Then there has been an inevitable damage caused by theappreciation of Yuan vis--vis dollar and other currencies. All these factorshad a negative impact on China's garment exports which set the ChineseGovernment really worried, forcing them to review its decision on mattersrelating to garment exports.

Almost as a U-turn, the Chinese Government has not only justrestored its full VAT rebates on clothing and textile exports, but it has goneto the extent of issuing a fiat freezing any more increases in minimum wages,suspended deposits on raw material imports and directed the State-ownedbusinesses not to fire staff and insisted unemployment benefit is used toretain staff while they are still at work. All this started showing results,which, however, left much to be desired. For example, Chinese garments exportsdeclined in the month of October 2008 by over 2%; though its exports to the US increased. Further, its vast domestic market still managed to expand by 20%, which ishowever less than 30% growth, which it registered for several months in thepast.

Will China be able to bounce back?

For this, we need to take a hard look at the competitionthat China faces in this fast changing, dynamic world of international garmenttrade. Though there are several countries in the run and in competition with China like India, Pakistan, Sri Lanka, Bangladesh, Turkey, Vietnam and Cambodia, but of these, themore potential rivals are essentially Bangladesh, Turkey, Cambodia and Vietnam.

First, the Bangladesh which is so flushed with orders thatits knitwear exports had not only grown at an extraordinary 45% on year-on-yearbasis from July to September, but also a number of its largest businessespractically turned customers away. Thus, Bangladesh should constitute a genuinethreat for China's unchallenged supremacy.

Turkey's performance in exports was unenviable, some time back. Reportedly, anumber of Turkish factories had been closed and half of the clothing andtextile workforce in South eastern city of Adiyaman had been laid off this yearwith the closure of 50% factories located in the area. However, Jak Eskinazi,President of Aegean Garment Exporters' Union (EHKIB) said that orders from Europe have started coming in, in larger number in October. He anticipates that exportorders from Europe would keep on flowing in, as the European retailers affectedby the financial crisis have stopped buying in big quantities and are shiftingorders from China to Turkey. While Turkish garment exports will get good ordersfrom Europe; things may not be very different in case of the US, too.

In so far as Cambodia is concerned, it has so far remainedsomewhat immune from the financial crisis looming large over the world. ItsPrime Minister, Hun Sen said only last month, "Cambodia's garment sectorwill not be seriously impacted by the global financial crisis. I think thatthere has been no serious impact on the garment sector." But this needs tobe juxta-positioned with the fact, as brought out by one union leader whoadmitted that 35 garment factories have been closed down in Cambodia this yearand these closures were caused by the pullout of some investors, who have movedon to avoid legal conflicts over labour issues with the workers. The pointwhich seemed to be made out by the said union leader was the closure offactories had nothing to do with the collapse of orders, both domestic andexport. Granting that there could be some cases where some factories have been closeddown, but it is also a fact that the Cambodian exports have not suffered anyserious adverse impact. Thus Cambodia continues to be a potential rival to China, which is surrounded by a number of adverse factors.

Perhaps, the most potential competitor is Vietnam, whose exports to the US increased by a mighty 21.9% between January-September this year, up from $3.3bn. to $4.08 bn. This performance is only next best to China and today Vietnam is credited with being the second largest garment exporter to the US, next only to China.

The Chinese Strength

The status of China, which was known as Workhorse or Manufacturing Workshop of the world stands diluted to quite an extent, for a number of reasons as already referred to above followed by what corrective measures have been taken by the Chinese Government to help garment export industry retrieve its earlier position.

Having said that, I find, on balance, that Chinese garment exports have not faired badly nor are likely to fare badly though its cutting edge in pricing has certainly been blunted. One proof of the same lies in the fact that while Americans are importing lesser number of garments this year, as compared to last or even earlier years, import of Chinese garments has only increased. This underscores the vitality and viability of Chinese garment imports in to the US. Yet it is also a fact that Chinese exports of garments in the world garment exports, has declined. This should be attributed to two reasons: First, there has been a perceptible decline in demand in foreign countries and second, China's cost has risen, admitted by 2.6% this year alone.

If Chinese garment manufacturers are trying to save on labour costs by moving to the interior of the country, where labour costs are lower, they have to pay more for transportation of their cargoes to the ports which are now more distant than before. Further, the cost of logistics would have also gone up. How much? Nobody seems to have worked out that way; and probably, it is too early to do so. Nonetheless, it would be safe to say that not much savings can be brought about by just relocation of manufacturing units in the interior as is being made out sometimes.

While piling up sops by redrawing the incentive schedule for garment exports would certainly have given some of much needed succour to Chinese exporters, but then, one should not forget that the American cap on quota of Chinese apparel still is in place and in all probably, would continue to be so, even if its format may undergo a change. Even the American demand for garments is more likely to come down, rather sharply, as the now-admitted recession is known to have just started. It rigour and intensity is likely to increase, notwithstanding the help that the US Administration is willing to extend. This cannot but impact the US demand for apparel too.

What will massive, even colossal, manufacturing infrastructure that China had created to meet the hypothetical astronomical world demand, do? The production has to be tampered down, which would in any case, increase the overhead costs, both in absolute and relative terms. What would happen to the repayment of large amounts of loans taken by Chinese manufacturers to set up these world class and world-scale facilities that have been set up? The fact of the matter is that the odds are heavily loaded against China.

On the other hand, the smaller, upcoming and developing countries with the clear advantage of lower labour costs and the availability of benign special concessions in terms of import duties available to them from the Western countries, would certainly steal a march on Chinese exports of garments and textiles.

Originally published in "The Stitch Times": December, 2008