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Cost pressures impacting Chinese apparel sector
Jun '11
With rising cost pressures in China, a trend has started, which is veering major international clothing brands, towards other countries.

Global brands, like Zara, H&M and Charming have begun shifting their orders to low-cost countries like Cambodia, Bangladesh, Indonesia, Pakistan and others. Orders in large quantities have now started moving towards these countries.

A few exporters say that, as suppliers keep changing prices on a daily basis, due to frequent changes in raw material prices, it is not possible for them to do business with overseas customers.

While others aver that, since raw material prices can be held for just 10 days, it is not possible for them to service their global clients who insist on long-term orders.

For many companies, the fluctuations in prices have now become routine. The volatility in cotton prices has led to a fluctuation in prices of cotton fabrics.

For instance, the price of a particular fabric which stood at 11.5 Yuan / meter towards the end of 2010; rose 2 Yuan / meter in early 2011. A few varieties of fabrics have risen by as much as 5-20 percent in just one quarter, which has made it difficult for businesses to adjust to these frequent price changes.

Salaries of workers too are increasing steadily, due to a gradual rise in living standards. Many provinces and autonomous areas have already hiked or plan to raise their minimum wages in the current year.

A few provinces like Guangdong, Zhejiang and Jiangsu have already increased their wages by 10 percent, while a few have hiked it by over 20 percent. The direct impact of this has resulted in a higher production cost.

In other competitor countries like Pakistan and Vietnam, wages are only one-third of those prevailing in China in the textile and clothing sector, which makes them a cheaper alternative compared to China.

Bangladesh has now risen to third place after China and Turkey in global exports of garments, according to a report of World Trade Organization.

Fibre2fashion News Desk - China

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