Strength index

During some Chinese traditional festivals, Ren Youfa, chairman of Haining China Leather Market Corporation, would receive greetings cards or gifts from overseas consulates in Shanghai.

"Previously, I felt surprised and strange since I didn't have a close relationship with these diplomats. Then, I realized that it's a way for overseas countries to show respect to our leather market in Haining," says Ren.

Located 100 km east of Shanghai, in Zhejiang province, Haining is famous as "the leather capital of China".

The city is the country's leading leather production base and distribution center and in 2007, the leather industrial output value reached 130.81 billion yuan, with sales income of 127.9 billion yuan.

Since 1994, Haining China Leather Expo has been held annually and has become an important arena for Chinese brands competing against international counterparts.

Also founded in 1994, the Haining China Leather Town, with a total construction area of 450,000 sq m, forms the country's largest and most professional leather market.

In August, a 70-story building called Leather CBD (Central Business District) began constructing the third phase of the Haining Leather Town, with a total investment reaching 600 million yuan.

"We are inviting the headquarters and research centers of famous leather companies to move into the CBD," says Yu Zhihong, Haining Party secretary, "We are not only luring excellent brands from overseas, but cultivating domestic name brands."

On October 15, Haining Vice-mMayor Shen Linong led a delegation to Copenhagen, aiming to strengthen cooperation with the famous Danish leather center and invite experts and world-class designers to join the development of the Leather CBD in Haining.

"After completion of Leather CBD, the leather market will be enlarged to 660,000 sq m. We will focus on the research and innovation of leather industry, and seek opportunities to go public in the near future," says Ren.

During the National Day holiday in October, about 330,000 travelers visited Haining for sightseeing and shopping in the leather market, and spending 305 million yuan in seven days.

As the pillar industry of Haining, about 80 percent of leather products are exported to overseas markets. Confronted with the global economic meltdown, the city's leather industrial output value was even up 4-5 percent in the first half of 2008.

"This current global financial crisis has had a negative impact on the local economy, but not very seriously. To some extent it spurred another reshuffle of management, techniques and branding which will benefit the industry in the following years," says Yu.

He adds: "Due to the credit crunch, quite a number of export-oriented private companies in Zhejiang province have gone bankrupt. In Haining, about 95 percent of enterprises are privately-held companies, but only 10 companies have closed down and they are all small businesses, with about 12 employees each."

Interviews with local entrepreneurs and officials show that "technology", "modern management" and "brand" are buzzwords and mantras for the city's leather industry to maintain its upper hand.

Since 2003, the leather industry in Haining has invested 4.3 billion yuan on technology improvement. In October 2007, Zhejiang Leather Industry Research Center was established.

To further spur development, local leather companies have been learning from overseas. In Haining-Copenhagen School of Furs, Haining has also build up cooperative relationships with leather associations in the United States, Canada, England, Italy and other overseas professional organizations.

In 2007, the government invested 1 million yuan to open a business school for the bosses of local companies. Professors from Zhejiang University were invited to teach in the weekends and about 50 bosses were the students in the first session.

"The classes are quite popular among the entrepreneurs and I'm surprised to find that none of them were absent for even one class. The government will continue to invest in the education of local entrepreneurs and I believe this measure can benefit the local economy in three to five years," says Yu.

To enhance efficiency and save costs, the management of companies are now more open to employee suggestions.

Take Haining Mengnu Group for example, where an employee with a local leather company found its plastic packages are a little longer than necessary and suggested making them 1 cm shorter. The advice saved the company 5 million yuan annually.

Warp knitting

Besides leather, warp knitting is another pillar industry in Haining. Warp knitting features several knitting methods in which the yarn zigzags along the length of the fabric and is widely used to produce textiles and seat designs in autos.

Founded in 2000, the Zhejiang Haining Warp Knitting Industrial Zone is the site of 300 companies. The zone's GDP is 25 percent of national warp knitting industry.

This year, a series of factors, including the fast appreciation of the yuan, a lower export tax rebate rate and the slowdown of the world's major economies, have added up to a very inhospitable atmosphere for the local warp knitting companies.

In the first eight months, the total industrial output value in the zone was 7.7 billion yuan, yet the profit decreased about a half compared with the same period last year.

Shen Shunnian, chairman with China Knitting Industrial Association and director of the Administration Committee of Zhejiang Haining Warp Knitting Industrial Zone, says "Though the performance is the worse than ever before, most companies in the zone can maintain a normal operation and we have confidence we can achieve this year's goal - industrial output value reaching 12.8 billion yuan."

Relying on industry centralization and associations, the warp knitting companies say they are getting through the credit crunch.

"With centralized industry, the zone covers comprehensive production lines, including materials, knitting and deep-processing, so the distribution costs can be saved. The industry association also helps companies to negotiate price to avoid vicious competition," says Shen.

On October 13, a price index system for the warp knitting industry was established in Maqiao county in Haining.

"With the price index system, companies can adjust the structure of their products efficiently and avoid vicious price competition," says Fan Haixiong, deputy director with Zhejiang Haining Warp Knitting Industrial Zone.

A Haining leather price index is also being developed in the city.

Chen Zifang, a professor with regional economy institute of Zhejiang provincial Party school, says "Two industry indexes can be a signal of a developed regional economy. With sound economic foundation and overwhelming market share, authoritative economic indexes can play a key role in the industry from home and abroad and help lure more production to this region."

(China Daily 10/27/2008 page10)