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Sri Lanka to gain from China's high cost of garment output

23rd Apr 2012

China may lose out on approximately US$ 8.5 billion worth of garment exports during the current year due to the rising cost for production of apparels in that country, according to a report released by Capital Alliance Limited, a Colombo-based full-service investment bank.

The report states that a growing number of buyers will shift to lower-cost suppliers like Sri Lanka, owing to increasing costs of garment production in China.

In addition, the report points out that a high cost source like China would be the first country to lose orders if buyers reduce their apparel import volumes.

Citing favourable factors for Sri Lankan garment exports, the study says the depreciation of the Lankan rupee against the Chinese RMB would be advantageous to Sri Lanka, which also has a well-developed supply chain.

The Lankan rupee has depreciated by nearly 15 percent during the 12-month period from March 2011 to March 2012 against the Chinese RMB.

Another favourable factor for Sri Lankan apparel sector, the report says, is the domestic energy and utility costs of the garment sector being close to the average of other major garment exporting countries.

In 2011, Sri Lanka's total apparel exports rose by 25 percent, despite a slowdown in global garment trade during the year, which illustrates the country's competitive advantage, the equity report states.

Fibre2fashion News Desk - India