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Clothing exporters losing their price competitiveness

03
Sep '08
A research report released recently, shows that, since the first half of this year, average unit price of U.S. apparel imports from China was only around 11 percent lower than imports from other countries and in some restricted clothing items, quotes of Chinese exporters were 100 percent higher than other countries and for items such as men's cotton knit shirts, the price of U.S imports from China was 105 percent higher than that from other countries.

The industry believes that China is losing its low-cost competitive advantage. After three years of exchange rate reform, total export cost (in U.S. dollar terms) of China's textile and garment industry has increased by about 60.89 percent while at the same time corporate profits are shrinking.

This situation has turned in to a dilemma for some companies in accepting orders in the first half of this year as in most of the orders they could generate marginal profits, but however if they were to refuse accepting the order, they would end up loosing their market share.

Costs have increased manifold in the last six months, but average export prices have risen by a mere 2.77 percent in the first seven months of the year. In the first seven months of this year, textile exports grew substantially by 22.62 percent while clothing was hit the hardest as exports increased by only 1.45 percent.

In recent years, general price increase in products of textile exports has basically maintained an average trend of just about 2 percent. However prices of clothing exports has averagely increased by about 10 percent every year since 2005, which has doubtlessly created enormous impact on garment export competitiveness.

The growth in export prices of garments has slowed down from 12.47 percent in the first quarter of this year to 4.02 percent in the period January to July, while drop in export volumes grew from 0.10 percent in the first quarter to 2.47 percent in the first seven months.

In addition, export prices from neighboring countries like India, Pakistan and Vietnam are much lower than China resulting in loss of orders from their long time traditional buyer countries.

Textile equipment imports have sustained and depicted a growth trend for years, but first indications of a fall came in the first half of this year. Data released from customs indicates that imports of textile equipment registered US $440 million in the first half of the current year, substantially down 16.8 percent from the same time last year, of which import volume of industrial sewing machines declined sharply by 48.7 percent.

Fibre2fashion News Desk - China


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