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Chinese textile sector to undergo significant change
Jan '11
Beijing Orient Agribusiness Consultant Ltd (BOABC) predicts that 2011 pattern of domestic textile industry will be significantly changed; some enterprises with insufficient financial viability will face possibility of closure.

Cotton production of this year is essentially flat with 2009, not showing a serious decline, but weak demand of textile enterprises in 2011 will likely lead to overstock of cotton, but downward trend of cotton prices will be limited under the pressure of global inflation and textile enterprises will continue to face cost pressures.

According to preliminary estimates, output value of China's textile enterprises (above designated size) will exceed 4 trillion Yuan in 2010, export value will be more than US $200 and profits are expected to exceed 2,00 billion Yuan, an increase of 40 percent year on year.

Textile enterprises achieved considerable high profits in 2010, but 2011 will be a year for Chinese textile enterprises to face a severe test.

First, raw material prices increased, global cotton area and production shrunk year by year, resulting in tight supply. Meanwhile, excessive liquidity in US pushed up futures value of cotton and other commodities, raw material costs of textiles had increased by about 30 percent over the previous year, of which, costs of raw materials such as cotton had been more than doubled, the increase hitting a new high in 15 years.

Second, labor costs increased, labor remuneration of textile industry has increased by 10 percent in general this year; wage increase of the Yangtze River Delta, Pearl River Delta and other places is up to 20 percent.

In 2009, average wage of China's manufacturing was 56,000 Yuan, while average wage of textile industry was 31,000 Yuan, resulting in one-way transfer of labor, the era of low-cost competitiveness as a core is close to an end.

Third, increased power consumption will make further demands on energy supply, since textiles is one of the biggest consumers of electricity, which is already in short supply currently.

Fibre2fashion News Desk - China

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