BENCHMARKING STUDY

OF
FOOTWEAR SECTOR

NOVEMBER 2008
 INDEX

1. INTRODUCTION .................................................................................................... 4
1.1. FRAME OF REFERENCE ............................................................................... 5
1.2. SCOPE OF THE IMPLANTATION PROJECT OF LA RIOJA IN CHINA.......... 6
1.3. METHODOLOGY............................................................................................. 8
2. ANALYSIS OF EACH FIELD ................................................................................. 9
2.1. ANALYSIS OF GROWTH ................................................................................ 9
2.2. ORIGIN AND CLASSIFICATION OF RAW MATERIALS............................... 15
2.2.1. ORIGIN AND CLASSIFICATION OF RAW MATERIALS ........................ 15
2.2.2. NON-WOVEN SUMMARY ...................................................................... 17
2.3. FOOTWEAR-MAKING PROCESS INTRODUCTION .................................... 18
2.3.1. FOOTWEAR-MAKING MANAGEMENT PROCESS ............................... 18
2.3.2. FOOTWEAR MANUFACTURING EQUIPMENTS OVERVIEW............... 19
2.4. FOOTWEAR QUALITY STANDARDS ........................................................... 21
2.5. DISTRIBUTION AND LOGISTIC OF SHOES ................................................ 22
2.5.1. FOOTWEAR IMPORT / EXPORT ........................................................... 23
2.5.2. FOOTWEAR EXHIBITION OUTLINED ................................................... 25
2.6. GOVERNMENT SUPPORT TO THE SHOE-MAKING INDUSTRY ............... 28
3. INNOVATION SYSTEM ....................................................................................... 29
3.1. INNOVATION MODEL ................................................................................... 29
3.1.1. STRATEGIES FOR THE FUTURE OF INNOVATION IN CHINA............ 31
3.1.2. NATIONAL POLICIES FOR PROMOTING INNOVATION IN CHINA...... 32
3.2. MAIN DOMESTIC FOOTWEAR RESEARCH AND DEVELOPMENT
INSTITUTIONS ..................................................................................................... 33
3.3. TECHNOLOGIES DEVELOPED IN CHINA ................................................... 35
3.4. FOOTWEAR RELEVANT DOMESTIC AND INTERNATIONAL AWARDS.... 35
3.5. PATENTS ...................................................................................................... 36
4. TECHNOLOGICAL COOPERATION................................................................... 37
4.1. THE FIELD OF DOMESTIC TRADE ASSOCIATIONS .................................. 37
4.2. PROVINCIAL ASSOCIATIONS ..................................................................... 37
4.3. DOMESTIC NETWORK OF COOPERATION ............................................... 38
5. PROMOTION ....................................................................................................... 39
5.1. SUMMARY..................................................................................................... 39
5.2. UNIVERSITIES LINKED TO THE FOOTWEAR SECTOR............................. 40
5.3. VOCATIONAL AND TRAINING CENTERS LINKED TO THE FOOTWEAR
SECTOR ............................................................................................................... 41
5.4. GOVERNMENT SUPPORT ........................................................................... 41
5.5. LEATHER AND FOOTWEAR INDUSTRY’S EXCHANGE OPPORTUNITIES42
6. GLOBALIZATION ................................................................................................ 43
6.1. DOMESTIC TECHNOLOGICAL LEADERS................................................... 43
6.2. FOREIGN TECHNOLOGICAL LEADERS ..................................................... 45
6.3. INTERNATIONAL COOPERATION............................................................... 46
6.4. INTERNATIONAL COOPERATION............................................................... 50
7. CONCLUSION ..................................................................................................... 54
7.1. OVERVIEW OF THE FOOTWEAR SECTOR ................................................ 54
7.2. OVERVIEW OF THE FOOTWEAR SECTOR FROM A RESEARCH AND
DEVELOPMENT POINT OF VIEW ....................................................................... 55
8. FUDE’s PROFILE ................................................................................................ 57
9. BIBLIOGRAPHY: ................................................................................................. 61
10. APPENDIX ......................................................................................................... 62

APPENDIX 1. QUALITY STANDARDS

APPENDIX 2. PATENTS APPLICATION PROCEDURE
APPENDIX 3. GOVERNMENT SUPPORT FOR INNOVATION INITIATIVES
1. INTRODUCTION

Background of the implantation Project of La Rioja in China

La Rioja set its pro-active strategies upon China in 2006, with the first official visit to
the P.R. of China of a delegation of the Government of La Rioja, the journey was
headed by the chairman of La Rioja, D. Pedro Sanz, along with more than 40
companies that represented all social and economic sectors interested in that
market.

During this trip there were strengthened contacts with different Chinese regions;
contacts that had been initiated in 2005 as a result of the visit to La Rioja of
delegations from Liaocheng and Heze, strategic locations for the food industry of La
Rioja in China.

These two cities, of great economic potential, are located on the west side of
Shandong province, a region that could be called as "the food pantry of China’s East
coast", and which constitutes an enclave due to the significant number of foreign
investments that have been performed there, including three from La Rioja.

During 2007 La Rioja continued betting for China, as a result, conducted a series of
promotional events under the Plan for Promoting Agro-Food Products of ICEX,
included in a plan for the 2007-2009 period.

In this context, the Economic Development Agency of La Rioja (ADER), as a public

entity conscious of the impact arising from the phenomena of globalization in civil
society of La Rioja, and more specifically in the local socio-economic field, made a
strategic movement toward the International innovation, by means of designing a
Regional Technology Strategy. By implementing the mentioned strategy, La Rioja
intends to reach the European target of destining 3% of the GDP in 2010 to the
investment in R & D. In 2008, and under the program Globaltech Rioja, ADER
began implementing a series of strategies for developing a technology platform that
links La Rioja with China, as a first step which allows establishing a stable
Technological Antenna in the Asian country.
 1.1. FRAME OF REFERENCE

There is something really important in China, and it is to know "how to do things"

based on lessons previously learned. Despite the fact that it is true for any market, in
China, its meaning is significantly a more decisive matter.

Experience shows that two projects which seem to be similar at first glance, must
face different obstacles and difficulties during their development phases in China.
Nevertheless, there is also a common fact: the high level of uncertainty that
accompanies the entire process, from its beginning to its end, due to the own
idiosyncrasies of the country.

The ability for not feeling a high necessity of controlling this uncertainty and to know
how to handle and solve problems in the shortest period of time and at the lowest
possible cost, makes the difference between companies-institutions that “know how
to do things in China," -acquired knowledge in a long practical experience in the
country-, and those who have no idea.

These bases must be known and accepted by everyone who wants to start a
business/project in China; they’ll also be the basis for success. On the other hand, if
these premises are forgotten, it will be too difficult to achieve the established goal in
the Asian country.

All these characteristics make it indispensable to follow a rigorous planning

supported by the possibility for checking and contrasting information at destination at
every time.

To do so, throughout this year 2008, a series of planning actions to define an

implantation strategy in China that allow the creation of a stable platform at the
destination have been scheduled.
 1.2. SCOPE OF THE IMPLANTATION PROJECT OF LA RIOJA IN CHINA

As it was already mentioned, the ultimate goal of the project La Rioja-China is laying
the groundwork for establishing a Technology Platform Rioja-China, a platform that
encourages the presence of Rioja’s companies in China. A platform would be the first
phase for achieving the ambitious plan of creating a Permanent Technological
Antenna in China, which forms an indivisible part of the Strategy of La Rioja in
China.
This strategy should include among other things, a close technological cooperation
that will help raising awareness and resources, whether human or technological.

This will aim promoting actions that would:

• Enhance the international dimension of the innovation activities of R & D in La
Rioja
• Identify international applicable technologies to Rioja’s companies to improve
their competitiveness
• Establish strategic collaborations with reference Chinese centers of R&D+i
• Provide La Rioja with a strategy to facilitate stable technological exchanges
and collaborations with China.

Based on these objectives is that the following working lines have been defined:
• Development of a roadmap in coordination with ADER for monitoring and
evaluating the advances in the project of introduction of La Rioja in China.
• Carrying out sector meetings that allow to identify project ideas at origin and
also, defining development lines of greater impact on La Rioja’s economy,
emphasizing on the following sectors: footwear, food, rubber-plastics, metal
and energy construction.
• Technological Prospection Mission to China, along with technological
centers of La Rioja, entities which represent the industry, and also with ADER
and the Counseling Bureau of Industry, Innovation and Employment of the
Government of La Rioja.
• Technological Benchmarking Studies in China for the definition of the
priority actions and working lines in the referenced sectors.
• Signing of at least three Strategic cooperation Agreements with Chinese
centers of R & D + i.
• Elaboration of a Document: “International Technological Strategy for La
Rioja in China”.
• Identification of projects and selection of initiatives to promote.
Benchmarking Studies.

Objective of the studies.

Through these studies it is intended to produce 9 reports of technological

surveillance aimed at defining priorities and working lines, in the defined objective
sectors:
• Vegetables. • Metal-mechanic.
• Meat. • Rubber – plastics.
• Mushrooms and • Energy.
edible fungus.
• Construction.
• Footwear.
• Environment.

The studies will focus on emerging technologies that are able to influence the
manufacture of new products or innovation process within the companies of La Rioja.

The analysis lines of the benchmarking Studies will show the situation in China, for
the following fields:

a) A brief analysis of sector situation.

b) Innovation structure.
c) Technological Cooperation.
d) Promotion of the R & D+i.
e) Internationalization of the R & D+i.
 1.3. METHODOLOGY

It has been taken as a starting point the needs expressed by enterprises and
technological centers of La Rioja, of the various sectors mentioned, collected over
the execution of more than 65 meetings held in a first stage of analysis and study,
established for defining the points of interest that the studies of technological
surveillance should include.

Likewise, the following chart explains the relationship between the phases of the
benchmarking study that is developed in this document (3, 4 and 5 of the graph), and
the phases 1 and 2, which correspond to earlier completed stages; steps that were
necessary for establishing a solid starting point, adjusted to the reality of each sector.

1. Defining strategic sectors for the economy of La Rioja

2. Industries with the greatest weight in each sub-sector, as reference points

3. Study of each sector in China on defined lines of interest

4. Information analysis based on the description of each sub-sector in China

Defining the most attractive Differential competitive aspects for

opportunities for cooperation and the enterprises of each analyzed
development sector

Technological prospection Companies’ projects

5. Conclusions of the studies

2. ANALYSIS OF EACH FIELD

This section of the study presents information not only about the sector, but also on
economic, technological, governmental and juridical issues related to its evolution. In
addition, it is included a compendium of valuable information that allows the reader
realizing how this sector is currently developed in China.

2.1. ANALYSIS OF GROWTH

(1) China footwear industry analysis

During the opening and reforming which started 30 years ago, China’s footwear
sector has had a strong growth and today is not only the biggest market, but also the
biggest footwear manufacturer country in the world; in China there exist more than
18,000 footwear companies which employ 3,500,000 people. These companies are
mainly in Zhejiang, Guangdong and Fujian provinces

Meanwhile, the footwear output of the three strongest Chinese provinces in 2005
was.
• Zhejiang produced 36.1% of China’s total footwear output
(1,240,000,000 pairs of shoes),
• Guangdong produced 26.9% and
• Fujian produced 14.3%.

According to the Chinese shoe-making and Investment Information Network Advisory

Network, during January and November of 2007, the output of leather shoes was
3,114,652,900 pairs bigger than in the same period last year, increasing a 13.98%.
Zhejiang production was increased in 975,506,000 pairs (22.13%) and Guangdong
production decreased 906,963,400 pairs (-5.16%).

Chinese footwear industry has usually taken the advantage of low prices based on
low resources costs (especially of its labor force), in spite of that fact, comparing it to
Europe’s footwear industry, Chinese still has a lack on technology, branding and
quality support. In western markets the Chinese footwear-branded product is mainly
consumed by low-incoming groups since it is considered as to be cheap; therefore,
that fact has strongly hurt those markets.
(2) The world's leading footwear producers’ low-cost strategy
During the first half of the twentieth century, the obvious center of the global footwear
industry was Europe (Italy, Spain, Portugal and others) but since the 1960s and
1970s it was shifted to relatively low cost areas like Japan, Taiwan, Korea and Hong
Kong, among others. Later, in the 1980s and early 1990s, the center was transferred
again, this time to mainland China coastal areas. The center has been moved many
times because there’s always been, omnipresent, a cost reducing strategy of world’s
leading footwear producers (the footwear industry is a labor-intensive industry; its
growth is decide mainly by factors like labor costs, raw materials supply,
environmental protection and of course, by the market).

