Chinese leather manufacturers are using lower raw material costs to offset tightened lending and business losses, according to a top industry official in Hong Kong.

Wong King Hang, the president of Hong Kong Hide & Leather Traders' Association, said that its industry had managed to stay firm despite the impact of the current "financial tsunami".

He said: "The dramatic price drop on raw materials in the leather industry led to a substantial charge-off in inventory value last year.

He said companies in this situation can replenish raw materials at low cost, and then resell items cheaply to maintain their competitive edge.

Wong added: "The Chinese government has launched a policy to help SMEs to boost domestic consumer demand, and to provide new directions and new challenges to the leather goods industry.

"We noticed that the execution of some stringent rules on operating requirements had been relaxed and accommodating.

"The industry players may now temporarily breathe a sigh of relief. They will be well equipped to cope with the current changes."

By Joe Ayling, news editor.