In September 2012, U.S. Post arranged meetings and site visits to the some of the largest tanneries in China, located in Fujian Province.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
GAIN Report Number: CH11836
China - Peoples Republic of
Amidst record high prices for U.S. hides Fujian remains a
Export Accomplishments - Other
Market Development Reports
Summary: In September 2012, Post encouraged the U.S. Hides, Skins and Leather Association
(USHLA) to lead a trade delegation and to conduct a trade servicing activities in Quanzhou and Jinjinag,
a prominent global manufacturing base for hides located in Fujian Province. Discussions on the latest
market trends and product supplies helped buyers and sellers understand each other better and laid a
solid foundation for sustainable trading. Amidst two-year record high prices for U.S. hides, Fujian
continues to purchase hides at a record rate and now directly from the States instead of through Hong
Kong brokers. In 2011, Fujian Province purchased $176 million worth of U.S. hides.
In September 2012, Post arranged meetings and site visits to the some of the largest tanneries in China
(and the world), located in Quanzhou and Jinjiang, Fujian Province. The trade delegation was supported
by members of the U.S. Hides, Skins and Leather Association (USHLA). The visit was important in
strengthening industry-to-industry communication and long term partnerships. It was particularly
significant this year as world prices for hides are a three-year high and U.S. hides on a two-year high.
USHLA staff addressed this issue first to a group of buyers of U.S. hides to confirm their partnership
and discuss the high prices as explain this phenomenon as a cyclical part of the business. ATO
Guangzhou assisted USHLA and industry conduct trade servicing activities by arranging meetings with
key local industry and government leaders overseeing the transformation of the local manufacturing
Financing: ATO Guangzhou facilitated discussions on the latest market trends of the region and on the
recent condition of U.S. supplies once they have arrived in the local tanneries. It is important to note
that Quanzhou/Jinjiang’s production has progressively moved up the value chain. Even though export-
reliant enterprises have felt the pinch of the global recession, leather apparel sales are growing and so is
demand for higher quality products that were previously only manufactured in Italy or the United States.
(Comment: This brought up discussion on the possibility of exporting U.S. alligator hides and higher
value U.S. dairy cattle hides.) And even as smaller operations go bankrupt, due in part to a reported lack
of credit from local financial institutions, sourcing issues as a result of higher prices and tight supplies,
or because of declining sales in the United States and Europe; the large companies are becoming
stronger and increasing their purchasing volumes.
Environmental concerns: Many of the larger plants we visited proudly displayed their water recycling
plants and environmental certificates. Factories producing lower-end products have also come under
pressure by authorities who are cracking down on highly polluting companies who have not invested in
waste and water treatment plants as stipulated in the newly enforced national environmental laws
enacted back in 2007 with the establishment of the national State Environmental Protection Agency.
And, this is another key market driver behind the exodus of many tanners from the region this year. As
one trade leader coined it “going VIP” (or moving operations to Vietnam, Indonesia or the Philippines)
is the direction many Taiwanese invested tanners are taking these days. According to the local industry
group leadership, the large-scale tanners who can afford to outsource some of their heavy polluting
operations, do so, but remain in the region to produce higher value products.
Direct importation and trade: National authorities have also increased pressure on Fujian authorities
to limit the amount of grey channel trade. Whereas in the last ten years, half of the imported hides were
purchased through brokers in Hong Kong, today, 75 percent of purchases are made directly by the
companies and also imported directly into Mainland China. Though demand for “services” provided by
Hong Kong brokers remains, industry consolidation trends (due to high prices and weak global demand)
have significantly reduced the demand for these services in the last three years.
Conclusion: As China does not have sufficient supplies of many raw materials, the Quanzhou/Jinjiang
story is just a microcosm of the bigger picture in a world manufacturing powerhouse that remains
depend on foreign suppliers to keep the factories running and employment. In Fujian, there remains
about 1,000 tanneries producing leather for apparel such as shoes, suitcases, and other accessories.
China is not self-sufficient in hide supplies. USHLA reported that China is the largest market for
importing hides, accounting for about 50 percent of all US hide exports globally. In 2011, Fujian
Province purchased $176 million-worth of U.S. hides exports. In fact, U.S. hides are the third largest
U.S. agricultural exports to Mainland China after soybeans and cotton.