In 1996 China became the world' s leader country in production and export of
footwear; in addition, during that time (1996 – 2008), the industry has grown up at
rates that fluctuate between the 10% and the 20% every year. During this period,
world’s leading footwear producers have also pointed to Vietnam and India, two
giants that can also provide a low labor force cost. So far, the Asian countries are
producing nearly the 85% of the world’s total footwear products.

Footwear industry cost comparison for the main footwear supplying country:
China shows some advantages and disadvantages respecting other countries like
Vietnam, India, Brazil, Indonesia and the European Union of countries, in regard to
costs of resources and their availability, as well as to the market. Balancing them all,
the Chinese shoe-making industry is still very competitive.

After nearly 20 years of development, China' s footwear industry has improved many
aspects that have allow it to reach a high-quality investment environment, as well as
to establish a complete industrial chain based on the arrangement of specific
industrial clusters.

Although the Chinese shoe-making industry is now facing the impacts generated by
the rising costs of its labor force, as well as those coming out of a fierce competence
especially from India, Brazil, Vietnam, and Indonesia; China still counts on some
competitive advantage in respect to other countries; specially its easy-access to a
relatively inexhaustible source of raw materials and an enormous domestic demand.

In opinion of recognized experts of the United Nations Industrial Division and Boao
Asia Forum – BFA-, at least in quite a long time and despite a regular off-shoring
(relocation) rate, the Chinese shoe-making industry’s capacity will not be transferred
to other countries.
(3) China's footwear industry's future development trend
China' s footwear industry has a long history; with the strong wave flow given by the
opening-up reform, China has first undertaken the challenge of being the center of
international shoe-making industry. In spite of that first stage, China’s shoes industry
is now looking forward to a restructuring process which allows it to be more
competitive in terms of the high-end footwear market.

China to China relocation process: China' s shoe-making manufacturers are

especially concentrated in the southeast coastal areas, even though, this fact is
expected to change since they have begun to face the effects of higher costs of
resources like labor force, supplies and raw materials; in addition, because of the
environmental policies –becoming more strict- recently issued in eastern areas.
Therefore, it is possible that a number of shoe-making factories must me relocated in
other places of China (go-west movement).

China's footwear industry's competitive advantages are still strong compared to

others’ advantages, though, the Chinese are trying to set up an strategy that
determines how to adapt to the forecasted changes in the international and domestic
markets’ environment, in order to keep its specific importance within the sector. All
the facts seem to indicate that China will move forward to a high-end footwear
industry and that consequently, the country should adapt and upgrade its footwear
industry.

Whit the industry relocation process that begins and the upgrade that footwear
companies will be forced to introduce, Chinese authorities expect to induce to an
industrial recovery that is based not only in the assimilation of foreign technologies,
but also, in the development capacity of the biggest enterprises. The aim is clear and
it is to become a high-end footwear manufacturer country.

Despite the specific “go-west” movement that the Chinese footwear sector is now
facing, it is expected that design and commercial issues stay at their current
locations, allowing to keep a closer track on international trends, exhibitions and
R&D+I institutions. I.e. The footwear industry of Pearl River’s delta in Guangdong is
expected to establish a footwear industry park in Dongguan city. In spite of that same
movement, it is also supposed that every region will keep its current business focus,
it is to say:
 • Dong Zhong and surrounding areas are going to keep their definition as
women's fashionable shoes production base area.
• Heshan and surrounding areas are going to keep their definition as high-end
men’s shoes production area.
• Chaozhou and Jieyang are going to keep their definition as footwear export
processing bases.
• Quanzhou and Jinjiang (Fujian) are going to keep their definition as sports
shoes production bases.
• Wenzhou and surrounding areas are going to keep their definition as men’s
shoes production bases.
• Zhongdi Dang, Chengdu and Zhong Didang, as well as their surrounding
areas, are going to keep their definition as women'
s shoes production bases.

China is also expecting to keep expanding its domestic market, where they want to
increase their sales and that the rate of per capita annual consumption of footwear
keeps increasing like in the last years. China’s domestic demand is also leading the
local manufacturers to establish their own brands and marketing channels, what it
considered a development of their own market.

Chinese brands are looking forward to introduce their products in foreign markets in
order to obtain greater profits that allow creating and encouraging industrial
advantages continuously.

All the reasons previously explained indicate that China is moving toward a
remodeling process of its footwear sector, in addition, all of the facts mentioned are
all linked one to each other, a situation that suggests and predicts the big change of
this industry in China.

(3) Trading Statistics

China's footwear exports status

The period between years 1994 to 2007, was a footwear exports accelerated phase
in China, see Table 1. During those 14 periods, the volume of China' s shoe exports
increased by 3.4 times, passing from 1994' s 2.42 billion pairs to 2007’s 8.1 billion
pairs. On the other side, the increase of the value in the market was four times during
that same period, passing from 1994' s USD 6 billion to 2007’s USD 24.1 billion.
 Table 1. Export of footwear 1994-2007

Source: China Leather and Footwear Industry Research Institute (CLFI)

Table 2 shows the average unitary price of exported shoes of the 14 periods
analyzed, showing an increase of only 1.16imes comparing the unitary prices of 1994
and 2007. In comparison to the 4 times growth of the exported value during the same
of time, it is possible to conclude that despite increasing by 3 the number of pairs of
shoes exported, they were mostly low-end shoes that had no considerable added-
value.

Table 2. Average export price 1994-2007

Source: China Leather and Footwear Industry Research Institute (CLFI)

Table 3 shows the top five export markets and the exported volume. The United
States is the first export market (1.99 billion pairs in 2007); it was followed by the
European Union (1.35 billion pairs), Hong Kong (0.92 billion pairs), Japan (0.51
billion pairs), and Panama (0.27 billion pairs) respectively; to other markets there
were exported 3.15 billion pairs.

Table 3. The top five export markets of footwear in 2007

Source: China Leather and Footwear Industry Research Institute (CLFI)

Panama jumped from sixth place in 2006 up to the fifth place in 2007, moving Russia
to the sixth position. 70% of China’s footwear exports have gone to the 31 countries
framed in that 5 main markets.

In October 7 of 2006, the EU's imposed a 16.5 % anti-dumping duty on the imported
footwear from China, therefore, the exports to that market shown a decrease of a
7.7% (passing from 196 million pairs in 2005 to 181 million pairs in 2007).

(4) Human resources of footwear industry

China' s shoe-making industry is a typical labor-intensive sector; human capital
employed within the sector generally shows a low education level, most people
working at the footwear industry are immigrants or have gone through a really short-
term training. In addition, now that working environment and conditions are becoming
more similar to international “standards” and that it is taking place a process of
gradual improvement of Chinese’s living standards, especially in coastal areas, labor
costs have rise significantly. All together, intensive labor-force and rising wages have
created a situation that is really affecting the profitability of industries within the
sector.

In addition, China' s shoe-making industry is on one hand facing the shortage on

workers availability, on the other, waiting fearful for the issuing and coming into force
of more restrictive labour policies that shorts the working time of employees. These
two phenomena affect not only the low-waged jobs, but also, medium and even high-
waged jobs.
In the field of labor-intensive footwear industry, the most notable characteristic of the
training system that supports its activity is the prevalence of a non-formal academic
training that hasn’t been standardized.

2.2. ORIGIN AND CLASSIFICATION OF RAW MATERIALS

2.2.1. ORIGIN AND CLASSIFICATION OF RAW MATERIALS

(1) Classification of natural skins

The following is the list of the main types of skins used in the production of Chinese
footwear:

• Pig skin • Sea Mammals: River pig

skin
• Kraft: yellow cattle leather, Buffalo leather, yak
skin • Fish skin: Shark skin,
whale’s skin
• Sheep's skin: mountain goat skin, sheep skin
• Reptile’s skin
• Other: mule skin, horse skin, camel skin, dogs
skin • Amphibians: crocodile skin
• Wild animals’ skin: wild boar skin, yellow goat • Bird’s skin: ostrich skin
skin, antelope skin

The following is the analysis of the origins of some of the main natural skins used by
the shoe-making industries in China:

Pigskin
Pigskin is produced all over the country. Sichuan province takes the lead, followed by
Shandong, Jiangsu, Zhejiang, Hunan, Hubei, Jiangxi, Anhui and Henan. Pigskin
supply chain can be divided into the North China pigskin, central China pigskin and
south China pigskin.

Overall, the South pigskin is better than the North pigskin, the precocious pig’s skin is
better valued by enterprises than late-maturing pigskin.

Yellow cattle leather

China'
s Yellow cattle leather resources come from all over the country; Henan,
Shandong, Shaanxi and Hubei (Northeast) are the main producers. In recent years,
with the introduction of new cattle species, both the meat-dairy and the hide
productions have grown, as well as products’ quality, which has been improved.
Yak skin
Yak is also known as Li cattle, it is a bovine animal adapted to cold climate and rough
lands. Yak skin is mainly produced in Qinghai, Tibet, western Sichuan, Gansu' s
Gannan and Qilian Mountains, Xinjiang' s central mountains, the Diqing area in
Yunnan and Inner Mongolia.

Buffalo leather
Buffalo’s skin world production is mainly divided in two areas: the Indian subcontinent
and the swamps of the Southeast Asian. China' s buffalo leather is produced in the
South area of the Huaihe River’s basin (Sichuan, Hunan, Hubei, Guangdong,
Guangxi, Zhejiang, Jiangsu, Anhui and Henan provinces).

Goat skin
According to traditional practices, China divided goat skin into seven roads:

• Sichuan road • Yunnan-Guizhou road

• Hankow road • Xinjiang road
• North China road • Tibet road.
• Jining road

(2) Synthetic Rubber Summary

After more than 40 years of enlargement, China’s Synthetic Rubber (SR) industry
has finally and independently developed technologies based firstly, on the
introduction of world'
s advanced technologies. SR itself is compound by a complete
system of products. According to the statistics of the National Bureau of Statistics of
China, the annual output of SR in 2007 in China was close to 2.2 million tons (there
are in China 15 enterprises producing SR at present), in addition, imported 1.33
million tons that same year.

China has entered into the rank of the world’s SR main producers and markets; the
Chinese installed production capacity ranked third in the world in 2007, while on
consumption issues it was ranked first in the world.

Along with China' s tire industry as the representative of the rubber industry'
s rapid
development, China SR production and consumption will be further increased. In
addition, it is expected that due to development of some sectors, such as automobile
and macro-infrastructure, it is estimated that China's demand for synthetic rubber will
continue to grow, although it is also expected that the growth rate will slowly go down
within the following years.

(1) Analysis of supply and demand of SR

At present, the world’s SR industry has entered into a slow growth period. Even
though, it is expected that Asia, North America and Latin America have a
considerably high growth in both consumption and production rates within the
following years. China's installed production capacity and consumption are expected
to grow significantly.

(2) China's inadequate supply of SR supply

China faces today the problem of a low SR production capacity installed and that fact
may be result risky for the sector in next years; self-sufficiency ratio is less than 60
percent at present. And the country is in addition, the world's largest importer of SR.

The domestic production capacity is mainly concentrated in a few enterprises; in

addition, the demand for SR is increasing considerably from many different economic
sectors; all of this facts, together, allow determining that China’s dependency on
imports and the fears of different sectors of a lack of SR supply, could cause a great
increase of prices of the SR used as raw materials and of course, of the final
products that are based on SR.

2.2.2. NON-WOVEN SUMMARY

(1) Non-woven Industry

By 2007 the world’s non-woven consumption (demand) was close to the 4 million
tons. Non-woven manufacturers are mainly concentrated in the United States
(accounting for 41% of the world’s total), Western Europe (30%) and Japan (8%);
China’s output accounted only for a 3.5% of the world’s total production. Contrary,
China’s consumption is 17.5% of the world’s total demand. According to the China
Light Industry Association, It is estimated that in the following years, China'
s output of
non-woven reaches 7% of world’s total production and consumption rate achieves a
21%t of the world’s total.

