Sunset of low-cost era in Chinese textile sector

28 Jun '10

2 min read

Although Chinese May import and export data are more optimistic than expected, it is still full of worries as China's foreign trade enterprises still face pressures of high costs.

Negative factors, such as rising labor costs, increase of RMB real exchange rate, gains of commodity prices, have brought pressures on corporate profit margins.

At the same time, the change of growth pattern in foreign trade also faces the thrust of a passive adjustment.

Pay increase is good for Chinese economy; everyone can share the ultimate goal of economic growth.

But on the other hand, in the current economic situation, enterprises in foreign trade will undoubtedly increase costs, which will generate impact on growth of exports.

In addition to labor costs, land, water, resources, energy input costs are also increasing. Moreover, China is facing pressure of RMB appreciation.

Expert analysis points out that, high costs will create pressure on margins of enterprises in foreign trade.

Manufacturers will find it difficult to pass increased costs out to overseas markets, therefore, China's foreign trade has to bid farewell to "low-cost era."

The growth pattern of low wage costs, high consumption and high emission relied on by China's manufacturing since a long time will be unsustainable.

Rising costs and RMB appreciation will reduce profits of export enterprises and while uncompetitive enterprises will quit the market, those that have upgraded will be able to survive.

Fibre2fashion News Desk