Growth of China''s textiles and garment exports in the international market is experiencing a downwards slopping trend. Textile exports surged 82.2% in March, as global retailers rebuilt their stocks. This is attributed to a combination of increase in labor costs, Chinese currency appreciation, and export rebate cut. The global crisis, which is slashing the economies of even the developed nations, has further worsened the problem.
Poor demand in the international market:
External demand in China is witnessing a downturn. Due to the economic crisis, unemployment rate in countries like US, and Europe are increasing. This affects their amount of disposable income, thereby forcing them to curtail their expenses, especially in garments. The change in the spending spree of the consumers has infected the Chinese exports 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. Despite the fact that China''s export tax rebate for textiles and apparels have been increased four times since the previous year to ease the pressures on export enterprises, the figures still keep declining. A recent survey reveals that, more than 50% of the Chinese export oriented apparel manufacturers have experienced a drastic decline in the export orders. The orders have decreased by approximately 30% as compared with the figures of the corresponding period during the previous year.
Rapid increase in costs:
During the past years, cost of labor and raw materials has rapidly increased in China. Raw material costs have increased by 10 to 20%, and labor costs have increased by 30%. One percent of RMB appreciation will cause a decline in 2 to 6% in the profit margin of textile and apparel industry. During the previous year, appreciation of Chinese currency over the US dollar was 6.8%, and RMB appreciation against the Euro was 11%.
Deteriorating Trade Environment:
Europe and US have imposed numerous trade protection measures against the import of Chinese textiles and apparels. In a letter sent to the National Council of Textile Organizations, President Obama has assured to impose a programme to monitor the textile, and apparel imports from China. He has expressed his intention to introduce a fair trading system regarding foreign exchange practices. He had promised to impose emergency restrictions against the import surge of Chinese goods. Due to the protection measures imposed by other countries with a view to protect their own economy, export trading environment in China is weakening.
Decline in the development of independent brands:
After a surge in the export figures, the attention of the Chinese manufacturers turned towards the domestic market. But these manufacturers did not have any specific brands, and distribution channels. Neither did they have any market experience is handling the domestic market. These barriers have increased the pressures on the survival of the enterprises.
The declining trend in the export market proves an evidence for a grave trade slump which might result in factory closures, and layoffs. 30% of the country''s textile market is dependent on exports. If the economic problems get worsened, it may lead to social unrest.