In today's fur market, fur-trimmed garments in mink or fox with retail prices of 3,000 to 4,000 yuan (US$350-500) are still the best sellers. Mink garments are considered the most prestigious and precious fashions. An estimated several thousand fur garments, at prices around 20,000 yuan (US$2,500) are sold in each of the major cities in the North, including Harbin, Shengyang, Dalian and Beijing. In the Northeast, it's popular for men to wear reversible fur/leather overcoats. The average price of these garments is 10,000 yuan (US$1,200). Blue or silver fox scarves, costing around 1,700 yuan (US$200) are also popular.
Domestic Pelt Supply
Domestic supply has been short. The production capacity is 700,000 to 800,000 skins per year. About 40% of those skins must be sold at the auction of China Animal By-Products Import/Export Corp. in Hong Kong to earn hard currencies for the government. With the increase of domestic demand, average fur prices have risen 90% since 1993. At the same time, China must import a large number of skins from abroad to meet the domestic demand for high quality furs. In 1994, China imported 500,000 to 600,000 blue and silver fox skins from Denmark and Finland for trimming garments. The quality of China's own ranch mink is not considered good. Importantly, ever-increasing feed prices have pushed up the cost of raising mink, leaving China's own mink less and less competitive.
Other major items of production include weasel, kolinsky, goupee (an animal unique to China), fox, rabbit, leopard cat, squirrel and lamb. Prices for these domestic-produced furs are relatively low.
Manufacturing Center
On the whole, the level of Chinese technology in tanning, dressing, dyeing and craftsmanship are relatively low. Most of the companies with expertise in these areas are concentrated in the Guangdong area.
The fur industry is in the process of restructuring in China. Most state-owned firms are doing poorly, and many are closing; people are being laid off. On the other hand, private firms and joint-venture firms are emerging to replace the old firms.
Existing firms can be classified in two categories: those in processing or production, and those "doing business in fur" or "dealing with fur" ("jingying" in Chinese). The former ones, state-owned, are very passive and conservative in their operations, just taking processing or production orders from the latter. They are not concerned about the market and the source of raw pelts.
The jingying companies, either private firms or joint-ventures or animal-by-product corporations, are doing business very actively. They watch the market carefully, make decisions in buying pelts, have them processed here and there and find the market for the finished products. Animal-by-product corporations have more interest in foreign than domestic markets, because their main mission is to earn hard currencies for the government. Jingying companies may keep a production force of their own, but not one large enough to remain flexible. They also trade, importing pelts and selling to smaller domestic distributors or users.
Market Segments
When we evaluate each area of the Chinese market, we consider the following factors: 1) the processing/production capacity; 2) the number of jingying companies; 3) local sales of fur products; and 4) the trading activity. Six geographic areas draw our attention: the three Northeast provinces, Beijing/Tianjin, Guangdong, Shanghai/Zhejiang, the Northwest, and Heibei province.
Northeast
Its three provinces are Heilongjiang, Jilin and Liaoning. This region, with a population of over 100 million, has the best fur market. An estimated 6,000 to 7,000 fur garments can be sold here each year. Jingying companies are doing well, though processing and production capacity is relatively weak.
Beijing/Tianjin
The local consumer market here is also good. Importantly, this region is strong in process/production and has a number of good jingying companies.
Guangdong
The strength here is in processing/production. There are a number of joint ventures here with expertise in dressing/tanning, dyeing and manufacturing. Jingying companies also are trying to get a portion of the Northern market.
Northwest
This mainly refers to the Xinjiang Autonomous Region. With cold weather and a favorable policy toward minorities (lower taxes and more government assistance), local market potential is good. There are currently no strong jingying and production companies.
Shanghai/Zhejiang
There are some sales of fur products here, but the market is not as good as it is in the North. A few companies are involved in jingying and production. There is a significant amount of trading activity in the city of Haining, Zhejiang Province, but mostly China-local pelts are traded.
Liushi, Heibi Province
Heibei's fur business centers in the town of Liushi, Li County. Its importance is in the scale of fur trading. To a certain extent, the prices of its market have national significance. Like Haining, most pelts traded are domestically produced. The area does not have strong jingying companies or processing/production capacity. The market is also mainly composed of small trading companies and individual peasants, with small trading volumes of each dealer. This is basically a second-hand market, meaning that some bigger companies from other cities buy products elsewhere and sell them here to smaller buyers.
Challenges
While China could very well be the land of opportunity for the fur trade right now, there are several challenges involved in opening this market.
The government imposes stiff tariffs and complex paperwork. In general, the tariff rate is 40% for raw pelts and 90% for finished goods; there is an additional 17% value-added tax. There are, however, numerous avenues to lower the taxes on fur products. In addition to normal import/export permits, all imported raw pelts are required to be checked by the animal health authority.
Market research is not easy to do in China. Very few statistical data about the fur industry are available. Quantitative methods, accurate data and market surveys are not considered important in business decision-making at this early stage of market development. Communication and transportation are not quite fully developed, and it takes a longer time to travel in China.
The understanding of wild fur by Chinese is different from that by North Americans. Chinese -- including those in the fur industry -- do not distinguish clearly between ranched and wild furs and tend to view North American wild fur as ranched. They often think that the term "wild animals" narrowly means rare and endangered animals. Chinese have little knowledge of beaver, coyote or fisher, but they are rather familiar with otter, muskrat, raccoon and red fox.
A New Day
With each visit to China, the country's transformation is readily evident. The most striking example of this occurred on my most recent trip there. The Rostrum in the Forbidden City in Beijing is one of the most important sites in China. This Gate is recognizable to Westerners as the area where the leaders of China review military parades, and it was here that Chairman Mao Zedong proclaimed the formation of Communist China. This vantagepoint offers a view of Tianmen Square, government buildings and Mao's Tomb.
This time I took in the view, as I looked out over Tianmen Square, I was startled to see the Golden Arches looming over Mao's Tomb. In the distance, McDonald's had erected its famous trademark atop a tall pole (this famous Western icon is currently planning to open over 100 restaurants in Beijing alone). You couldn't help but see it.
As the leaders of the Central Government inspect the annual military parade, they can look at tanks, missiles, soldiers and the golden arches. There can be no doubt that China is open for business.
David Sebben is executive director of the Toronto-based Wild Fur Council of North America, which promotes North American wild fur skins under the Northern Supreme label. The Wild Fur Council has recognized China as a major emerging market for its product, and therefore has become one of the first international fur trade organizations to travel there and conduct market research. To obtain a copy of a full report on marketing opportunities for wild fur products in China, contact the Wild Fur Council at 461 King St. West, Suite 300, Toronto, Ontario M5V 1K4 Canada; telephone (416) 593-1129; or fax (416) 593-6663.
