Procurement Pfer: Mainland China'S Low Order Orders Begin To Flow Out.

According to the China Cotton Textile Association report, small and medium-sized manufacturers in mainland China responded to the first quarter of this year (2014).

There is a sharp reduction in the phenomenon, while large manufacturers claim that the order is fully loaded. For enterprises, this change is most damaging to small manufacturers with low technology, while orders are concentrated in large enterprises.

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In March (103), the survey of clothing and Apparel Industry Association (GAGGAI) showed that only 22.3% of the 4600 local manufacturers of the main export production base in mainland China, Guangdong Province, had sufficient orders. More than 66% of the manufacturers said that the number of orders received could only support three months' capacity.

The study also revealed that 574 of the 4674 local manufacturers in the province reported a total of 573 billion 400 million yuan ($92 billion 300 million), an increase of 13.2% in 2012, only in the largest province of China's textile and garment exports. The overall revenue of Guangdong was still a profit state, with a total profit of 25 billion 800 million yuan, an increase of 19.95% over the same period last year.

According to the ConvergEx Securities Group report, one of the problems faced by mainland Chinese manufacturers is the minimum wage. At present, the minimum wage in mainland China is about $0.8 per hour (RMB 4.9 yuan), while in India, it is 0.28 dollars.

Other factors that affect the cost increase include the appreciation of the renminbi and the soaring cotton and energy prices.

In addition, according to the 2013 report of McKinsey consultants in the United States, the importance of peripheral procurement to some European and American clothing brands is increasing, forcing them to seek closer manufacturers from mainland China.

As a result, the number of large scale textile enterprises in mainland China has shifted to some overseas businesses. The most recent case is the Cole group of Zhejiang, which invested 218 million US dollars in the construction of cotton yarn factory in South Carolina.

A spokesman for the Cole group said publicly that this is the first overseas plant of the company, marking the beginning of the company's strategy of helping to avoid rising costs in mainland China. The reason behind this change is that the United States has a certain level of labor and low power costs in the region.

Cole group is not alone. The Shanghai Tianhong Textile Group Co., Ltd. listed on the important cotton yarn supplier listed in Hongkong, went to (2013) to set up a factory in Turkey to provide better service for European customers. However, the company still focuses on Vietnam and has been operating since 2006.

Hong Tianzhu, chairman of Tianhong textile, said at a recent investor meeting that Vietnam will become the main production base of Tianhong Group. As the members of the p Pacific Partnership Agreement (TPP) also include the United States, it is expected that the company will make profits after becoming a TPP member in Vietnam.

The net profit of Tianhong textile in 2013 was 860 million yuan (US $138 million 390 thousand), an increase of 77% compared with the same period in the previous year.

At the company's investor meeting in 2013, President Hong Tianzhu attributed it to the growth of Vietnam's capacity because of its 5 factories in Vietnam.

Ensuring leadership status

However, in addition to these changes, according to the McKinsey Co's report on the results of the 2013 visit to 29 major global purchasing managers, China is still the most important source country for garment manufacturers in the world. 72% of respondents said that although China would pfer part of its orders to other Asian countries in the next 5 years, China would still be the largest purchasing market.

Take the German brand Adidas as an example. Even if the factories in mainland China were shut down in 2012, and orders were pferred to neighboring countries such as Vietnam, Kampuchea and Bangladesh, the garments made in China still account for 4% of the global garment products.

A spokesman for adidas said that Adidas has only 10 manufacturing equipment in the world, highly dependent on foreign purchases, and altogether works with 1214 factories in the world and 339 factories in mainland China, and China will continue to maintain its position as the most important foreign sourcing market in adidas group.