At present, handmade non-woven fibers still dominate the Chinese production of

non-woven. China Light Industry Association, the main materials used in the
production of the fibbers are polypropylene (63%), polyester (23%), viscose (8%) and
acrylic fibers (2%); the 4.5% corresponds to other fibers.

In recent years non-woven absorbent materials can be found in health/medicine,

transport, textile and footwear products.

2.3. FOOTWEAR-MAKING PROCESS INTRODUCTION

The following diagram shows a flowchart that indicates the main operations of the
shoe-making process:

Footwear-making process

Cutting Typing Adjustment Sole Molding

for shaping adjustment

2.3.1. FOOTWEAR-MAKING MANAGEMENT PROCESS

The list of areas or divisions that a common footwear industry has in China is:

1. Raw materials warehouse 7. Folder for molding workshop

management management
2. The workshop management 8. Wiping and molding
3. The deployment centre management 9. Sorting and packaging
4. The cutting workshop management 10. Other equipment for shoe-making
5. Soles workshop management production lines

6. Semi-finished products warehouse

management
 2.3.2. FOOTWEAR MANUFACTURING EQUIPMENTS OVERVIEW

Due to the fact that China is becoming the world' s footwear industry processing base,
shoe-venture companies have accomplished an initial phase of accumulation of
capital and technology, now, it is believed that the time has arrived for them in order
to enter into a shoe-making process improvement that pulls the development of the
production technology made in China.

The advances on design and production of new machines and the desired
improvement on final product’s (footwear) quality are inducing into a development of
the footwear-machinery sector.

Guangdong is one of China' s shoe-making key regions; the province exports not only
final products, but also, raw materials for the footwear industry. This fact stimulates
the growth and establishment of a large number of shoe-making machinery
enterprises, especially in Dongguan, Shenzhen and other regions.

Major enterprises within the footwear manufacturing equipments sector are:

• Dongguan Qifeng Shoe-Making Machinery Factory
• Kyushu Shoes Co., Ltd.
• South China Sea Shoes Factory.

These factories provide, besides the main equipment, spare parts and after-sale
services, they have footwear production equipment spread through factories located
all over China.
In addition, the appearance of Guangdong' s Taiwan-funded enterprise (within the
footwear manufacturing equipments sector) is a phenomenon that has influenced the
growth of the nation'
s shoe-making machinery industry.

(1) Development of Shoe-making machinery

After nearly 20 years of digestion and assimilation, China' s leather shoe-making
machinery industry has increasingly introduced new technology, materials,
developments and designs in order to create a wide variety of shoe-making
equipments that have increased the level of the final products.

At present, domestic manufacturers of leather machinery equipment have produced

standardized machinery that allows processing cow, pig, sheep, and other skin
leathers. In addition, the Chinese shoe-making machinery industry has developed
equipments that cover all the aspects of footwear production. In recent years, the
shoe-making machinery of Zhejiang, Guangdong and Fujian has been rapidly
developed.

In recent years, the sales of Chinese shoe-making machinery have growth more than
20% every year. Furthermore, it is estimated that China's shoe-making machinery
industry counts on more than 300 enterprises, mainly in Wenzhou (Zhejiang),
Guangdong, Fujian and Jiangsu provinces (accounting for the 90% of the enterprises
and sales of this industry).

(2) Wenzhou Industry – Following international routes

Wenzhou shoe machines occupy 60 percent of the domestic market share. Shoes
industries are mainly distributed in the Ouhai economic development zones,
industrial parks Lucheng, Longwan economic development zone, Ryan, Yongjia.

Originally, their fist Chinese equipment’s prototypes took Italian and Taiwanese
equipments as a basis; then those equipments were re-engineered and adapted to
China’s conditions. Today, shoe-making machinery enterprises in Wenzhou have
developed more than 100 different equipments which cover all the aspects of
footwear production.
Some key industries that have undertaken the development of this footwear sub-
industry are Wenzhou Dalong machines Limited, Wenzhou Oujiang Hydraulic
Machinery Co., Ltd., Wenzhou Dashun Machinery Manufacturing Co., Wenzhou
Cangqiao light industrial equipment Manufacturing Co., Ltd. and Wenzhou Yongyu.
Some of the companies in Wenzhou have exported their products to Europe and /or
have been powered with foreign capital in order to strengthen their development.

(3) Yancheng - "China's shoe machinery hometown"

Yancheng City in Jiangsu Province counts on more than 100 equipment’s
enterprises. This sector is supported by 150 scientific personnel in charge of
researching within more than 30 institutions.

(4) Other equipments manufacturers in other regions

• Dongguan Qifeng shoe-making machinery factory

Guangdong • Kyushu Shoes Co., Ltd.
• South China Sea Factory.

• Sino-Thai Shoes Development Co., Ltd.

Jinjiang (Fujian) • Jinjiang Octopus shoes clothing plant
• Kaijia Machinery Co., Ltd.

2.4. FOOTWEAR QUALITY STANDARDS

The Standardization Administration of the People' s Republic of China (SAC) was

established in April 2001 and is authorized by the State Council to exercise
administrative responsibilities by undertaking unified management, supervision and
overall coordination of standardization works in China. SAC also represents China to
join the International Organization for Standardization (ISO), the International Electro
technical Commission (IEC) and other international and regional standardization
organizations.
Its main responsibility, among many others, is to draft and revise the state laws and
regulations on standardization, to formulate and implement the policies on
standardization; to formulate the national administrative rules on standardization and
develop relevant systems; to organize the implementation of laws, rules and systems
on standardization.

In the Appendix 1 it is confined a list of standards which rule the quality issues
related to this sector, as well as a list of codes which allow to determine the type of
each standard. The list allows determining when a standard is mandatory, voluntary
or a simply guiding technical document, as well as the nature of the standard and
even sometimes, when the standard is a local or a provincial one.

2.5. DISTRIBUTION AND LOGISTIC OF SHOES

Compared with footwear logistics in developed countries, the logistics of China'

s
footwear industry is still in the infancy stage of development of its main
characteristics.

In China, industries have tried to introduce the international footwear manufacturer’s

logistics models and strategies. In recent years China' s enterprises have tried to get
as close as possible to foreign enterprises through learning step-by-step, about their
logistics models that allow improving and developing their owns.

Since Chinese finally understood the influence that logistics systems have on the
value chain of the sector and the great cost-saving opportunities that a good logistics’
management can bring they have decided to introduce many changes, based on
world’s leader’s logistics systems:

(1) Nike’s logistics strategy outlined

NIKE Company attaches great importance to the construction of its logistics system,
tracking the international advanced logistics technology developments and timely
upgrading their systems.

NIKE has a global logistics distribution network. In the United States NIKE has three
distribution centers, two of them in Memphis, Tennessee. As part of expansion, NIKE
also established a three-tiered shelf of the warehouse, and installed a new automatic
replacement system, making NIKE able to guarantee that clients, stores and
warehouses/distribution centers in countries of Europe, Asia and South America
receive their orders within 48 hours after placing the order.

NIKE companies in the Asia-Pacific region are its factories or workshops, they send
their production by sea, to the U.S. west coast, and then by their special railway,
products are transported to Memphis. Other products like hats, shirts and others are
sent also to Memphis, from where they are distributed everywhere else in the
country.

Memphis distribution center increased by four its storage areas, making the total
storage area reached 1.25 million square feet. It was also added a new delivery
system and a 13-mile-long conveyor belt; in order to being able of handling larger
containers, it has added a sorting machine over a place. Its distribution center is
supported by a first-class logistics infrastructure, logistics software, and RF data
communication systems.

In early 2000, NIKE started, on its website, direct-to-consumer product sales. To

support this new business model, UPS Worldwide Logistics and NIKE signed a
distribution collaboration agreement. At UPS warehouse in Louisville large NIKE’s
stock has been stored, including shoes and other products).

(2) ADIDAS company's logistics strategy

ADIDAS’ logistics strategy and NIKE’s one are not the same. While NIKE counts on
its own logistics infrastructure, using their own logistics system supported by
companies like UPS, ADIDAS has established a system based on the outsourcing of
its logistics operations, focusing on the costs and efficiency control.

2.5.1. FOOTWEAR IMPORT / EXPORT

Import and export procedures

The following lines show the import and export procedures to follow for this kind of
products.

(I) Import Process

1. Handle import license at Bureau of Foreign Trade and Economy.
2. Sign contract, issue certificate and deliver goods.
3. Document against Payment by the bank (sight).
 4. Change bill of lading at shipping company.
5. Apply for inspection to Inspection and Quarantine Bureau.
6. Application to customs office, inspection of goods, paying duties and
clearance.
7. Pay fee and pick up goods at port bureau.
8. Inspect goods and put in storage.

(II) Flow chart for export

 Source from: China Import & Export Head Office

2.5.2. FOOTWEAR EXHIBITION OUTLINED

The following are the main exhibitions related to the leather and footwear sector in
China and Hong Kong:
1) CHINA INTERNATIONAL EXHIBITION FOOTWEAR

Time: February to April every year

Place: Shanghai a New International Exhibition Centre, Hall 5, Hall 3
Characteristics: industry analysis, product exhibition; communication and
negotiation; trade
Scale: Large buyers and retailers, especially from Europe, United States, Russia,
Southeast Asia and the Middle East.
Aim: to be a trading platform to further expand the domestic market share of small
and medium-end shoe-making enterprises, the Chinese market in order landing
some foreign brands has stated to participate in the exhibition and it will take the
China International Exhibition footwear as the best business platform for expanding
Chinese market.

2) APLF - MATERIALS, MANUFACTURING AND TECHNOLOGY

Time: 31 March - 2 April 2009

Place: Hall 1,2 and Concourse Hong Kong Convention and Exhibition Centre,
Wanchai, Hong Kong
Characteristics:
• Raw Materials & Leathers
• Tanners
• Traders of hides and skins
• Semi-Finished and Finished Leather
• Process Chemicals & Dyes
• Process Chemicals and Dyes
• Machinery & Technology
• Machinery parts, tools and tanning machinery
• Shoe machinery
• Components & Accessories
• Components / Accessories such as footwear and finished products.
Scale: 28 group pavilions from 22 countries and regions including Argentina,
Australia, Brazil, China, Ethiopia, Egypt (First time hosting), France, Germany, Hong
Kong, India, Italy, Korea, Mexico, New Zealand, Pakistan, Spain, Taiwan, Thailand,
Turkey, the United Kingdom and the USA 126 first-time exhibitors from Argentina
(2), Brazil (3), China (29), Colombia (2), Czech Republic (1), Egypt (13), France (1),
Germany (6), Hong Kong (16), India (13), Italy (18), Japan (1), Korea (3), Pakistan
(3), Philippines (1), Russia (1), Spain (1), Taiwan (4), Thailand (1), Turkey (4),
Ukraine (1) and USA (2)
Aim: APLF- materials, manufacturing and technology offers a platform to find any
kind of leather products and machinery from may countries.

3) FASHION ACCESS

Time: 31 March > 2 April 2009 (Tue - Thu)

Place: Convention Hall & Foyer, and Hall 5 & Concourse, Hong Kong
Convention and Exhibition Centre, Wanchai, Hong Kong
Characteristics: trade; seminars; Product exhibition
Scale: Importers, wholesalers, representatives of fashion brands, private
labels, buying offices, departments stores and retailers & boutiques buyers
from all around the world.
Aim: Fashion Access slogan in October was, "Let's get ready for Summer
2009” The program of seminars and special events, linked with the various
trend lounges, all focused on assist buyers and exhibitors to make the correct
choice for the coming seasons.
Next event to be held on 31 March > 2 April 2009:
APLF - Materials, Manufacturing & Technology 2009

4) CHINA INTERNATIONAL FOOTWEAR FAIR (CIFF) AND MODA SHANGHAI

Time: Shanghai on 3 – 5 September 2008.

Place: Hall W3, Shanghai New International Expo Centre, 2345 Longyang Road,
Pudong, Shanghai, P R China
Characteristics: trade; Product exhibition
Aim: Organized by APLF Limited and China Leather Industry Association China
International Footwear Fair (CIFF) and Moda Shanghai offers a platform for entering
China' s fast-growing domestic retail market for footwear products, leather garment,
travel ware, handbags and fashion accessories.

