CHINESE textile firms are facing their most difficult year in 2008, with the appreciating yuan, rising raw material costs and shrinking European and U.S. markets hit by the subprime credit crisis.
China exported US$16.44 billion of textile and apparel products in the first two months of 2008, a growth of 5.7 percent over the same period a year earlier. Guangdong Province, the largest textile products export base in the country, exported US$3.52 billion in that period, an unprecedented 11.3 percent fall, according to Guangzhou customs.
Many of the province’s textile firms have been forced to move from their labor-intensive model to an innovative, environmentally friendly model and even move their production bases to inland provinces to cut costs.
“It takes half a year from receiving the order to delivering the goods. The yuan appreciation in the period has consumed much of the profits,” said Cai Minqiang, board chairman of Chaozhou-based Guangdong Famory (Group) Co. Ltd., the nation’s largest wedding dress producer. “The cost of foreign exchange trading has been raised 20 to 25 percent since 2007 due to the continuous rise in the yuan valuation.”
Labor costs have also increased remarkably. The average monthly salary of textile workers in Xiqiao Township of Foshan City, a major textile production base, is now between 1,600 yuan (US$228) and 1,700 yuan, a 20 percent rise year on year, said an executive with Guangzhou Huanya Garment Co. Ltd.
The skyrocketing prices of oil and raw materials create another headache. “The price of wool has increased 20 to 30 percent and the coal used in the ironing process increased from 350 yuan to 680 yuan a ton in 2007,” said Chen Huiyong, a leading executive with Moonlight Fashion Co. Ltd. based in Dongguan City of Guangdong.
Stricter environmental protection requirements and an electricity bottleneck have also plagued textile firms.
Eight printing and dyeing firms in Foshan were closed last year for not meeting environmental protection standards. This affected the textile industry chain and thus increased the costs of textile firms, said Chen Shubin, director of Foshan Textile and Clothing Association.
In addition, textile firms in the province get only four days of electricity each week due to a power shortage. This had forced the companies to buy diesel generators and thus further increased costs, Chen said.
The unfavorable conditions are forcing textile firms to adapt to the market, standardize their production processes and develop value-added products.
A sense of urgency in the need for change is prevalent among China’s textile exporters. Yu Yimin, general manager of Soho International Group, which deals in natural silk fabrics, said his company had developed an obsession with innovation, which it considers the only way to survive.
The relocation of factories to the inland regions of the country, where labor and raw material costs are much lower, were among the textile firms’ strategies to combat the difficulties.
Zhao Yumin, a research fellow with the Trade and Economic Cooperation Institute under the Ministry of Commerce, said only cost-efficient companies that constantly improved their productivity had a chance of surviving the fierce global competition and growing protectionism. Most of the woollen textile firms in Dongguan still use handlooms, which are low in productivity. Computerized weaving machines imported from Germany and Japan cost a great deal more but their productivity is four times that of the manual handlooms, said Ye Jianhua, deputy secretary-general of Dongguan City Woolen Textile Association.
“Importing the highly-efficient machines is just one step to technology innovation. In the long run, investment in technology will pay off,” Ye said.
(Xinhua)
