New labour law could have knock-on effect
A new labour law introduced in China on January 1 could have a knock-on effect for the leather and footwear industries around the globe, not only as it could lead to a reduction in demand for raw materials from abroad but could also affect retail sales if the price of finished goods increases significantly as a result of the new laws.
Under the new law Chinese workers will be entitled to a minimum wage and fixed contracts, rather than working under open-ended agreements, and will be entitled to one month’s severance pay for each year worked if their contracts are ended. This will, in essence, drive up labour costs in the country that has, until now, been able to produce goods more cheaply than other countries as a result of an abundant and ‘cheap’ workforce.
Massive companies such as footwear maker Yue Yuen have already moved production away from China as a result of rising labour costs and local sources are predicting that the new law could lead to many other companies following suit and closing down their Chinese facilities in order to relocate to other lower cost countries in an attempt to protect their margins.
