The once dynamic shoe making business at the Pearl River Delta in southern China has become stagnant following the recent close-downs of over 1,000 such companies due to rising costs of labour and raw materials.

An abandoned shoe-making factory in Guangdong Province with closed doors at 10 a.m. (CCTV photo)

According to Li Peng, secretary of the Asia Footwear Association, Guangdong has been home to some five to six thousands shoe makers, however, more than 1,000 large and medium-sized shoe companies have been forced to close down and some even had to move out of the region.

A recent report by CCTV, China's Central Television, said that it's not only shoe makers in the region who have suffered a downturn, other industries like garments, toys and electronic products have also hit on hard times.

The report adds that it is hard to employ cheap labour since monthly wages have jumped to as high as 1,500 yuan a month from only 450 yuan in 2002. Plus, most product prices have also added to the industry's soaring costs, like water, electricity and rent.

Some 120 labour-intensive companies in the industries of light textile and electronic appliances have had to be transferred from Guangdong to a neighbouring regions where labour costs are still cheaper.

Statistics from the Asia Footwear Association indicate that 25 percent of Guangdong's shoe makers have set up their factories in southeast Asian countries, such as Vietnam, India, and Myanmar. Another 50 percent have switched their business to hinterland provinces and regions, like Hunan, Jiangxi, Guangxi and Henan.

However, a leading American shoe maker, Leeway Footwear Company, said the company does not intend to migrate as no place has better industrial links than Guangdong. Moreover, removal to other places would therefore increase the costs of logistics.

At a recent forum on the shoemaking industry, Liang Yaowen, director-general of the Foreign Trade and Economic Cooperation Department of Guangdong province, pointed out that technological solutions will be the only way out for local shoemakers.