Growth of China's textiles and garment exports in the international market is experiencing a downwardsslopping trend. Textile exports surged 82.2% in March, as global retailersrebuilt their stocks. This is attributed to a combination of increase in laborcosts, Chinese currency appreciation, and export rebate cut. The global crisis,which is slashing the economies of even the developed nations, has furtherworsened the problem.


Poor demand in theinternational market:


External demand in China is witnessing a downturn. Due to the economic crisis, unemployment rate in countrieslike US, and Europe are increasing. This affects their amount of disposableincome, thereby forcing them to curtail their expenses, especially in garments.The change in the spending spree of the consumers has infected the Chineseexports for textile and apparels.


To survive the global turmoil, China's export tax rate for textiles and apparel was increased from 15 to 16% from April. Despitethe fact that China's export tax rebate for textiles and apparels have beenincreased four times since the previous year to ease the pressures on exportenterprises, the figures still keep declining. A recent survey reveals that, morethan 50% of the Chinese export oriented apparel manufacturers have experienceda drastic decline in the export orders. The orders have decreased byapproximately 30% as compared with the figures of the corresponding periodduring the previous year.


Rapid increase in costs:


During the past years, cost oflabor and raw materials has rapidly increased in China. Raw material costs haveincreased by 10 to 20%, and labor costs have increased by 30%. One percent ofRMB appreciation will cause a decline in 2 to 6% in the profit margin oftextile and apparel industry. During the previous year, appreciation of Chinesecurrency over the US dollar was 6.8%, and RMB appreciation against the Euro was11%.


Deteriorating Trade Environment:


Europe and US have imposednumerous trade protection measures against the import of Chinese textiles andapparels. In a letter sent to the National Council of Textile Organizations, PresidentObama has assured to impose a programme to monitor the textile, and apparelimports from China. He has expressed his intention to introduce a fair tradingsystem regarding foreign exchange practices. He had promised to imposeemergency restrictions against the import surge of Chinese goods. Due to theprotection measures imposed by other countries with a view to protect their owneconomy, export trading environment in China is weakening.


Decline in the development ofindependent brands:


After a surge in the exportfigures, the attention of the Chinese manufacturers turned towards the domesticmarket. But these manufacturers did not have any specific brands, anddistribution channels. Neither did they have any market experience is handlingthe domestic market. These barriers have increased the pressures on thesurvival of the enterprises.


The declining trend in the exportmarket proves an evidence for a grave trade slump which might result in factoryclosures, and layoffs. 30% of the country's textile market is dependent onexports. If the economic problems get worsened, it may lead to social unrest.


References:


  1. &sec=article&uinfo=<%=server.URLEncode(1898)%>" target="_blank">http://www.ccfgroup.com/
  2. &sec=article&uinfo=<%=server.URLEncode(1898)%>" target="_blank">http://www.chinadaily.com.cn/
  3. &sec=article&uinfo=<%=server.URLEncode(1898)%>" target="_blank">http://news.bbc.co.uk/
  4. &sec=article&uinfo=<%=server.URLEncode(1898)%>" target="_blank">http://www.china.org.cn