Fierce Competition In Textile Industry

According to the data released by the National Bureau of statistics on 11, the clothing prices in July increased by 2.4% compared with the same period last year, which is significantly lower than the 10% increase in the factory prices of industrial products in China over the same period.

In an interview with the first financial daily, textile and garment enterprises both said that although the cost of production rose sharply this year, because of the fierce competition in the industry and the depression of the market, the clothing category was difficult to increase substantially, and profits were becoming thinner.

Self adjustment of digestion cost pressure

Zhu Sujun, assistant president of Ningbo Shanshan Limited by Share Ltd, told an interview with our reporter yesterday that by the influence of raw materials, labor costs and RMB exchange rate, the enterprise's comprehensive cost has risen by 10%~15% this year. It is difficult to raise prices for some old customers, and can only continuously absorb the cost pressure in developing new products and new markets.

"We export the largest market, and the US orders this year have dropped sharply. Some buyers began to pfer some of their low price orders to neighboring countries such as Vietnam and Indonesia because of the impact of the subprime mortgage crisis." Su Jun said, "because of rising costs, we have no advantage in price. This year, Shanshan has increased its strength to the middle and high end, basically abandoning low-end orders, and constantly developing new products with high added value. For example, the price of these suits is higher through the" wool lining technology ", which has higher technical content. These products are currently able to raise prices by more than 10% for the European Union and Russia.

In the domestic market, Shan Shan used to focus on the middle end market, and this year began to develop high-end market, and domestic sales also rose to a certain extent.

Zhou Xiaonan, deputy general manager of Ningbo Dunhuang import and Export Co., Ltd., told the newspaper that the raw material cost of the yarn was about 30% higher than that of last year, because the raw material of the enterprise's yarn was a by-product of petroleum. The coal price in the production process was doubled, the labor cost was also rising, and the appreciation of the RMB, and so on. The overall cost in the first half of this year increased by 8%, but only slightly increased to 3% for the customers. The rest still rely on self digestion, and the profit is getting thinner and thinner. Some orders have already lost money.

Zhang Yisheng, general manager of Guangdong Kaiping Da Da Clothing Co., Ltd., in an interview with this newspaper, also said that the competition in China's textile and garment industry is very fierce, and it is very difficult to raise prices to customers or consumers. Once the price is too high, customers will immediately pfer orders to other factories or countries around the country, and the cost of most of them will still be digested by themselves.

On the other hand, the company has shifted half of its production line to Jiangxi to reduce costs this year by adjusting its product structure and upgrading its technological content so that it can not be easily replaced by other enterprises.

"Excessive demand" hamper corporate price increase

A survey conducted by the China clothing association on better run enterprises showed that the production cost of garment manufacturers increased by 15.16% in the first half of 2008. The average labor cost increased by 13.25%, the average cost of raw materials increased by 8.89%, and the cost of finance, pportation, monitoring and energy increased by 7.34% on average. The profit margin of the surveyed enterprises decreased by 2.31% on average.

Wang Qian, a senior textile analyst, told this newspaper yesterday that despite the sharp rise in production costs, the clothing consumption index CPI has been negative this year, and the clothing price has basically maintained a 2% increase this year.

At present, clothing manufacturers basically have to bear the limit of cost, in this case, they can only raise their prices, or they will be eliminated.

According to the National Bureau of statistics, clothing prices in the whole country dropped by 1.5% over the same period in June.

Among them, clothing prices fell by 1.6%.

"It is very difficult to raise prices. At present, the industry is too competitive. Over 4.3 yuan of textile enterprises have more than 5 million yuan of sales income, and the number of textile enterprises below scale is estimated to be over 40 million.

Coupled with the downturn in the international garment market this year, some of the products will return to the domestic market, which will aggravate competition in the domestic market, making it more difficult to raise prices than the international market.

Wang Qianjin thinks.

Textile investment has fallen to a low point in 10 years because of the decline in industry earnings expectations.

According to the statistics of National Bureau of statistics, the total investment in fixed assets of cities and towns in 1~6 this year totaled 5 trillion and 843 billion 598 million yuan, an increase of 26.8% over the same period last year.

In sharp contrast, affected by the expected downturn in the whole textile industry, the fixed asset investment in the textile industry experienced a "sharp brake" decline. The cumulative investment in 1~6 months was 126 billion 729 million yuan, up 14.24% from the same period last year, and the growth rate was 11.5 percentage points lower than the 2007 level (25.74%).

Most enterprises are obviously lack of confidence in follow-up investment.