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 sub-prime credit crisis.
China exported 16.44 billion U.S. dollars 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 3.52 billion U.S. dollars in the period, an unprecedented 11.3 percent fall, according to Guangzhou customs.
Many of the southern province's textile firms have been forced to transit from their labor-intensive model to an innovative, environmentally friendly model and even move their production bases to the 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 cost has also increased remarkably. The average monthly salary of textile workers in Xiqiao Town of Foshan City, a major textile production base, has reached 1,600 yuan (228 U.S. dollars)to 1,700 yuan, a 20 percent rise year-on-year, said an executive of Guangzhou Huanya Garment Co., Ltd.
The skyrocketing prices of oil and raw materials are another headache. "The wool material price 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 of the 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 the 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 have only a four-day electricity supply each week due to a power shortage. This has forced the companies to buy diesel generators and thus increased its costs, Chen said.
Under such unfavorable circumstances, the textile firms are forced to adapt to the market, standardize their production and develop value-added products to sharpen their edge.
In Xijiao Town, 17 printing and dyeing companies invested a total of 60 million yuan to set up pollutant discharge pipes by the end of February. This had kept the printing and dyeing procession the industry chain and would help the development of the whole industry, said Feng Yongkang, deputy head of the Nanhai District government, Foshan City.
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.
"Importers would just say 'No way' and walk out if we hinted at a price hike as competition is fierce in China. But if we have something unique, then it strengthens our hand," he said.
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 strategy 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, Dongguan City Woolen Textile Association deputy secretary-general.
"Importing the highly-efficient machines is just one step to technology innovation. In the long run, investment in technology will pay off," Ye said.
