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China struggling to check apparel business outflow
May '12
Rising production costs and stringent environmental compliance norms is impacting the competitiveness of Chinese textile and apparel producers, who are losing export orders to their counterparts in other emerging countries, Wang Shouwen, Director of the Department of Foreign Trade at the Ministry of Commerce, said.

The country's textile and apparel exports to traditional markets like EU, US and Japan grew rapidly prior to 2010. However, the industry witnessed a sluggish growth in exports during initial four months of the current year, as it lost around 20 percent of its orders to emerging countries like India and Vietnam.

While China's textile and apparel exports to Japan increased by just seven percent during the period, Japan's imports from other emerging countries soared by over 40 percent.

These factors have persuaded the Chinese Government to consider introducing supportive measures like tax rebates and low transportation charges for textile and clothing firms.

Foreign apparel buyers now prefer procuring cloth or lining from China, but get the apparel produced in Vietnam, which offers labour cost advantage of at least five percent, and also because, exports from Vietnam to the US are duty-free.

Moreover, the 'China plus one' strategy embraced by several overseas buyers is also taking away orders from Chinese exporters. Until a few years ago, China used to be a key procurement source for overseas buyers, but now most of the buyers have identified at least one alternative source in emerging countries to offset rising costs in China.

Moved by the trying export situation, the Ministry of Commerce urged the owners of firms that produce goods meant for exports to shift to the Central and Western regions and upgrade their industries in the coastal cities by raising investment in research and development on side of value addition, Mr. Shouwen said.

He said high transportation and logistics costs prevent the coastal exporters from shifting their production bases to Central and Western regions, which contributed 9.9 percent of China's trade in 2010.

Mr. Shouwen suggested that export orders can be retained if the garment firms can manage to combine the benefit of well-developed industrial chains in the east and low land and labour costs in the Central and Western regions of the country.

Fibre2fashion News Desk - China

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