5) THE BIGGEST AND MOST IMPORTANT INTERNATIONAL LEATHER TRADE

FAIR IN CHINA

Time: 2 - 4 September 2009 (Wed - Fri)

Place: Hall W1, W2, W4 and W5, Shanghai New International Expo Centre 2345
Longyang Road, Pudong, Shanghai, P R China
Characteristics: trade; seminars; Product exhibition; fashion shows, seminars and
special events designed to keep all participants conversant with fashion and
technology developments

Scale: ACLE has impressed exhibitors with the number and quality of buyers
attracted to the event, while buyers have found an extraordinary variety of exhibitors,
particularly from overseas.
Aim: The exhibition provides the largest variety of leather, components &
accessories, manufacturing equipment and tools, machinery and technology and
business services.

2.6. GOVERNMENT SUPPORT TO THE SHOE-MAKING INDUSTRY

In some provinces and cities have had traditionally supported the footwear industry
by issuing encouraging policies to the sector, i.e. Wenzhou (Zhejiang Province),
where regulations have strongly encouraged enterprises to expand the scale of their
business.

On the other hand, Chinese footwear industry fears and concerns especially about
the issuing and coming into force of new policies related to:

(1) Labor Contract Law

(2) The export tax rebate policies (fear the modification or cancellation of
this policy, by lowering the rebates of production of low value-added
products of the times has gradually gone)
(3) The Environmental Protection related policies (since footwear
productive process generates a considerably amounts of wastes and toxic
gases, the new laws expected to be issued are going to be surely more
restrictive and are going to look forward to a more sustainable
development)
3. INNOVATION SYSTEM

This section of the study presents information of the innovation system in China,
providing data related to technological centers, pioneer technology used, research
and development current situation and the process of patents, giving the reader an
overview of the Chinese R&D+i platform.

3.1. INNOVATION MODEL

The Ministry of Science and Technology (MOST) is the organization in charge of

establishing the R&D+i policies at a national level, making sure that it is developed in
the priority areas designated by the Government.

It also works for the national promotion and improvement of the capacity for scientific
and technological innovation of the system.

Dependent of the Ministry are the Science and Technology Bureaus, Technology
Commissions, which at a provincial level are the ones responsible for the promotion
of the scientific and technological innovation and for the control of the application of
national plans.

At a primary level are the technological research centers, universities and

corporations, which are the ones that carry out the actions of R&D+I at a public level,
and technological enterprises with their own research groups and industrial
departments of innovation that lead the private enterprise.

Independent corporate R & D

“Government-led"
Joint R&D of university and enterprises

Major Universities and Scientific Research

China R&D
organization “Science-pull"

“Industrial traction"

Preproduction R&D alliance

 3.1.1. STRATEGIES FOR THE FUTURE OF INNOVATION IN CHINA

The Ministry of Science and Technology (MOST) has defined an innovation

strategy for China for the short and medium term detailed in the Outline of National
Medium- and Long-Term Science and Technology Development (2006-2020) in
which it is defined as key objective to improve the industrial structure of the country in
order to turn China into an innovation driven economy. .

To do so in the forthcoming years the actions oriented towards the creation of an

autochthonous capacity for innovation will be encouraged.

The change that the Chinese Government intends to make in this sense is reflected
in the words of the Prime Minister of China, Sr. Wen Jiabao, who stated “Generic
technology cannot be purchased. It is only from a solid capacity for scientific and
technological innovation and for obtaining our own intellectual property rights (IP) that
we can promote competitiveness [of China] and earn the respect of the international
society.”

In order to achieve this objective the Chinese Government has defined three key
elements to develop:
• Generate innovation in the field of basic investigation;
• integrate the existing technology to create new products and
competitive commercial sectors; and
• Assimilate, adapt and improve the technologies imported in order to
create new IP rights from said technologies.

This way the policies aimed at promoting innovation, that were directed towards,
firstly, helping Chinese companies strengthen their capacity for research and
development with a view to create and patent generic technologies, secondly,
assimilating the existing technologies and at the same time introducing advanced
foreign technology, are now focused on improving the protection of IP rights as a
means for encouraging investment in innovation and obtaining the related benefits..

Likewise, in the framework national strategy, measures that are aimed at improving
the innovation system have been adopted. These include:

• Support for small and medium enterprises.

• Collaboration within the enterprise, university and academic circles,
• Commercialization of the results of the research and development
projects carried out in institutes and universities, and
• The promotion of mediation services such as information services, IP
institutions, investment and incubator services.
 3.1.2. NATIONAL POLICIES FOR PROMOTING INNOVATION IN CHINA

Starting in the 1980’s, China progressively revealed a series of comprehensive

scientific-technological research and development plans, directed towards raising
globally and strategically the whole of the competitive strength in science and
technology for the 21st century.

A. NATIONAL SCIENCE AND TECHNOLOGY RESEARCH PLAN OUTLINED

This Plan, which was launched in 1982, was China’s biggest plan in the 20th
century relative to science and technology. Oriented towards solving key
problems arising in the national economy and in social development, it is linked
to areas such as agriculture, electronics, information, energy, communications,
materials, resource prospection, environment protection, medicine and health,
etc. The plan is, up to now, among the state scientific and technological plans,
the one with largest investment accumulation, the one that involves the most
human participation and the one with greatest influence on the national
economy. Several dozens of thousands of workers of over a thousand scientific
research centers all over the country participated in the execution of this plan.

B. HIGH-TECH RESEARCH DEVELOPMENT PLAN (863 PLAN)

In March 1986, after a series of debates and broad, comprehensive, thorough
evaluations by hundreds of Chinese scientists, the High Technology Research
and Development Plan (abbreviated 863 Plan) was approved. It selected 20
topics in eight areas: biology, space navigation, information, laser, automation,
energy, new materials, and sea. During its execution, the main functions of the
government departments were the regulation and macroscopic control and the
provision of the services necessary for the scientific research work. The
direction of the studies and concrete aspects of the plan were discussed by the
scientists and Expert Council. The functions of the members of the Expert
Council are to watch over the direction of the development of the advanced
international scientific research, draw up yearly reports on the research and
study in each given area, and define new lines research.

C. THE STATE'S KEY BASIC RESEARCH DEVELOPMENT PLAN (973 PLAN)

The State Program for the Development of Important Basic Research or 973
Plan, started out in 1998. Mainly focusing on important scientific problems in
the areas of agriculture, energy, information, resources, environment,
population, health, materials, etc., it covers the development of comprehensive
investigation of several disciplines and offers a theoretic foundation and a
scientific base for problem solving. The Plan encourages outstanding scientists
to focus their attention on big and important scientific and technological topics
and technical advances and to carry out important basic studies in key fields in
favor of the socioeconomic development, fulfilling the goals of the State. The
 Plan provides a solid scientific and technological support and a solution to
problems that may arise in the development of the Chinese economy and
society of the 21st century.

D. TORCH PLAN
Launched in August 1988, it is the most important plan of China’s high
technology industry. It is a state guiding plan that includes the following tasks:
organizing the execution of a group of projects for the exploitation of products
of high technology and advanced technological level, with a good national and
international market and a good economic yield; establishing a group of areas
for the exploitation of the high technology sector at a national scale; sounding
out administrative structures and function mechanisms that are adequate for
the development of the high technology industry. The project places emphasis
on topics like new materials, biological technology, electronics, information,
technical-mechanical-electronic integration, new energy sources, economizing
technology, etc.

E. SPARK PLAN
This Plan, which dates back to 1986, has as objectives to strengthen the rural
economy relying on the progress of science and technology, to generalize the
scientific and technical knowledge in rural areas and to orient the peasants to
prosper. Currently, over 140.000 topics are starting to be put into practice as a
pilot experience.

More recently in the year 2006, within its 11th “Five-year Plan (2006-2010)” in
order to establish the guidelines of policies for the economic and social
development, China has confirmed its commitment with innovation by
acknowledging the essential role of innovation as key element for increasing
the industrial technological level and the competitive improvement of all
Chinese productive sectors as a priority matter for the country’s progress

3.2. MAIN DOMESTIC FOOTWEAR RESEARCH AND DEVELOPMENT

INSTITUTIONS

(1) CHINA LEATHER AND FOOTWEAR INDUSTRY RESEARCH INSTITUTE (CLFI)

The CLFI is responsible for establishing the quality regulation at a national level and
participates in international committees of the standardization organizations; in
addition, is in charge of defining the standards for the entire Chinese footwear
industry.
The CLFI is the first investigation institute in China -inside the light industry sector-
that got the Accreditation ISO 9001/2000.
The CLFI groups the following centers:

• National center for normalization of leather and skin

• National center for normalization of footwear
• Secretary of the national center for normalization of leather and skin
• Secretary of the national center for normalization of equipment for
leather and skin
• National center for the inspection and testing of footwear
• National center for inspection and testing for leather
• National center for inspection and testing of equipment for leather and
footwear
• National center for productivity of the leather and footwear industries

After becoming a Scientific enterprise in 1999, the CLFI has developed 10 national
projects such as biological technology applied in both tanning and developing
engineering, research on the Chinese right foot type; CAD/CAM superior and newest
integrated system, research for producing artificial skin out of animal collagen,
research on sustainable development of the tanning industry and research on the
tanning industry wastewater.

(2) OTHER ASSOCIATIONS AND RESEARCH INSTITUTIONS

The following is the list of other research institutes and/or universities recognized in
the field of the footwear research and development:

Universities
• Sichuan University
• Shaanxi University of Science and Technology
• The University of Wenzhou

Other institutions engaged in R&D+I for the footwear sector:

• Zhejiang Institute of Industry and Trade
• Beijing Institute of Clothing Technology
• Shandong Institute of leather
• Wenzhou Leather Institute
 3.3. TECHNOLOGIES DEVELOPED IN CHINA

(1) Clean production technology

Jianwu Company has developed a technology management methodology that allows
getting a production according to prevention and control measures in aspects like
sewage and screening of residues from wastewaters.

(2), Information technology

The field of information technology in the shoe has a very broad room, Chinese
footwear enterprises are getting on the trend of modernization, through specific ERP
(Enterprise Resource Planning) system developed (or adapted) by Chinese. The
system has allowed the expansion of electronic commerce, the promotion of
technologic information exchange and its subsequent application.

3.4. FOOTWEAR RELEVANT DOMESTIC AND INTERNATIONAL AWARDS

(1) Domestic awards

DUAN ZHENJI LEATHER AND FOOTWEAR SCIENCE AND TECHNOLOGY

AWARD
China' s light industry set the "Duan Zhenji Leather and Footwear Science and
Technology Award". This prize is awarded to scientific research advances,
technological innovation and development. The aim of this granting this award is to
promote the use of scientific and technological achievements, as well as the
industrialization of new technologies believed to bring contributions to the units and
individuals engaged in the development of the footwear sector.

(2) Foreign awards

Chinese shoes have been granted with international design awards:

• Cup logo leather • Golden Monkey, the concept of Chinese footwear

design Grand Prix
• Jordan Cup, Chinese sports equipment design contest
• Chinese shoes across the Taiwan Strait College sports shoes Design
Competition
 • Hong Kong Design Competition shoes

In spite of that fact, the Chinese footwear research and development system has
received just some little recognition in regard to science and technology.

3.5. PATENTS
The patent administration departments of the State Council are responsible for the
management of the country' s patent work, acceptance and review of patent
applications, and patents granted in accordance with the law. Departments of
Provinces, autonomous regions, and municipalities directly under the Central
Government, which are responsible for patent work, are in charge of the patent work
management of their administrative regions.

In Appendix 2 there is shown the procedure to follow when applying for a patent.
4. TECHNOLOGICAL COOPERATION

This section contains information related to domestic and international associations,

institutes and organizations that are involved in cooperation for the development and
encourage of the footwear sector.

4.1. THE FIELD OF DOMESTIC TRADE ASSOCIATIONS

China Leather Industry Association

China Leather Industry Association, founded in 1988, has over 1,300 member units,
representing 400,000 workers. China Leather Industry Association is the leather
industry trans-regional and inter-departmental link of the footwear and leather sector-
related enterprises.

China Leather Industry Association is divided into 10 professional committees; each

one is responsible for operational management on a specific field related to the
leather and footwear sectors. The implementation of brand strategies, the promotion
of scientific and technological progresses, as well as the arrangement of technical
training and international exhibitions are its main tasks. China Leather Industry
Association has also carried out active international exchanges and cooperation in
this area.

