China fur factory costs rising

SANDY PARKER REPORT, VOL. 32, ISSUE 20, JUNE 30, 2008
The following extract is reproduced with permission from Sandy Parker Reports, Weekly International Fur News. Sandy Parker has been covering the fur industry for more than four decades. For most of that time he has published a weekly newsletter, detailing results of international pelt auctions, wholesale price trends, business developments and movements in the trade, as well as economic and political activities that may impact on it.
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International Fur News
with Sandy Parker
China fur factory costs rising
HIGHER COSTS ARE IMPACTING ON HONG KONG MANUFACTURERS, the vast majority of whose factories are located on mainland China. The new labor law that went into effect at the beginning of this year is estimated to be pushing labor and labor-related costs up anywhere from 30% to 50% over last year, especially when a shortage of skilled labor is factored in. Thus, if the labor component is only 20% of the cost to produce a fur garment in China, the new rates can add as much as 10% to the cost. But manufacturers are also paying more for energy to run their plants as well as for measures to comply with China’s new anti-pollution rules.
So far, new import rules aimed at cutting pollution have not been applied to fur skins, but this is still a possibility. Under the rules, importers of “restricted” materials must pay a 15% duty plus 17% value-added tax, both of which are to be refunded when the finished product is exported. The same levies are collected on so-called “prohibited” materials, but are not refunded on exports, thus becoming what may be considered as punitive taxes. As a leading Hong Kong manufacturer has pointed out, either way, it’s a big amount of money to be tied up for a small company. “It’s a big problem for dressers and manufacturers,” he said, adding “we might have to move elsewhere or close.”
On top of this, China also has been clamping down on loopholes that have enabled manufacturers to avoid import duties on skins. Closing those loopholes would also increase manufacturers’ costs and be passed along in the form of higher prices. One Hong Kong manufacturer acknowledged that there already has been a general price increase for new and unconfirmed orders, the extent depending on when the factories purchased their skins, but the implication was that further increases are imminent.
IN THIS ISSUE:
Service Business Moving Well…
…but Stores’ Costs Are Going Up
China Factory Costs Also Rising
New Price Hikes Seen Coming
Consumer Confidence at Low Point
For extracts from back issues of Sandy Parker Reports see News Index. Subscribers can access an archive of complete issues at www.sandyparker.com.
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