According to the China Leather Industry Association (CLIA), many leathergoods producers in Zhejiang and Guangdong provinces are having to relocate some, or all, of their production to less developed inland areas.

Aokang, which was originally established in Wenzhou, one of the country’s largest leather clusters, but has been moving parts of its operations to Chongqing where production costs are significantly lower.

According to the CLIA’s secretary general, Su Chaoying, it was mainly small and medium sized businesses that were forced to relocate until recently. However, more and more large firms are now also feeling the need to move in order to cut costs.

One of the main problems associated with producing leather in larger cities is the high pollution treatment costs, in addition to higher labour and energy costs. While research and development centres are, on the whole, remaining in coastal areas, production centres are being moved in order to keep costs as low as possible.

China’s leather, fur and leathergoods exports fell 10.8% in June compared with June 2008. However, the rate of decline is starting to slow, and the CLIA has reportedly said that it expects the industry to be on the road to recovery by the end of the year.

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