4.2. PROVINCIAL ASSOCIATIONS

(1) Leather Industry Association of Zhejiang Province

Zhejiang Leather Industry Association was established in September 16, 1994. It
works on areas like tanning, fur, leather skin clothing, footwear, leather goods,
leather chemicals, leather machinery, hardware leather, shoe materials; it is also
attached to the leather industry from the industrial enterprises and institutions, tertiary
institutions to scientific research units.

(2) Guangdong Leather Industry Association

Guangdong Leather Industry Association was founded in 1990 in Guangdong
Province. It has become a strong sector’s production system support in aspects
related to leather tanning, fur, leather shoes, leather clothing, luggage, leather goods,
leather sports goods, leather chemicals, leather machinery, leather hardware, shoe
materials, research institutes and universities.
 4.3. DOMESTIC NETWORK OF COOPERATION
China' s footwear industry domestic cooperation network is compound by enterprises,
colleges and universities/research institutions; it supports cooperation in regard of
scientific and technological matters for upgrading the sector. This chain is supported
by national and provincial sector’s associations.

In this regard, the Chinese leather and footwear industry and the Shaanxi University
of Science and Technology Research Institute are doing it better, a link through
which many well-known domestic footwear enterprises have initiated an extensive
cooperation.
5. PROMOTION
This section provides information of the Chinese education system, as well as of the
most relevant training and vocational centers in China, including the way these
centers are classified and the support that they receive from the Chinese
government. In addition, there are highlighted institutions and also professionals of
relevance within the education system that are related to this sector.
Finally, there are shown the promotion opportunities to which actors within the
education system are supported with, for improving the quality of education and the
results obtained by researchers related to this sector.

5.1. SUMMARY

Chinese education system is compound basically by four parts, basic education,

vocational and technical secondary education, regular higher education and adult
education; the following is the description of each one.

(1) Basic education

Basic education refers to pre-school education and general primary and secondary
education. Primary education contains six years; secondary educations are divided
into junior high school and senior high school, containing three years respectively. In
addition, some schools contain nine years, which fuse the primary and secondary
school education into a single one.

(2) Vocational and technical secondary education

Vocational and technical secondary education (3 years) mainly contains secondary
specialized schools, technical schools, vocational secondary education and other
forms of short-term vocational training center.

(3) Regular higher education

Regular higher education refers to specialist (associate degree), undergraduate
(bachelor degree) and postgraduate (master) education and so on. Specialist
education contains two or three years, graduate education four years, (i.e. medical
education takes five years and engineering majors are designed on a base of a five
years study plan). Postgraduate education contains two or three years and PhD
education contains three years.

(4) Adult education

Adult education contains all kinds of educations that aimed to offer school education,
literacy education and other forms of educations to adults which haven’t passed
through the education system at an average age.

5.2. UNIVERSITIES LINKED TO THE FOOTWEAR SECTOR

(1) Shaanxi University of Science and Technology

Shaanxi University of Science and Technology (former Beijing Institute of Light
Industry that was moved to Xian Yang, Shaanxi province) is one in a series of
universities and colleges spread all over China, which are under the supervision of
the China’s Light Industry Association.

Until 1985 the Shaanxi University of Science and Technology didn’t start offering
professional post-secondary education related to the footwear industry; today, the
university offers a master'
s degree in research and development related to the
features and appearance of leather products (it is the only footwear-related master'
s
degree authorized by the Chinese education system).

Many of the Master’s graduates are currently working and have become the
backbones of well-known footwear enterprises like Belle, Anta, Double Star, Aokang
and Daphne Hong Qing Ting.

(2) Sichuan University School of Textile and Food

The Textile and Food College (established in 1952) of the Sichuan University is the
first entity that run a course related to chemical fibers. It is also another of the
colleges that depends on the China’s Light Industry Association; personnel of this
organization has been supporting and training scientific and technological staff of the
college.

The College counts on a professional instructor’s team of first level; among the 114
people working at the school there are 30 associated and fellow teachers, 30
researchers and engineers and 15 doctoral tutors.

The College attaches great importance to academic exchanges, therefore it has

collaborated in the past not only with domestic partners, but also with foreign
counterparts from the United States, Great Britain, Japan, Germany, France, the
Czech Republic, the Republic of Korea, Singapore, Taiwan and Hong Kong.
 5.3. VOCATIONAL AND TRAINING CENTERS LINKED TO THE FOOTWEAR
SECTOR

(1) Zhejiang Vocational College of Industry and Trade

Zhejiang Trade and Industry Vocational and Technical College are located in
Wenzhou City, Zhejiang. Today, at the college there are studying around 700 people,
guided by a team of 284 full-time teachers. The college focuses its activity on
imparting technical courses related to industrial, technological and trading aspects of
the sectors within the China’s Light Industry Association, especially those related to
consumer goods (including leather and footwear).

(2) Vocational Education Base of Wenzhou

It is a school district close to Wenzhou city in Zhejiang Province. It is considered as
the backbone of the industrial arrangement of the area; enterprises demand the
“base” for qualified technicians and technical-engineers. Many of technicians who
graduate from the center speak English or French for technical purposes; in addition,
some of them are specialists on the certification of International Quality Management
Systems. The center has also built a footwear design training center and a footwear
technology training center

(3) Li Yi Footwear Training School

Li Yi footwear training school was established in August 2000 with the aim of
improving not only the quality of the courses related to the sector, but also achieving
a nice learning environment. It is catalogued as an important training base due to the
enrollment rate of their graduates within the footwear industries, associations,
research and development institutes, etc. It has been considered as a main training
“base” also by international and domestic institutes, associations and enterprises; it
has collaborated with the United States and Footwear Association and the
Guangdong Science and Technology Development Corporation.

5.4. GOVERNMENT SUPPORT

The government focuses its support in providing the units and individuals engaged in
technology transfer, technology development and related business, with policies
focused on exempting business and incomes taxes. On Appendix 3 are described
the policies for the organizations that want to be exempt of paying some taxes
because of its nature or business scope.

5.5. LEATHER AND FOOTWEAR INDUSTRY’S EXCHANGE

OPPORTUNITIES

The opportunities for students and researchers that belong to the leather and the
footwear industry, to study or go on an exchange program abroad are mainly directed
to countries like USA and England. The Chinese institutions that have developed
exchange programs in the past are:

• Shaanxi University of Science and Technology

• Sichuan University
• Chinese Leather and Footwear Industry Research Institute
• Industrial Technology Research Institute
6. GLOBALIZATION

This section contains information related to the main and well-known domestic and
international enterprises/organizations involved in the technology field Located in
China. There are also data of international cooperation networks linked with that
country, although the information contained in this item is not necessarily attached to
the footwear sector.

6.1. DOMESTIC TECHNOLOGICAL LEADERS

(1) China’s Universities Technologically-Oriented Leaders

Shaanxi University of Science and Technology and Sichuan University are the two
universities that more advances in the fields of research and development have done
to the China’s footwear industry and its related fields. The works and projects
undertaken by these institutions are only comparable to similar tasks undertaken by
well-known research and development centers affiliated to the leather and footwear
sector.

(2) Domestic Research and development Leaders

China Leather and Footwear Industry Research Institute (CLFI) is China’s unique
state-level comprehensive scientific research institution related to the leather and
footwear industry. The CLFI bases its success not only in the pursuit of the
improvement of the footwear and leather products, but also in the close cooperation it
has established with Chinese industry leaders; consequently, the market is the
beginning and end of each project undertaken.

(3) Domestic Industry’s Technology Leaders

A. LI NING
Li Ning Company Limited was founded in 1990 in Sanshui, Guangdong province. It
has been an enterprise that has always wanted to succeed by developing its own
branding strategy.

In 1992, Li Ning Company receives the Chinese Olympic delegation and starts
supplying it with sports footwear and apparel, becoming the first Chinese Olympic
Team’s sponsor. In 1998 this company establishes in Foshan (also Guangdong
province), its apparel and footwear design and development center. Within that
center it was developed by the company a research program for identifying the
mechanical and comfort features of its products; this project started with the creation
of an athlete’s foot database that helped them enhancing its products

After 15 years of exploration, Li Ning product’s catalogue includes not only sports
footwear and apparel, but also accessories. The advances made by this company
have been related not only to its products, but also on the business, production and
distribution management thanks to the application/implementation of systems like
SAP, AFP and ERP.

in 1990 Li Ning Company became the first Asian Games sponsor; on the other hand,
In 2005 the company became an official NBA’s partner and later in 2006, an ATP’s
Market partner.

B. ANTA
Anta Sports is one of China' s leading brands in the industry of sports footwear,
apparel and accessories’ design, development, production and marketing. The
Group' s distribution system is done through distributors all over the country'
s retail
outlets and a broad distribution network outside China.

The Group focuses on brand value and on media advertising, therefore, Anta
trademark has been listed by the Chinese State Administration for Industry and
Commerce Trademark Office as a "Famous Chinese Trademark" for seven
consecutive years.

In 2005 the Group established the first national "sports science laboratory", a center
that uses advanced testing and quality control equipments; "Innovation and change"
is Anta’s pursuit in regard of technological innovation. Additionally, the company
supports the work of the Standardization Administration of the People' s Republic of
China (SAC) in regard to the establishment of sporting goods-industry related
standards.

C. BELLE
Belle Group is China' s largest clothing retailer enterprise; its products are mainly
footwear, sportswear, clothing and bags; in addition, it has the China' s largest chain
of self-distribution network with more than 4,000 outlets spread all over the country;
due to this reason Belle is also a distributor agent for China of many worlds’ top
brands including NIKE, ADIDAS, REEBOK and KAPPA.
Belle’s products are exported to the United States, Europe, Japan, Southeast Asia,
the Middle East and Africa. Its mains brands are:

• BELLE. • TATA.
• STACCATO. • JOY & PEACE.
• TEENMIX. • FATO.

"BELLE" in example is a well-known brand in China, where it is among the top 10 of

women's footwear rank.

D. AOKANG
Aokang Group is part of a bigger group also involved in real estate and biological
products; the company is considered as one of the China' s largest private shoe-
making enterprises. Aokang has three major production bases and a distribution net
of more than 3,000 stores spread all over China. in addition, it has established
branches in countries like Italy, Spain, USA and Japan and three “Design Centers” in
Wenzhou, Guangzhou and Milan (Italy).

E. YONGJIA
Yongjia Group is the successor of the Olin shoe factory, founded in 1988 in Zhejiang
province. The companies within the group have been certified with ISO9001 and
ISO14001; in addition, Yongjia’s main brands O’Conner and Wang have become
pretty popular within the Chinese market.

6.2. FOREIGN TECHNOLOGICAL LEADERS

In the footwear industry’s technology research and development, many worlds’

leaders within the sector, especially research institutions like SATRA and CTC have
extended their activities to China.

(1) SATRA
This British organization is the largest international and membership-based
certification body related to industries like footwear, clothing and furniture (1,200
members). SATRA was founded in 1919 and is currently employing 180 scientists,
technical experts and members of 70 different countries.
It was established on behalf of the world'
s footwear certification standards; therefore,
first-level companies (Such as Nike and Adidas) base their operations and products
on the technical standards and requirements issued by SATRA.

(2) CTC
The French CTC is a specialized footwear and leather products testing and quality
certificatory agency of the European Union; it is also the entity in charge of issuing
many standards related to the footwear industry in Europe.

Its branches in China are located in Chengdu, Shanghai and Guangzhou and from
there, the CTC provides quality testing and assessment services (by applying and
providing standardized tests and inspections that fit the guidelines according to the
European regulation) for Chinese companies that want to export their leather shoes
to European markets.

Foreign Technology-leader Enterprises

Foreign enterprises such as NIKE and ADIDAS that count on their own specialized
scientific research systems have started to investigate in China.

Adidas, in example, has established its research and development center in

Dongguan (Guangzhou) at the high port industrial park. It is Adidas’ largest research
and development center in the world.

6.3. INTERNATIONAL COOPERATION

China' s international science and technology cooperation main system, in the field of
international cooperation is mainly done by the Secretary for International
Cooperation Division.

The functions of the secretary for international cooperation division are:

• The study of international cooperation in science and technology principles,

policies and related regulations.

