A respected international cotton trade publication is once again drawing attention to difficulties throughout the Chinese textile and apparel industry that threaten the underpinnings of the complex.
At the conclusion of 2011, Liverpool-based Cotlook Ltd. commented on how rising labor costs and an appreciating currency had taken their toll on the country’s competitiveness in export markets. Latest business data out of China suggests outside pressure continues unabated, and the future may rest with domestic demand from a growing middle class.
The following report is found in the latest issue of the weekly Cotton Outlook:
“In China itself, however, cotton spinning, and the textile and apparel complex as a whole, are clearly experiencing difficult trading conditions, and may be approaching a period of quite significant structural change. Financial results for last year announced this week by the country’s largest spinning and weaving concern, Weiqiao, may be considered a bellwether for the fortunes of the industry as a whole. The group’s output of cotton yarn and grey cloth fell by over 14 and nearly 11 percent, respectively, last year. Although the much steeper fall in profits can be ascribed principally to the recent, damaging volatility in raw cotton and cotton yarn values, the company also refers to “the shifting of export orders to its neighbouring countries gradually due to production cost considerations”, amongst which finance and labour are specifically mentioned.
“China’s retail market for textile and clothing market is reckoned already to account for more than half of China’s cotton textile output, and commentators point increasingly to a future shift in the model that has seen China’s textile exports expand exponentially since the country’s accession to the World Trade Organisation in 2001. That model, based on low labour costs, a surge of both domestic and foreign investment in the sector and (at least until fairly recently) an undervalued currency, also gained impetus from the more liberal global market conditions that followed the final elimination of quotas in 2005. China’s dominant position as an exporter of clothing and textiles will not, of course, collapse overnight, but slowing global demand and rising domestic cost pressures would seem to signal the approaching end of an era.”
Questions: If the future for China’s textile and apparel industry is in the domestic populace, is it bright or threatened with a slow decline?
What are the prospects for continued foreign and domestic investment into the industry?