The challenges and opportunities facing the international cashmere supply chain were among issues discussed at the first Hong Kong staging of the Cashmere World trade show last month.

As well as fibres, yarns and finished cashmere products on offer, the event looked at trends in the cashmere trade through a series of seminars.

Hao Xukuan, chairman of Viction Cashmere Group which supplies cashmere fibre, yarn, and finished items, noted that China produces 200,000 tons of cashmere fibre a year, 70% of which comes from Inner Mongolia. In fact, 50% of the world's cashmere comes from this region.

With a good source of quality raw material, together with state-of-the-art machinery and techniques and professional management, China is the world's leading cashmere supplying region.

However challenges include rising raw material, labour and energy costs, as well as barriers imposed by the strict ecological production requirements of Western markets. Chinese cashmere companies have also come under pressure from the lower sale price of cashmere which is harming the industry's luxury image and profits.

One opportunity for Chinese cashmere companies is to develop a luxury brand image, with Viction, for example, now venturing into its own cashmere brands for domestic customers.

The World Luxury Association (WLA) also forecasts that China will lead the way in the purchase of luxury goods.

Chinese purchases of luxury goods in France, Italy and the UK already account for 48% of all sales. And moves by China this month to reduce customs duties on imported luxury goods are set to see domestic sales increase considerably. Prestige cashmere labels from Italy and Scotland are already present in the country, but reduced import tariffs will make China even more attractive to international and Chinese brands.

For cashmere buyer Alessandra Cocchi, managing director of EastMax Fashion Ltd, one of the current concerns is that China has been creating a monopoly by buying up large quantities of greasy cashmere.

Available quantities of greasy cashmere in China have halved to 5-6,000 tons while Mongolia is now below 3,000 tons, down from 5-6,000 tons two to three years ago. China has also been buying in Afghanistan, where prices have surged and supplies depleted.

Cocchi is also concerned about the increasing number of cashmere goats, resulting in less grazing grassland per goat - and a coarser fibre. Breeding for quantity and not quality is not good for the future of cashmere industry, she warned.

Concurring with Mr Hao, she stressed that cashmere should remain a luxury item and needs to eliminate low and mass market products to uphold its fine image.

Murray Ko Sek-yan, managing director of Meridian Industries Ltd which oversees the cashmere supply chain from goat to garment, said Western customers place great emphasis on cashmere composition tests to show proof of quality.

However, test results are far from accurate, he said, with different test laboratories or even different technicians, yielding different results from the same batch. He recommends in-house and third-party testing at every step of the process.

Cashmere World returns next year, from 25-27 September.