• The organization system for the implementation of bilateral, multilateral and

relevant international organizations.
 • Scientific and technological cooperation between the plan.

• The official technology Cooperation agreements such as foreign affairs, audit

and coordination of important scientific and technological cooperation and
exchanges opportunities between civil projects.

• The organization and implementation of foreign governments’ international

organizations related to science and technology in China.

• China's foreign assistance and technology assistance in guiding the work of

science and technology.

• Contact foreign governments and international organizations in China’s

Science and technology agencies.

• Contact the Hong Kong and Macao Special Administrative Region and Taiwan
region on science and technology work.

The following are some of the international working groups and commissions in
which China plays an active roll at present.

Science and Technology for Society (STS)

Science and Technology for Society (STS) was founded in September of 2004 in
Tokyo (Japan), as a result of an initiative proposed together by Ministry of Science
and Technology of Japan, the USA Academy of Sciences and The Ministry of
Science and Innovation Department in the UK Department of Trade and Industry.
China is one of the participants of STS Forum.

STS is a multi-disciplinary and crosscutting Science, Technology and Social Forum,

participated by governments departments, scientific community and enterprises. STS
has annual meeting in Tokyo every September.

STS Forum is an unofficial open discussion mechanism which aim is to build new
types of community in order to resolve the questions caused by science and
technology application in time. This community also expounds the opportunity which
brings the use of science and technology for solving human problems.
APEC Industrial Science and Technology Working Group (APEC-ISTWG)
APEC Industrial Science and Technology Working Group is one of the professional
working groups linkedd to the Asia Pacific Economic Cooperation (APEC).

The present 21 members of APEC are: Australia, Brunei, Canada, Chile, China,
Hong Kong, China, Thailand, Indonesia, Japan, Korea, Malaysia, Mexico, New
Zealand, the United States, Papua New Guinea, Peru, Philippines, Russia,
Singapore, Chinese Taipei and Vietnam. Macao (China) is a member of observation.
All AEPC members and Macao (China) have participated in the Industrial Technology
Working Group (APEC-ISTWG) activities.

The working group holds two regular meetings each year, in those meetings there
are discussed the scientific and technological development and cooperation issues,
as well as other matters of interest for its members.

OECD Committee for Scientific and Technological Policy (OECD-CSTP)

Organisation for Economic Co-operation and Development -OECD- and its
Committee for Scientific and Technological Policy –CSTP- consists of 30 member
countries, including 5 observer countries which are China, Russia, South Africa,
Israel, and the European Union.

CSTP is one of the executive committees which, it consists of four working and
professional groups named: NESTI, TIP, WPB and GSF.

It was approved by the State Council and The Ministry of Science and Technology of
China to formally join the CSTP as an observer at the end of 2001. On the other side
and despite the fact that China is merely a CSTP observer country, the country can
participate equally in tasks of the working groups.

CSTP is mainly engaged in generating science and technology indicators, the

national innovation system, biological resources and policy research of the
international scientific project, prospective study, the establishment of policy model,
and promoting successful experiences in member countries.

CSTP holds two meetings annually and since joining the CSTP, the Ministry of
Science and Technology of China has organized relevant departments to attend all
CSTP’s annual meetings. As a result of its membership, China, has obtained access
to CSTP information on science and technology policies, science and technology
indicators and global scientific plans. This chance allows China to understand and
track the research developments done abroad, especially the strategic and forward-
looking research for its National interests. Meanwhile, the OECD provides China a
useful reference for issuing and adjusting policies related to the research field.

The Third World Academy of Sciences (TWAS) & The Third World Network of
Scientific Organization (TWNSO)
TWAS is a non-governmental, non-political and non-profit international scientific
organization. It was founded in October 10th, 1983, in Trieste, Italy. TWAS
represents the best of science in developing countries. TWAS’ main mission is to
promote scientific excellence and capacity in the South for science-based
sustainable development.

The Third World Academy of Sciences (TWAS) led the drive for the creation of
TWNSO, which in 1990 acquired consultative status with the United Nations
Educational, Scientific and Cultural Organization (UNESCO).

TWNSO is a non governmental organization founded by ministers of science and

technology and higher education and heads of science academies and research
councils in developing countries, to promote science-based sustainable economic
development in the South.

The Department of Science and Technology of China is a member of The Third

World Network of Scientific Organization (TWNSO) and the Vice-President (for Asia)
is the Minister of Science and Technology of China, Mr. XU GUANHUA.

Commission on Science and Technology for Sustainable Development in the

South (COMSATS)
COMSATS was founded in 1994 and headquartered in Islamabad, Pakistan. Among
the existing 21 member countries, China is one of its founding members.

COMSATS' purpose is to promote scientific and technological cooperation and

exchanges between developing countries, mainly to promote the assistance among
the central networks. Cooperation includes staff training, seminars, and exhibitions.
Relevant scientific research institutions in China have participated in the central
networks. Some scientists also served as the corresponding duties.

Commission on Science and Technology for Development (CSTD)

CSTD was established in 1992, as a subsidiary institution under UN Economic and
Social Council. CSTD is emerged from reconstructing economic and social affaires
agencies by UN Economic and Social Council in 1992. Taking the place of affaire
agencies like “Committee of Inter-governmental Science and Technology Promotion
and Development”, ”Advisory Committee of Science and Technology Promotion”,
”Science and Technology Development Center” etc., CSTD is currently the only
institution in charge of scientific and technological affairs in UN system, and plays an
important role in cooperation and exchange between member countries. CSTD holds
a one-week plenary session in Geneva every year.

CSTD has 33 members currently, 8 of them in Africa, seven in Asia, 6 in Latin

America and the Caribbean, 4 in Eastern Europe and 8 in Western Europe. Each
member country is selected by the United Nations Economic and Social Council for a
term of four years. China is CSTD members for a term to end in 2010. Ministry of
Science and Technology is CSTD national corresponding unit, responsible for
coordination and management of its cooperation with China. According to the
practice, the leader of International Cooperation Division will be CSTD member on
behalf of the Chinese Government.

UNESCAP-Asia and Pacific Technology Transfer Center (APCTT)

APCTT initially belonged to United Nations Economic and Social Commission in Asia
and Pacific (UNESCAP), the aims are to strengthen the developing, transferring,
adapting ability, to promote technology transfer between middle and small size
enterprises, to promote spreading of technology information, to establish database
on technology and business, to enhance technical management and to be agent of
market assessment, technical consulting and transfer negotiation etc..

APCTT is a service institution to promote development of local society and economy.

Its service scope covers Asia and Pacific areas. APCTT was founded in 1977,
located in Bangalore, India, and moved to New Delhi in 1933. In recent years,
APCTT launched a series of technical cooperation with Hubei province, Jiangsu
province, and Shanghai Technology Exchange, including Asia-Pacific Traditional
Chinese Medicine Network (Wuhan) and UN Medium and Small Enterprises
Technology Network portal site in China.

6.4. INTERNATIONAL COOPERATION

The following is the list of countries and the specific agreements that China has
signed with them in order to cooperate in different key fields or sectors, with the aim
of improving the R&D+I results and supporting its development system.

Australia
Main Cooperation Plan
China-Australia Special Fund for Science and Technology Cooperation
China-Australia Young Scientists Exchange Scheme
MOST ACIAR Agricultural Program
MOST(Ministry of Science and Technology)--CSIRO MOU

Brazil

There are more than 30 science and technology cooperation agreements, protocols
and other documents signed between China and Brazil. The cooperation between
China and Brazil in scientific and technological field covers aerospace, information
technology, communications, hydropower, agriculture and animal husbandry,
forestry, medical and pharmaceutics, environmental protection, geology, transport
and energy, chemical industry, biotechnology, aquaculture and new material etc.

Canada

China and Canada governments signed a scientific and technological cooperation

agreement in Jan.17th, 2007.

The China - Canada science and technology complementary research project started
in April of 2006 and finished in September of the same year. The priority cooperation
areas were initially identified as energy, environment, medicine, health and
agricultural products processing.

The following are the current agreements:

Ministry of Science and Technology-NRC MOU and Steering Group Meeting

Ministry of Science and Technology -IDRC Program
Former SSTC-IDRC MOU

United States

Under the framework of “Sino-US Scientific and Technological Cooperation

Agreement”, relevant departments of the two governments signed 50 cooperation
protocols (agreements and memorandum).

The cooperation area covers energy, environment, agriculture, basic science,

technology information and policies, geology, natural resources, transportation,
hydrology and water resources, medicine and health, measurements and standards,
civilian nuclear technology and nuclear safety, statistics, nature conservation,
forestry, high-energy physics, fusion, material science and engineering measurement
sciences, bio-medicine, seismology, marine, atmosphere, mapping etc..
A series of important projects were completed, including Beijing electron-position
collider, Beijing spectrometer, digital seismic network, remote-sensing satellite
ground stations etc. The government agencies of China that participated in these
projects almost covered all government departments related to science and
technology.

New Zealand

Scientific and Technological Cooperation agreement between China and New

Zealand was signed in 1987 and renewed in 2003. The priority cooperation areas are
biotechnology, information, ecological and environmental protection, geophysics,
medicine and public health etc.

Ireland

China and Ireland officially signed science and technology cooperation agreement in
2000. In 2002, China and Ireland established a “Research fund for science and
technology cooperation between China and Ireland” to provide financial support for
cooperation projects in biotechnology, information and communication technology,
new material science etc.

Cooperative research include: modern wireless communications, high-performance

processor and routers network optimization, network computer evaluation system,
bio-pesticides -infiltration, dehydration, storage of insects disease nematode and
infiltration and inducement of the new gene, microorganism - Host Interaction of
bacterial signal transduction, tissue engineering and new materials research, and
other new technologies.

Austria

After China and Austria signed a science and technology cooperation agreement in
1984, both sides carried out extensive cooperation in many areas of science and
technology, mainly in personnel exchange based. From 1985 to 2007, the two sides
have held 8 meetings between science and technology department of the two
governments. Cooperation areas cover medicine, remote sensing, forestry, material,
environmental protection, extensive contacts and exchanges between scientists of
the two sides.

Belgium

China and Belgium signed “PRC and Belgium-Luxemburg Economic Union of

Science and Technology Cooperation Protocol” in 1979. Until 2006, China and
Belgium have held 16 meetings between departments of science and technology of
the two governments. Both sides have carried out more than 300 cooperation
projects between the two governments till now. On average of 3-5 agencies
participated in one cooperation project, there are more than one hundred research
institutions, universities, and enterprises participating and more than one thousand
scientists exchanging ideas within these 20 years.

Cooperative areas include agriculture, energy, geology, seismology, remote sensing,

environmental protection, nuclear safety, biology, information technology and nano-
technology and so on.

Germany

When China and Germany signed science and technology cooperation agreement in
1978, the cooperation areas agreed were energy, metallurgy, aviation, agriculture,
medicine, mathematics, physics, chemistry, and etc.

During the cooperation process, the two sides enlarged the cooperation area to
manufacturing technology, laser processing, materials, information, biology, heritage
conservation, and so on.

France

China and France have extensive cooperation in many areas, including agriculture,
biotechnology, information communication, environment, material, energy, nuclear
energy, transportation, aviation, space, construction, medicine, marine, chemistry,
physics, astronomy and geology, forestry, measurement, weather, patents and so on.

During Premier Wen’s visit to France in December 2005, he declared that priority
cooperation areas between China and France are aviation, nuclear energy and
railway.

China and France Advanced Research Projects (PRA)

In order to further strengthen basic research and cooperation and research in high-
tech area, Chinese and French government signed cooperation agreement on Sino-
France Advanced Research Project in 1991 and set up a steering committee of
experts. PRA plan was involved in six areas, namely bio-medicine, biotechnology,
environment, information, material and geology.
7. CONCLUSION
The following lines contain the conclusions drawn based on the analysis done, not
only of the information included in this report, but also, after the results obtained and
experience gained in the development of the “Big Frame” that surrounds and limits its
making, the GLOBALTECH project.

After finishing this report, the main conclusion drawn is that there are many gaps in
the Chinese Research and Development System that open a wide range of
possibilities of cooperation among research entities of both countries; not only for this
sector, but also for other types of food industries and differently focused sectors.

In addition and since the extremely close relationship, even interdependence

between science and industry, determining the precise and pertinent cooperation
lines will be a decisive factor that influences the results of the whole Globaltech
Project.

