Fabric Cost Growth Hits Clothing Industry

It is reported that in the past six months, the production and closure of factories in the entire Pearl River Delta and eastern coastal manufacturing areas were mainly due to soaring cotton prices and the need to attract workers through increased wages and benefits.

Factory owners now say that they want a streamlined, more efficient and more high-end production chain, but the pition period is difficult.

"Pressure comes from two aspects," said Zhang Yunqing, general manager of Guangdong Dongguan Yichuan Wool Knitting Co. Ltd.

Zheng Zhaobo, training manager of Guangdong Foshan Anthony Knitting Co. Ltd. said that the supply of surplus materials last year helped the company to operate earlier this year, but in the long run, consumer prices will rise.

"Now there is not much room for us to make other choices," Zheng said. "We must pay higher prices, because many migrant workers recently do not want to leave their hometown at all."

The strength of migrant workers promotes the development of manufacturing industry

China has long relied on the strong force of migrant workers to promote the development of manufacturing industry.

It is estimated that 200 million migrant workers in China, with relatively cheap and stable labor force, work in the construction and production of factories and construction sites in richer cities and regions.

But now, part of the government's massive infrastructure projects, such as train and highway construction, have brought prosperity to the countryside. Hundreds of thousands of migrant workers can find suitable jobs near their homes.

At first, factory managers hoped that this trend would pass, and that they could bring workers back to the Pearl River Delta and other hub areas.

Now, they begin to weigh their options and consider how they can continue to develop.

Kong Jun, an analyst of textile industry in China's Construction Bank, said the pition period would be painful.

The industry has attracted small companies to rely on meager profits, many of which will not survive.

What the company can do now is to increase the added value of products and improve the quality level through research and development.

But it's very difficult for them.

Some companies have difficulty in making these efforts.

The market situation is also very chaotic. In order to compete, they will have to lower the price, and the profit will be smaller. "

This impact can be felt in every workshop.

"I hope the price of raw materials will not go up again," Huang said.

"If we go up again, we will face serious problems.

At present, we can cope with the situation. "

Kong said that there are no good assessments of how many factories can survive in fierce competition.

Now, many small production plants are in a dormant period, and the gap is compensated by finding new workers and having higher income publicity.

At the same time, the Chinese government has begun to encourage mergers and acquisitions industry, plus tax incentives, to attract manufacturers to develop in less developed western regions.

However, the biggest factor facing China's production line has exceeded the control range.

Compared with last year's level, the price of cotton has exceeded 15% in China and more than two times in the international market, which will determine the fate of the industry in the coming months, Kong said.

Zhang said he was not optimistic about it.

"It's not easy to do this business," he said.

"I'm afraid it will become more difficult in the future."

Hongkong purchasing giant Lian Tai has seen changes.

"The biggest challenge for our industry is cotton prices, costs, especially wage growth," said CEO, Henry Tan.

The price of clothing will go up.

Consumers will have to face this point, that is, the price will be higher.

Tan explains that increasing costs means changing production facilities and changing the relationship between retailers, brands and manufacturers.

"We have a better relationship with our customers."

He said, "they work with us to reduce costs.

Some people are now willing to listen to it. For example, we talk about changing a garment -- not changing its appearance, but it may make the sewing easier, which saves the cost.

Such a thing is difficult to understand in the past.

The past was a unilateral partnership, but now, to a certain extent, they have to help us. "

Lian Tai provides a full range of production for some mainstream brands including: Ralph Lauren, Esprit, Limited, Adidas and Coach.

Guangdong has two urban supply chains to maintain its current level of production in China.

He said that Luen Tai will expand its scale in other countries.

It has recently expanded production in Philippines and Indonesia.

He also said that the company is "seriously considering and looking at the development of Kampuchea".

But that is not enough to offset the growth of the minimum wage in the region.

"The region where the United States has no cheap wages can develop," he said.

"Even in the cheapest countries, such as Bangladesh, there is an increase in the main wage cost."

Tan said that this is the first time in this era of supply and demand balance, ending the era of tight clothing prices.

He added: "the financial crisis, the increase in cotton prices and production costs, and the collapse of so many small factories in China mean that there is a balance between supply and demand now."