On September 16, a Chinese-owned shoe warehouse was burnt down
in Elche, Spain, causing damages worth over 1 million euro. This
incident sounds a warning to China's developing foreign trade
sector that "made in China" commodities need to go beyond ultra-low
pricing to establish their position in the long term.
On the evening of the arson, several hundred Elche locals
crowded into the Karus industrial area, where many Chinese shoe
wholesalers are based, throwing rocks at shops and shouting
protests. Around 20 locals then set fire to a shoe-filled warehouse
owned by Chinese entrepreneur Chen Jiusong. All the stock was
destroyed, but thankfully no one was hurt. A week later some Elche
locals staged another, more peaceful, demonstration against Chinese
shoemakers.
Wang Changchuan, manager of the Spanish branch of Wenzhou Jierda
Shoes Company, told China Newsweek: "Our hearts still flutter with
fear." The shops are now operating normally again, though they do
sometimes shut earlier than they used to.
Local police have attached great importance to this incident,
stationing many officers around the area to avoid further problems,
said Wang, adding that now any demonstrations must first be
approved by the government so that police may inform Chinese shops
to close ahead of them.
Chen Jiusong has employed lawyers to handle the incident but it
is hard to say whether the loss can be reclaimed, according to
Wang.
The Chinese Embassy in Spain, Ministry of Foreign
Affairs, Ministry of
Commerce and China Leather Society all responded quickly,
asking Spain to guarantee the security of Chinese residents and
punishment of the attackers, as well as compensation for the
affected businessmen. By September 23, fifteen protesters had been
arrested.
A Spanish news agency, EFE, reported that after the attacks
anonymous posters had been spotted in Elche, claiming that local
shoemakers are in crisis because of competition from Asian, and
especially Chinese, manufacturers.
Elche is a traditional shoemaking base for Spain and for Europe
as a whole. In recent years an increasing number of Chinese
shoemakers have come to the area with low priced shoes to register
companies and rent or buy shops. Manufacturers from Japan and
Vietnam have followed suit, but Chinese (mainly from southeast
China's Wenzhou City) dominate.
As the Spanish government has yet to instigate measures to
protect local producers, Chinese and Spanish shoemakers have been
competing in an open market. This has had a detrimental effect on
Elche's local industry, with over half local manufacturers closing
and only the lower end of the market able to match prices.
Yu Jinhua, the board chairman of Wenzhou Jierda Shoe Company,
denied that shoes are sold at 3 to 5 euros in Elche. "It's just
domestic factory price. Considering customs and transportation
costs, the wholesale price of tanned hide shoes is usually 8 euros,
while that of leather shoes is 12 to 15 euros," said Yu when
interviewed with China Newsweek. This is still half the price of
local producers' shoes since cheap labor costs give Chinese
manufacturers a competitive edge.
Wang Changchun said that only a few Spanish people were involved
in the arson and that most people are still friendly to Chinese. "I
don't feel discrimination against us in my business and life," he
said.
The Elche event is the first example of such violence against
Chinese in Spain. "Instead of taking extreme actions, the European
Union has been rather gentle towards China-made industries," said
Zhang Hanlin, director of the China National Institute of the WTO
with the University of
International Business and Economics, "So don't exaggerate this
event, it can be solved through legal means. The event sends a
warning to us."
As of January 1, 2005, the EU will lift import quotas on some
categories of China-made shoes. This will not only offer a bigger
market share for Wenzhou shoe manufacturers in Europe but may also
usher in more trade disputes.
At the 2nd International Anti-Dumping Forum in Beijing last
October, Zhang predicted that the year 2005 will see more foreign
countries charging China with goods dumping and the start of other
trade conflicts.
Though China has industrial associations and trade unions, their
functions are limited since they are run under civil affairs
departments while enterprises are administered by industrial and
commercial departments.
Chinese businesspeople in Spain established an emergency group
only in the wake of the shoe-burning incident. There should be
industrial associations composed of professionals and business
representatives set up before these incidents take place to prevent
possible frictions through negotiation and exchanges with foreign
organizations.
"China must also establish an international market distribution
network," said Zhang. "Relying only on salesmen will result in
China sinking into a vicious circle of low-prices, anti-dumping and
trade frictions."
(China.org.cn by Guo Xiaohong, Tang Fuchun, Yuan Fang, October
25, 2004)