Therefore, the following specific conclusions link science and industry related issues,
by establishing connections and a relation cause-effect that with an indifferent flow
direction, determine some of the possibilities that have been discovered at the eyes
of the Spaniards in order to establish possible cooperation areas of interest.

7.1. OVERVIEW OF THE FOOTWEAR SECTOR

The Chinese footwear sector is mainly based and structured in provinces like
Zhejiang, Guangdong and Fujian. The largest and well-known companies, as
well as the main research and development centers, universities and equipment
producers that have links or deal with the leather and footwear sectors are also
located in these areas.

Despite the fact that the import of footwear has been increasing in recent yeas,
especially for high-end shoes, Chinese are also increasing their production in order
to cover the domestic demand. High-end footwear is being taken seriously by the
sector, which tired of a low-end focused industry which gives low benefits is decided
to improve the quality and other aspects of the products, in order to manufacture all
types of footwear, including those that are destined to supply high-end markets.

China’s footwear industry has traditionally based its competitiveness on a low-cost

strategy, on the other hand, it is totally decided to change its strategy to other that
allows producing not only high-end shoes, but also, improving the quality of all of the
products. Despite the fact they want to introduce, there are still many lacks in their
footwear industry, especially in aspects like design, branding, standardization of
production and quality assessment.
Technology applied is a key matter, not only because the currently doesn’t allow
reaching an adequate standardization process according to a production of scale, but
also because the research and development initiatives are mainly focused in aspects
like developing leather and other materials’ features and reducing the environmental
impact of the industry (a fact which is not bad itself, but insufficient). Another issue
that plays against China’s interests is the regulation in some western markets,
especially in the European Union, where due the menace the Chinese footwear
industry represents for European manufacturers, the European Commission has
started to introduce more severe policies which are not easy to reach by the Chinese
manufacturers, especially those matters related to quality or environmental issues.

There are other many lacks that need to be improved by the Chinese footwear
sector, not only those related to technology or quality assessment. Design and
branding are currently two strong limitations (not for all types of shoes) that restrict
the competitiveness of Chinese competitors in western markets.

China’s industry, in general, is also facing a complicated era. Western provinces,

industrially saturated, have started to restrict the opening of new enterprises;
additionally, already set enterprises which are labour intensive are destined to face
troubles, especially the rising costs derived out of the increasing costs of resources
(wages, raw materials and supplies), the lack of qualified staff and the introduction of
environmental friendly policies.

7.2. OVERVIEW OF THE FOOTWEAR SECTOR FROM A RESEARCH AND

DEVELOPMENT POINT OF VIEW

Chinese research and development centers related to the footwear and leather
industries show different characteristics depending on their nature. First, there is only
one national public research and development center, although this one has
branches in several provinces and collaborates also with private enterprises. On the
other hand, private R&D centers are established by enterprises for their own benefit;
among the private ones there are some which have been set by foreign brands
(specially by sportive brands).

Research and development centers, especially the public ones, are currently
focused on developing advances that allow reducing the environmental impact of
the footwear industry, not only through technologies that allow reducing the wastes
generated, but also through technologies that permit a better use of resources,
specially raw materials and supplies like energy and water.
With the aim of giving support in matters which have become important for the
competitiveness of the industries within the sector, many research and development
centers are offering advice and certification on quality assessment systems, there
are foreign centers which are certifying/verifying those quality systems introduced
by Chinese manufacturers.

Footwear’s research and development system seems to be properly supported by

the academy, especially in those areas where the sector is strong (and including
provinces where leather is produced) and relatively important for the economy of the
regions that home their activities.

In regard to collaboration, it is acceptable to conclude that there are a large number

of cooperation possibilities among Spain and China, covering not only the
development of new processing techniques and technologies, but also the
development of new products; thus, a cooperation that allows complementing
each other’s lacks would be feasible, especially in the following aspects:

• Research in Styrofoam (polystyrene foam) and materials for soles.

• Development of adhesives for soles.
• CAD / CAM systems that integrate design and cutting of last (shoe tree).
• Development of nanotechnology applications for footwear.
• Design of shoes for specific markets like European and Chinese.
• Recycling wastes of skin (hides).
• Using biotechnology techniques in the tanning of leather.
• Development of eco and multifunctional skins.
• Research in obtaining artificial skin.
• Technical support in aspects like quality and certification.
8. FUDE’s PROFILE

FUDE DEVELOPMENT ENGINEERING SL (FUDE) is a Spanish company that

during the last 20 years has offered full services to companies that wish to relate or
introduce themselves in China and also to Chinese companies which are interested
in outside markets.

Our trade mark is our philosophy. In Mandarin, FU means “wealth” and DE means
“virtue”. Both make reference to the word FUDE; “wealth or profitability all reached in
a transparent manner”

FUDE offers to its clients a team of more than 20 professionals in various fields as
well as prestigious collaborators in each of these areas. FUDE has an own office in
Beijing since 1997 and a delegation in Shanghai since 2006.

SPAIN
FUDE Development Engineering, S.L.
Edificio Bidekoa. C/ Etxesakan 5, Oficina B6/S6
31180 ZIZUR MAYOR (NAVARRA), SPAIN
T. +34 948 281 370 F. +34 948 281 369
fude@fude.es

CHINA
CHINA BEIJING CHINA SHANGHAI
Xuanwumen West Street, 129 Xinsong Road, 999
Room 1120, Jinyu Office Building REPAULSE BAY GARDEN, 241
100031 BEIJING (CHINA) 201612 SHANGHAI (CHINA)
T. +86 10 66 411 958 / 959 T. +86 13 636 691 112
Fax. +86 10 66 411 962 Fax: + 86 21 57 688 076
bjoffice@fude.net.cn shoffice@fude.net.cn
SERVICES

In FUDE we offer answers to any scope related with China. Our value resides in a
team of multidisciplinary people both in Spain as in China (Beijing and Shanghai), to
think, act and move according to the philosophy our client but under the profound
knowledge of a market/country as special as the Chinese.

In FUDE we have developed specific programmes that offer integral services:

1. Integral Service of Internationalisation with China (siic). In order to carry

out the Project successfully FUDE has created siic, the integral service of
internationalization with China; an advance searching, analysis and decision
making system of companies, focusing on a process of integral
implementation in the Asian country.

The siic is the answer to the questions made by any organizations that is
planning to adventure in China. It is built up of three parts: analysis,
strategies and operability.

2. FQ+, a specialized service for industrial projects. FQ+ is the result of efforts
that FUDE has concentrated upon to offer the best solution in the process of
design management, commercialization, management, supervision and
control of industrial projects.

Our commitment in the development of the efficient industrial systems has

located us to find implementation tools in China through clients of all sectors.
FQ+ makes a management Project during all the industrial implantation with
the intervention, if necessary, of the productive process, processing
equipment, and auxiliary systems of installation, civil Works and the
assistance in the assembly and the beginning.

We offer integral solution “turnkey projects” to the industry. Because in

FUDE we can count on our own engineering.
OUR PHILOSOPHY

Our working philosophy is founded on:

THE SEARCH FOR EFFICIENCY

Get the best favourable opportunity and transform this opportunity into a unique and
profitable solution.

COMMITMENT
The reassurance of knowing that your advisor in China forms part of your team and is
fully committed with your Project.

CONFIDENCE
The best partner and interpreter, a marketing advisor who thinks, acts and develops
your project with total confidentiality.

RESPONSIBILITY
To know that the success of your projects is in our hands.

KNOWLEDGE
Experienced professionals who carry out personal research where your company
needs.
WHAT MAKES US DIFFERENT
The keys understand the differentiation that FUDE looks in everything that it does.

The EXPERIENCE of working in China for twenty years developing integral projects
(concept design + detailed project + construction) of manufactured, logistic and
expansion.

The SERVICE of and integral system of internalization from the beginning of the
project until its total integration in the Chinese market.

The GUARANTEE of knowing where are sleeping because we have already been
there; in FUDE we have been witnesses our own internationalization.

We are PEOPLE that work with people, that respect our clients, their initiatives and
we execute their projects with the same philosophy.
9. BIBLIOGRAPHY:

• China leather
• Encyclopaedia of Chinese footwear industry standards
• Leather goods material science
• China Leather Industry Yearbook
• China Leather Information
• Western Leather
• Leather Material Science
• Leather Analysis and Inspection
• Leather Shoes Design Science
• Sports Shoes Design Science
• China Leather Industry Information Web
• China Footwear Information Web
• China Light Industry Information Web
• China Science and Technology Department Web
• International Footwear Trading Web
• China Jinjiang Footwear Web
• Global Shoes Web
• Taiwan Shoes Information Web
10. APPENDIX

APPENDIX 1. QUALITY STANDARDS

APPENDIX 2. PATENTS APPLICATION PROCEDURE

APPENDIX 3. GOVERNMENT SUPPORT FOR INNOVATION INITIATIVES

 QUALITY STANDARDS

A.1 FOOTWEAR STANDARDS

INTERNATIONAL
NO. STANDARDS NAME CODE REMARK
CODE
A.1.1. GB/T 3293-2007
China'
s shoes types series
Stage for
comments
Leather shoes industry The revised
A.1.2. GB/T 2703-1981
Terminology standards known
as the "shoe
terminology"
GB/T 3293.1-
A.1.3. Shoes sizes ISO 9407-1991 IDT
1998
period for
A.1.4. Fabric shoes Categories GB/T 6677-1986
comments
Acceptance, logo, packaging,
A.1.5. transport and storage of QB/T 1187-1991
leather shoes
A.1.6. Footwear logo QB/T 2673- 2004

A.1.7. Footwear logo DB11/095-1998

Classification and code of
A.1.8. GA 240.40-2003
shoe prints
Classification and code of sole
A.1.9. GA 240.52-2003
patterns

A.1.10. Rubber shoes terminology HG/T 3083-1999

A.1.11. Shoe-making machinery and QB/T 1522-1992

equipment terminology
 B.1 THE METHOD OF FOOTWEAR STANDARD

NO. NAME CODE INTERNATIONAL REMARKS

B.1.1 GB/T 3294-1998

China'
s shoe types series
GB/T 3903.1-
B.1.2 Footwear General testing
1994
method
GB/T 3903.2-
B.1.3 Footwear General Naizhe
1994
testing method
GB/T 3903.3-
B.1.4 Footwear General Naizhe testing
1994
method
GB/T 3903.4-
B.1.5 Footwear General Naizhe testing
1994
method
GB/T 3903.5-
B.1.6 Footwear General Naizhe testing
1995
method
GB/T 3903.6-
B.1.7 Footwear General testing of anti-
2005
skid performance
GB/T 3903.7-
B.1.8 Footwear General testing ISO 20870 2001
2005
methods for Ageing conditioning
Footwear testing methods for GB/T 3903.8-
B.1.9 ISO 20866 2001
insoles-Delamination strength 2005
GB/T 3903.9-
B.1.10 ISO 20867 2001
Footwear bottom testing 2005
GB/T 3903.10-
B.1.11 Footwear bottom size testing ISO 22651 2002
2005
GB/T 3903.11-
B.1.12 Inner part testing ISO 22652 2002
2005
GB/T 3903.12-
B.1.13 Outer part testing ISO 20872 2001
2005
GB/T 3903.13-
B.1.14 Size stability testing ISO 20873 2001
2005
GB/T 3903.14-
B.1.15 Hard testing ISO 20874 2001
2005
B.1.16 GB/T 11413-2005
Footwear strength testing
B.1.17 GB/T 21284-2007
Footwear warming testing
B.1.18 GB/T 16641-1996
Water proof testing
B.1.19 QB/T 1812-1993
Footwear structure testing
B.1.20 QB/T 1813-2000 ISO 18896:2006
Side strength testing
B.1.21 Water proof testing QB/T 2225-1996 DIN 53338
 NO. NAME CODE INTERNATIONAL REMARKS

B.1.22 Shoelace wear-resistant test QB/T 2226-1996

method
B.1.23 Footwear marking specifications QB/T 2674-2004

B.1.24 Shoe laces testing methods QB/T 2675-2004

Footwear Heels testing method

B.1.25 for determining lateral impact QB/T 2863-2007 ISO 19953:2004, IDT
resistance
Footwear Heels testing method
B.1.26 for determining anti-fatigue QB/T 2864-2007 ISO 19956:2004, IDT
conditions
Footwear-Test methods for
B.1.27 uppers linings and insocks-Colour QB/T 2882-2007 ISO 17700:2004, IDT
fastness to rubbing
Footwear-Test methods for
B.1.28 uppers linings and insocks-Tear QB/T 2883-2007 ISO 17696:2004 IDT
strength
Footwear-Test methods for
B.1.29 QB/T 2884-2007 ISO 20871:2001 IDT
outsoles-Abrasion resistance

Footwear-Test methods for

B.1.30 QB/T 2885-2007 ISO 17707:2005 IDT
outsoles-Flex resistance
QB/T 2886-2007
Footwear-Test methods for whole
B.1.31 (GB/T 21396- ISO 17708:2004 IDT
shoe-Upper sole adhesion
2008)
Footwear-Test methods for whole
B.1.32 shoe-Washability in a domestic QB/T 2887-2007 ISO 19954:2003 IDT
washing machine

B.1.33 Fabric shoes testing FZ/T 80005-1999

1. NATIONAL STANDARDS CODES

NO. CODE CONTENT COMPETENT DEPT.

