Chinese T&C export growth difficult to sustain – Experts

19 Jul '10

2 min read

China's textile and garment exports amounted to US $18.665 billion in June, up 33.83 percent year on year, of which textile exports rose 44.43 percent year on year and clothing exports grew 28.07 percent year on year.

Exports from the sector rose by 22.09 percent in the first half again of which textiles augmented by 32.36 percent year on year and clothing ascended by 16.07 percent year on year.

Despite the fact that June exports have risen and also have achieved highs attained in the first half of 2008, most industrial experts are of the opinion that sustainability of the industry is not strong.

First, the likely appreciation of the RMB will definitely affect the margins of the sector and if it appreciates by more than 4-5 percent, many factories will have to close down operations as they will be running in to losses.

Second, the continuing rise of raw material prices and labor costs has also squeezed profitability of exporters, due to which low-cost advantage of Chinese market has been reduced. Signs are visible that, textiles orders are gradually transferring to Southeast Asian countries.

Third, although the US unemployment rate fell to 9.5 percent in June, the lowest since August 2009, it still has a great distance away from normal levels, which also raises concerns about sustaining the export growth rate.

Fourth, unemployment rate in the European Union in the month of May increased by 10 percent under the influence of debt crisis, the highest level in history and unemployment rate in the same month in Japan, rose for third consecutive month to 5.2 percent.

Therefore, they opine that, demand revival in developed countries is extremely fragile and do not rule out the possibility of a decline once again in the second half.

Fibre2fashion News Desk