over-competitive industry. The tightened market could enhance competition and help reinforce the nation's role as industry leader, they said.

Figures show the number of shoemaking factories on the mainland increased from 20,000 to more than 30,000 between 2002 and 2006, but orders were much slower, leading to an irrational "price war", experts said.

Industry newcomers, most of them SMEs, were further hit by an unfavorable marketing environment that included the appreciation of the yuan, price hikes of raw materials, rising labor and land costs, the reduction of the export refund rate and revised policy on custom duty deposit, analysts said.

"The industrial reshuffle has just begun. More SMEs without core competitiveness will be washed out and those with better technology and sound internal governance will survive," Xinhua said.

Compared with burgeoning markets such as Vietnam and India, experts said China still has advantages in terms of cheap power and water supply, excellent infrastructure and an integrated industry.

To lower costs and expand capacity, some large firms in Guangdong have built new plants in other provinces.