Standardization Administration of the People'

1 GB Mandatory National Standards
2 GB/T Voluntary National Standards
National Standardization
3 GB/Z
Guiding Technical Documents
s
Republic of China
Standardization Administration of the People'
s
Republic of China
Standardization Administration of the People'
s
Republic of China

2. PROFESSIONAL STANDARDS CODES

NO. CODE CONTENT COMPETENT DEPT.

1 BB Packaging
2 CB Ship
3 CH Surveying
4 CJ Urban construction
5 CY Press and publication
6 DA Archives
7 DB Earthquake
8 DL Power
9 DZ Geology mineral
10 EJ Nuclear industry
11 FZ Textiles
12 GA Public security
13 GY Radio, film & TV
14 HB Aviation
15 HG Chemical Industry
16 HJ Environmental Protection
17 HS Customs
18 HY Ocean
19 JB Machinery China Machinery Industry Federation
20 JC Building materials
21 JG Construction industry
22 JR Finance
23 JT Communication
24 JY Education
25 LB Tourism
26 LD Labor and labor safety
 NO. CODE CONTENT COMPETENT DEPT.
27 LY Forestry
28 MH Civil aviation
29 MT Coal
30 MZ Civil affairs
31 NY Agriculture
32 QB Light industry
33 QC Automobiles
34 QJ Space
35 QX Meteorology
36 SB Commerce
37 SC Water product
38 SH Petrol chemical industry
39 SJ Electronics
40 SL Water resources
41 SN Commodity inspection
42 SY Petroleum gas
43 SY(>10000) Oceanic petroleum gas
44 TB Railways transportation
45 TD Land administration
46 TY Sport
47 WB Goods
48 WH Culture
Civil products from arms
49 WJ
industry
50 WM Foreign trade
51 WS Hygiene
52 XB Rare earth
53 YB Ferrous metallurgy
54 YC Tobacco
55 YD Telecommunication
56 YS Non-ferrous metallurgy
57 YY Medicine State Drug Administration
58 YZ Posts

Note: The codes of mandatory standards are shown on the above table and the codes of
voluntary standards are added "/T" after mandatory codes. For example, a code of agricultural
voluntary standards is "NY/T".
 3. LOCAL STANDARDS CODES

NO. CODE CONTENT COMPETENT DEPT.

1 DB + * Mandatory local standards Province Level Bureau of Technical Supervision

2 DB + */T Voluntary local standards Province Level Bureau of Technical Supervision

Note: * represent Province code

4. ENTERPRISE STANDARDS CODES

NO. CODE CONTENT COMPETENT DEPT.

1 Q+* Enterprise standards Enterprise

Source Strike 2595 Renew time 2007-07-25 15:05:28.0

 APPENDIX 2
PATENTS APPLICATION PROCEDURE

PATENT APPLICATION PROCEDURE

11. INTRODUCTION OF PATENT APPLICATION

Applying patent can make the products get maximum protection. How well the
application is composed, directly influences the protection level.

A Technical Introduction Manual of the patent must be prepared; it must include at

least the following six parts:

• The invention names: simply reflect the technical contents of the inventions.

• Affiliated technical fields: in order to be easy to classify, the patent must manual
must include a brief of the technical fields and applying files of the invention.

• Technical background introduction: one or more contrastive documents that are

closely related with the invention in role, purpose and structure should be provided,
briefing its main structure, constitution or techniques, explaining through attached
drawing if necessary, pointing out the deficiencies objectively and the causes and
introducing the current technical level, disadvantages and deficiencies.

• Explanation of the technical content of the invention in details: it should clearly and
completely explain the invention, based on the realization of techniques, briefing the
technical content of invention, explaining in detail.

For the products, explain the parts, the dubiety, connection relations and action
principle. For the technical measures, explain the steps, how to operate in each step
and the action of the step. Compare the strong point of the invention with the current
techniques and products; explain the advantages of the invention combining the
technical content. For example, structure is simpler, process is convenient,
production efficiency is increased, yield coefficient is increased and environmental
pollution is decreased.

• Attach a diagram and explain it briefly – use a diagram to explain the description,
which can make people intuitively and visually understand the characteristics of
every single aspect and of the whole technical proposal; product’s shape and
structure must be clearly defined.
At least one sketch should be provided to comprehensively reflect the characteristics
of product’s structure. Cutaway diagram should be provided if necessary. But there
should be no character in the diagram. Each part should be assigned a number; the
same number must be used always. In general, there is no need to indicate
dimensions but its lines should be clear. Some patents could provide no diagrams.

• Affidavit of claim

12. MATERIALS NEEDED FOR THE PATENT APPLICATION

o Materials needed for applying for design patent.

• The documents that do not need patent introduction book and claims include:
application, two sets of attached drawings (photos or drawings), brief introduction
and priority documentary evidence (if priority is needed); among them, the
attached drawings include: front view, back view, vertical view, upward view, left
view and right view.

• Space diagram should also be provided; the dimension of the diagram should be
no more than (15× 22cm) and (3× 8cm).

o Materials needed to apply for patent of utility model

• The material that need to be provided: application, patent specification, affidavit of

claim, attached diagram, abstract and priority proof documents or PCT
documents (if priority is demanded).

o Materials needed to apply for invention patent.

• Application, patent specification, affidavit of claim, attached diagram, abstract,

CICC certificate (if needed) and priority proof documents or PCT documents (if
priority is demanded).

13. THE TIME NEEDED FOR APPLYING FOR PATENT.

B. The time it takes is of about 24 months, counting from the submitting date until
the approval’s date.
C. For applying for the patent of a utility model the sustentative examination process
is not required, so it only takes about 8 to 12 months.

D. When applying for a design patent it only takes 8 to 12 months.

E. Generally, getting a patent application appointment only takes 15 days.

 APPENDIX 3
GOVERNMENT SUPPORT FOR INNOVATION INITIATIVES

13.1. GOVERNMENT SUPPORT FOR INNOVATION INITIATIVES

BUSINESS TAX PREFERENTIAL POLICIES

1) Revenue is exempted from business tax is as follows: the units and individuals
(including foreign-invested enterprises, foreign-invested research and
development centers, foreign enterprises and foreign individuals) engaged in
technology transfer, technology development and related business technology
consulting, technology services business (Ministry of Finance, State
Administration of Taxation, taxation word [1999] 273).

2) Revenues of technology transfers of scientific research institutions remain

exempted from business tax, and revenue of technology transfers from colleges
and universities are exempted from business tax from May 1st, 1999 (Ministry of
Finance, State Administration of Taxation, taxation word [1999] 45).

3) Revenues of non-profit research institutions engaged in technology development,

technology transfer and related technical advice and services, are exempted from
business tax and enterprise income tax according to relevant provisions (the
State Administration of Taxation, the Ministry of Finance, taxation word [2001] No.
005).

4) Revenue of approved foreign institutions and Hong Kong and Macao, who are
engaged in technology development, technology transfer and associated
technical advice and services, can apply to the local competent tax authorities for
exemption from Business tax after getting confirmation of the provincial
management institutions.

5) Students are encouraged to run new technology business independently.

Revenue may be exempted from business tax, urban maintenance and
construction taxes.

6) Support the development of science and technology intermediary. Revenue may

be exempted from business tax, urban maintenance and construction taxes and
education additional fees relating to technical transfer, technical development,
technical advice and technical services after the technology contract is registered
in science and technology intermediary institutions.

7) Support the development of constitutions in scientific and technological start-up.

Revenue may be temporarily exempted from business tax, income tax, property
tax and urban land use tax since the confirmation date in national and local
 service centers of high-tech venture, University of Science and Technology Parks,
Software Park, and exchange students’ Innovation Park and other incubators.

8) Business tax should be levied from the income of the technical development to
the developer who is accepted by the commission of software development.

9) Strengthen social services of intellectual property rights. The fees can be

deducted when calculating the business tax to the intermediary service
organizations of social intellectual property engaged in intellectual property rights
that have paid fees in the trade permit collection.

13.1.1. INCOME TAX PREFERENTIAL POLICIES

1 Revenue of non-profit research institutions engaged in technology development,
technology transfer business and related technical advice and technical services are
exempted from business tax and enterprise income tax according to relevant
provisions (the State Administration of Taxation, the Ministry of Finance, taxation
word [2001] No. 005).

2 Revenue of scientific research units, colleges and universities in the service

industry in the transfer of technological achievements, technical training, technical
consulting, technology services, technical services contract are exempted from
corporate income tax (the governance of the State Administration of Taxation,
taxation word [1999] 45 ).

3 To encourage technology services. Revenue is exempted from corporate income

tax in the colleges and universities, research institutes and organizations engaged in
promoting agricultural technology and technological achievements transfer, technical
training, technical consulting, technology services, technical contracting and other
activities of the technical services after the technology contract registered.

4 Revenue is temporarily exempt from income tax in the enterprises and institutions
in the process of technology transfer related technical advice, technical services,
technical training with a net annual income below 300,000 RMB (The Ministry of
Finance State Tax Office, tax word [1994] 001).

5 The law approved establishment of foreign institutions including Hong Kong,

Macao and abroad and their right to apply at the tax bureau for the exemption of
corporate income tax when buying foreign patents, proprietary technology with
advanced technology and with favorable deal conditions.

6 Support the development of institutions engaged in scientific and technological

start-up. Revenue may be temporarily exempted from business tax, income tax,
property tax and urban land use tax since the confirmation date in national and local
service center of high-tech venture, University of Science and Technology Parks,
Software Park, and exchange students’ Innovation Park and other incubators.

7 Students are encouraged to run new technology business independently.

Revenue may be exempted from income tax for two years in science and technology
enterprises; technology intermediary advisory institutions founded by dropouts
(university students) are also included within this aspect.

8 Revenue can be exempted from income tax for the first year or the first two years
counting from the opening date, to the enterprises or business units which have a
totally new independent accounting and which are related to the consulting industry
(including technology, law, accounting, auditing, and tax consulting industry),
information industry and the technology services industry. (The State Administration
of Taxation, the Ministry of Finance, taxation word [1994] No. 001).

9 Social funds which donated to non-profit research institutions, colleges and

universities for technology research and development, are exempt of paying the
donator’s income tax range.

10 Revenue is exempted from corporate income tax for the first year and second
year, and levies half of the corporate income tax for the third and forth year to the
new confirmed software enterprises since the moment they start earning profits. (The
Ministry of Finance State Administration of Taxation, General Administration of
Customs, taxation [2006] 25).

11 To the key software enterprises under the state’s Overall Industrial Arrangement
Plan, if they did not enjoy duty-free concession, a 10 percent can be reduced from
corporate income tax. (The Ministry of Finance State Administration of Taxation,
General Administration of Customs, taxation [2000] 25).

12 To the enterprises whose single integrated circuit line’s width is less than
0.8m/set, revenue is exempted from corporate income tax for the first two years, and
is halved for the next three years the moment they start earning profits. (The State
Administration of Taxation, the Ministry of Finance and taxation [2006] 070).

15 The actual total wages of a software development enterprise should be deducted

from the amount in the calculation of taxable income. (The State Administration of
Taxation, [2000] 24).
 APPENDIX 1
QUALITY STANDARDS