Chinese currency appreciation and the meltdown of the US economy have influenced the Chinese textile exporters putting them into uncertainness. China has witnessed increasing costs during the recent past like Yuan appreciation, export tax rebates, and increasing labor and raw material costs. Many Chinese exporters expected to shift the increased costs to their buyers. But the financial turmoil in US is currently forcing them to compromise with lower prices in order to attract adequate orders and sustain themselves in the US market.

 

The China Syndrome:

 

After the 2008 Beijing Olympics successfully conducted in China, what should have been a triumphant year in its history actually turned out to be a period of factory shut downs, and decline in its textile exports. Instead of basking in the spotlight of its Olympic torch, China unleashed greater instability on global markets. Temporary quotas imposed by US ended up globally during 2005. China, being the worlds largest exporter of textile requested the EU and US to extend the quota till the end of 2008. Now as the end of 2008 is nearing, Chinese textile exporters are feeling pessimistic about the textile market in US in 2009, despite the fact that the year is quota free for exports to US. Textile industry in US is being squeezed by the economic predicaments caused by housing market debacle, credit crunch, and rising commodity prices. Hence they might oblige the Government to make proceedings to protect their interests. In this regards, the House Ways and Means Committee has formally requested the International Trade Commission (ITC) to provide information about the Chinese textile imports which will be helpful in framing new import quotas.

 

Some analysts believe that the Government has taken initiatives to stimulate the economy to tackle the financial turmoil, and that the consumer market is going to recover during the third quarter of this year. On the contrary, a few others state that, the recession will last upto the first half of the next year and may not have a recovery until the end of 2009.

 

Certain principles regulate the functioning of international treaties in US and EU. Textile industry in US may petition duties for Chinese exports if:

 

  • The concerned industry can show that its business is damaged for at least a quarter.
  • The affected industry is making the request.
  • A long and time consuming procedure is gone through in the petitioning process.
  • The industry filing the petition should prove that unfair practices have caused the damage.

 

US customers also feel the price hike in Chinese garments by 15 - 25%. Due to this, textile exports from China have been decreasing during the past 5 months. The increase of the Chinese Yuan by 18% against the US dollar was also supplementary to the decline in the export figures. This has made many Chinese textile exporters to seek for options in the markets of other countries including the EU and South America.

 

The US meltdown, and banks filing for bankruptcy has caused a drastic change in the financial landscape; globally. Textile businessmen; worldwide are still waiting with uncertainty, what the blizzard would bring into their business.

 

References:

 

1)      http://chinadaily.com.cn

2)      http://www.textileworld.com/

3)      http://www.sportstrader.co.za

4)      http://economictimes.indiatimes.com