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Small garment factories in coastal areas face closure
Aug '11
Small garment factories, especially in the coastal areas of China, are facing a closure and according to a report, around 30 percent of these units are likely to close this year.

Cost pressures and transfer of orders to other countries are among the factors that are likely to cause the collapse of small garment manufacturing units located in coastal areas, according to the report.

Soaring raw material prices and the hike in wage rates are among the reasons that have led to an increase in production costs. The price of cotton rose to more than 34,000 Yuan/ton in March 2011 from 14,873 Yuan/ton at the end of December 2009. The price has dropped in last few months, but it is still high compared to 2009.

For export-oriented garment companies, the rise in the cost of raw material means the company has to spend more money for buying the same amount of raw material as earlier, or in other words, the firm would need to pour in additional amount of money to procure the same amount of raw material.

The hike in wages is also affecting the cost of production. Wages of general workers have touched 2,200-2,300 Yuan/month this year, in view of the annual increase rate at 20 percent of the minimum wage.

Even after giving the present wage rates, factories are finding it difficult to recruit new workers and the number of workers have declined by 10 percent since last year, which in turn, leads to a drop in production.

Owing to the increase in costs, several export orders from foreign countries get transferred to other countries where comparatively cost of production is less. These include Bangladesh, Vietnam, and other Southeast Asian countries. Chinese enterprises thus end up losing orders. Since small units are especially vulnerable, they are facing closure.

Fibre2fashion News Desk - China

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