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Exchange rate – Most risky export variable in 2010
Mar '10
Demand for Chinese textile and apparel products from oversea markets has picked up since October 2009, but according to experts, the demand was mainly due to refilling of inventories by retailers.

Most enterprises were of the opinion that, in the first two months of 2010, exports have significantly improved from a year ago. January export value of textiles increased over 20 percent year on year, of which, the increase of orders to the US was most obvious, while those to Europe and Japan was moderate.

The pace of orders received by large enterprises was faster, as they have a competitive edge due to economies of scale, better advantages, high level of research and development and also they have more abilities to resist risks than smaller companies.

Although demand has warmed up, pressures on business costs have also quietly increased. Textile firms feel that, the expected appreciation of the Yuan could become the biggest variable for exports, this year, however, the pressures of rising costs in labor, raw materials and energy cannot be ignored, either.

At present, China's textile and garment exports are still mainly based on low-end products. International competitiveness is mainly derived from low cost advantages. However, labor costs in coastal areas are rising; due to which enterprises can only achieve 2-3 percent net profits through various measures.

Therefore, innovation, transformation and quality improvement have become inevitable choices for the textile industry. Some enterprises have attracted orders by product innovation and product differentiation. Meanwhile, many textile enterprises have already made preparation to control exchange rate risks in advance.

Fibre2fashion News Desk - China

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