Many private enterprises in Wenzhou city complained that the sale value grew in 2010 while profits dropped significantly, which was even worse than that in latest financial crises. Wenzhou SMEs Association president Zhou Dewen said 1% to 3% of gross profit margin in traditional shoemaking industry is hard to support them to survive.
Two years ago some shoemakers in Wenzhou closed their business as financial crises, now the pressures come from labor costs and raw materials price hiking, and revaluation of Chinese currency. According to statistic department 2000 enterprises in Wenzhou city had closed their business, half of them are manufacturing enterprises. Although the numbers are less than those closed in previous years the lower profit are huge pressure for shoemakers.
A shoemaking owner said we have to close 4 of our 14 production lines as insufficient labors. The profits margin has dropped to 2% or less 3% from 8% in 2009 because of 20% surging in raw materials.
A survey to 129 leading enterprises showed that only 33.3% of them achieved increase in profits in the third quarter, profit earning in apparel and footwear sectors is just 10% of that in 2000.
300 enterprises among 500 closed in Lucheng area come from apparel and footwear sectors.
Wenzhou SMEs Association president Zhou Dewen said new round of bankcrapcy may take place this year in the context of production costs further increasing and profits shrinking, which is even worse than that in 2008, Zhou urges local government to show their concern over the situation in manufacturing sectors.
