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Chinese apparel units indecisive about relocating

08
May '12
Considering that costs are increasing relentlessly, textile and apparel enterprises have the option of either relocating to Midwest China or neighbouring Cambodia and Vietnam.

A survey conducted by China Federation of Textile Industry reveals that employment costs of the textile industry have risen 12.6 percent since 2011 and overall costs have increased by 10.8 percent, while profit margin has declined 2.5 percentage points.

The difficulties currently encountered by the textile industry are more serious than the ones they encountered in the 2008 international financial crisis.

Some enterprises have even stopped production in some segments due to business difficulties, especially processing enterprises are under more difficult circumstances.

To reduce labor costs, China's textile enterprises have two options to relocate factories. One is the Midwest of China, the other is Cambodia.

However, some companies say though labor costs of the Midwest is indeed less than two-thirds of that in Zhejiang, but labor costs in Midwest are still more than double from Cambodia.

In addition, transport costs of their exports would be higher, if they move to the Midwest.

Countries like Cambodia and Bangladesh have least developed country (LDC) status, so their textile exports to the European Union, Canada and Japan enjoy duty-free measures.

Cambodia maintains good relations with China, so investment risk is relatively small. They also consider Vietnam also as a good place for relocation, but labor force is relatively scarce in Vietnam.

Some companies are still indecisive, despite temptation of low-cost. They say labor productivity is low in Cambodia and Vietnam and workers strikes are a common phenomenon. So, they have to take these risks into account.

Fibre2fashion News Desk - China


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