China's garment industry faces myriad of problems

16 Jan '14

2 min read

The garment industry in China is facing myriad of problems and it has reached a critical moment where transformation, upgrading and brand building has become necessary for its sustainability in future.

In 2013, China’s apparel industry faced problems from overstock, shrinking demand, and decrease in profitability. In fact, the main business income, gross profit and gross tax increment speed of China’s domestic apparel industry has slowed by varying degrees, according to a joint study conducted by the Economic Daily and the Economic Monitoring Centre of the National Bureau of Statistics.

According to industry analysts, a major problem facing the Chinese garment industry is the serious backlog of inventory, which is estimated to be about two times the total sales in a year. In other words, even if apparel firms do not produce for the next two years, they would have enough stock to sell for the period.

Looking at the current scenario, several garment enterprises have opted to give discounts, and are selling online at lower rates, in order to lessen stocks and divert the funds for accelerating upgradation.

However, selling online at lower rates is also having its own drawbacks as consumers are switching from buying at stores to online buying. It is also causing some damage to brand value.

In the past, the Chinese garment industry relied heavily on earnings from exports, but now the export orders are decreasing. The report on first three quarters (2013) performance of China’s textile industry released by the Ministry of Industry and Information Technology (MIIT) showed that the demand for Chinese clothing fell in the EU and Japan.

On the other hand, the performance of Chinese garment enterprises in the domestic market is also not good, and apparel retail sales decreased by 2.9 percent year-on-year in the first half of 2013.

In addition, rising domestic labour costs, shop rents, raw material costs, and the strong impact of international apparel brands have together affected the sustainability of Chinese garment enterprises.

Hence, Chinese apparel industry will have to readjust its industrial structure to survive in future by actively cultivating brand growth, and moving from a manufacturing power to intellectual power.

Fibre2fashion News Desk - India

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