Textile exporters feel the pinch

Shrinking profit margins, rising labor cost cloud industry prospects

BEIJING - Textile exports may witness a lower growth in the second-half of the year as rising production and labor costs will hurt margins, said industry experts.

"Compared with the first seven months, the increase in garment exports will be much lower for the remaining months due to shrinking margins," said Zhang Xi'an, secretary-general of China Chamber of Commerce for Import & Export of Textiles (CCCT).

According to Zhang, the yuan appreciation and increased raw material and labor costs have contributed to an increase in costs for textile exporters.

Raw material prices, especially of cotton, have been increasing in the last few months. According to the Ministry of Agriculture, in July, the cotton price was $2,159 per ton, 51 percent higher than that of the same period last year.

Li Luan, deputy director of the commercial bureau in Baoding city, Hebei province, said the biggest problem for the textile industry is employees shortage, which has led to an increase in recruitment costs.

"Most of the exporters could not undertake all the orders they received, as international export prices have not rebounded enough to offset the rising production costs," said Zhang.

The overall textiles volume hit an all-time high during the first half of this year, higher than the levels seen before the financial crisis.

Data released by China's Customs in August shows that the nation exported $109.67 billion of textile goods and garments in the first seven months of this year, up 23 percent over the same period last year.

"Textile exports this year are expected to increase by 20 percent to $186 billion," said Zhang of CCCT. He attributed the high growth in textiles exports during the first half to the robust sentiment prevailing before the financial crisis.

Prior to the financial crisis, China's textiles exports saw continuous growth and reached a record high of $185.2 billion in 2008. But, affected by the global economic recession, textile exports fell 9.8 percent to $167 billion last year.

Garment exports reached $66.83 billion in the first seven months, up 17.4 percent from the same period last year, and that of textiles goods grew 32.8 percent to $42.84 billion, according to the Customs.

At present, China's garment products are mainly exported to Europe, the United States and Japan, which account for 70 percent of garment exports. Meanwhile, textiles including raw materials and semi-finished products are mostly exported to Southeast Asian countries like Vietnam, Cambodia and Bangladesh.

"Increased exports of raw materials to countries with cheaper labor costs will accelerate the transition of China's textile industry from a labor-intensive to a value-added one," said Zhang.

China Daily

(China Daily 09/13/2010)