Apparel firms in China's Guangdong face tough time

26 Dec '12

2 min read

Guangdong province, considered to be the first garment production province in China, is witnessing a sharp downturn in apparel production this year.

Rising labour costs, rising costs of raw material, lack of orders and difficulty in recruiting workers are among the problems that affected Guangdong garment enterprises during the first half of the current year, according to a recent survey.

Due to the impact of multiple factors, the average profit margin of apparel sector SMEs processing lower-end products in Guangdong has declined to about 3 percent, according to the estimates of the China National Garment Association. The dip in profit becomes more evident in case of companies executing garment orders from emerging countries.

Moreover, the garment enterprises in the province are facing huge inventory problem, to the extent that these firms would be ruined if they sell their stocks at reduced prices.

In addition to rising labour costs, which are increasing by about 20 percent per annum, clothing enterprises in Guangdong are finding it more and more difficult to recruit workers, as garment industry is currently shifting to central and western regions of the country.

According to a study, several Guangdong companies have either cut or stopped their production this year. Nearly two-thirds of apparel firms have significantly reduced their production compared to the corresponding period of last year.

The decline in production is mainly due to labour shortage and a dip in orders. At present, the average operating rate of garment enterprises in Guangdong is around 75 percent, and nearly 20 percent of the firms are operating at below 50 percent of their capacities.

Fibre2fashion News Desk - China

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