Untapped potential of rural markets succor for T&G sector

July 04, 2009 - China

Under the impact of shrinking global demand, more than 10,000 textile and garment enterprises closed down in the first half of last year in China, with a vast majority of them, being unlicensed or doing job work for foreign brands.

Even if these enterprises shift to domestic market, which has not seen a big slowdown, they would face barriers like not having a brand name along with not having domestic sales experience and proper distribution channels.

In addition, despite low labor costs providing competitive advantage to China's export products, with the rise of textile and garment industries of neighboring countries in Asia, China’s edge has been gradually weakened.

Particularly in recent years, pressures from rising costs, such as raw materials, labor and other costs, as well as the appreciation of the Renminbi, have squeezed profitability and they have weakened competitive edge of exports from the sector.

China’s domestic demand for textiles and apparel continues to grow, due to support from increasing disposable income, continued growth in urbanization and population, though consumer preferences differ from those in western countries.

Judging from clothing consumption, even though China's per capita fiber consumption has increased from 7.5 kgs in 2000 to around 15 kgs now, there is still a big gap compared to 30 to 40 kgs per capita in developed countries.

With an increasing level of disposable incomes and a growth in number of new homes consumption of home textiles has touched 10-15 kgs on an average, which is a welcome sign for manufacturers of home furnishings.

In, China's vast rural areas, current consumption of textiles is still low, which means that there is still a huge domestic market and potential space for China's distressed textiles and garment export industry to diversify in to local markets.