Analysis of the Current Market Situation of the Leather Industry in China in 2018

Currently, China's leather industry is facing overcapacity, primarily dominated by small and medium-sized enterprises. Due to the low standardization of raw materials and products, processes such as tanning, thinning, dyeing, and leather matching in leather processing mainly rely on manual labor, resulting in a low level of mechanization in the industry, which provides ample survival space for many small and medium-sized enterprises. According to the goals set by the "12th Five-Year Plan Guidance for the Leather Industry," by 2015, the proportion of large and medium-sized enterprises in the leather and footwear industries should reach 20% and 28%, respectively, while small enterprises occupy the majority of the market share. Most small and medium-sized enterprises have relatively low research and design capabilities, and the phenomenon of product homogeneity is prominent, leading to overcapacity in the low-end sector of the industry, with significant pollution issues.

After 2011, the growth rate of clothing and footwear consumption in China continued to decline, and the export advantages weakened, which also affected the growth rate of the leather industry. In 2016, the revenue and profit of China's leather, fur, feathers, and their products and the footwear industry increased by 3.69% and decreased by 2.43% year-on-year, respectively, marking the lowest growth rate since 2000. The business climate index and entrepreneur confidence index of leather industry enterprises also continued to decline, increasing the operational difficulties for enterprises. In 2017, the leather industry achieved a revenue of 1.47 trillion yuan, a year-on-year decrease of 2.81%, and a net profit of 89.6 billion yuan, a year-on-year decrease of 1.75%, further increasing the operational difficulties in the industry.

With the decline in industry prosperity and the government's increased environmental protection requirements, backward leather production capacity is gradually being eliminated. In 2010, China's production of light leather reached 749 million meters, but has since shown a downward trend, with an increase in industry concentration. In 2016, China's production of light leather was 735 million meters, a slight year-on-year increase of 3.31%, and in 2017, the production of light leather in China remained relatively stable.