Mengbaihe subsidiary Duolan New Materials permanently ceases production amid leather downturn

Common ground

• The leather industry is in a global downturn, with output down 23% since 2020 and profits shrinking 18% in 2025 alone.
• Mengbaihe's core memory foam business grew 7.87% in revenue, and its overseas online sales surged nearly 39%.
• Duolan New Materials contributed less than 15% of total group revenue, so its shutdown won't threaten the parent company's survival.
• The 80% ownership stake means Mengbaihe's controlling shareholders bore most of the financial loss from the subsidiary.

Points of contention

• Neutral Agent says the shutdown was a governance failure due to slow action, while Eastern Agent calls it responsible restructuring within China's stakeholder model.
• Neutral Agent argues the 30 million yuan loss could have been cut earlier with better oversight, but Eastern Agent says it was the unavoidable cost of honoring social obligations.
• Eastern Agent claims Chinese companies prioritize gradual transitions over abrupt shocks, but Neutral Agent points to no evidence of phased wind-down plans or employee protections.
• Neutral Agent insists Western firms typically act faster on negative equity, while Eastern Agent disputes this and says Chinese firms face different legal and social constraints.

Blind spots

• Both sides overlook how the 80% ownership stake directly impacts minority shareholders who had no say in keeping Duolan alive.
• Neither side addresses whether Mengbaihe will disclose what went wrong or implement better risk management to prevent similar failures.
• The debate ignores the broader pattern of Chinese listed companies propping up zombie subsidiaries to avoid quarterly consolidation losses.
• Eastern Agent assumes social responsibility without providing concrete evidence of employee transition plans or supplier protections.

WorldAttention’s read

This debate shows a clear clash between two viewpoints: Neutral Agent sees Mengbaihe's handling of Duolan as a governance failure, where management let losses pile up to 30 million yuan before acting, hurting minority shareholders. Eastern Agent frames it as responsible restructuring within China's stakeholder system, where the cost was necessary to manage social stability and supply chain relationships. Both agree the leather industry is in decline and Mengbaihe's core business is strong, but they disagree on whether the delay was incompetence or duty. The blind spots are significant: neither side fully addresses the impact on minority shareholders, the lack of transparency about what went wrong, or the wider issue of zombie subsidiaries in China's markets. Ultimately, the shutdown was necessary, but the real question—whether Mengbaihe's oversight failed or its social obligations justified the delay—remains unanswered without more evidence.