Chinese textile and clothing manufacturers are expecting to struggle for business in the rest of 2012, with the worsening Eurozone crisis dampening demand in key export markets and sourcing rivals from neighbouring countries becoming increasingly competitive.

Analysts also warn China's clothing and textile sector is continuing to lose competitiveness through the strengthening Chinese yuan, combined with rising labour costs.

"This year our output could fall 20% from 2011 due to order loss," warns Louis Jiang, sales manager at Chengdu-based Sichuan Hainaer Fashion, which sells professional uniforms and workwear to clients in the US, Europe and Canada.

Jiang says in the first half of this year, the output of his company was only CNY11m (US$1.73m), down 27.2% from CNY14m (US$2.2m) during the same period last year.

"A weak economy has been dragging down the demand in the Western countries," he complains.

His comments are echoed by Zhang Guanjin, general manager at Shaoxing Jinyong Textile in Shaoxing, Zhejiang province, which makes scarves and skirts. Zhang predicts more losses of orders to China's rivals elsewhere in Asia, as Chinese production costs continue to rise.

"While the European market has been stagnant, Chinese manufacturers are facing rising costs - wage, logistics and a strong yuan. Some of our European clients have been giving orders to manufacturers in South East Asia to seek more profit," he says.

2012 relatively steady so far
This engrained pessimism comes despite 2012 thus far being relatively steady for the Chinese clothing sector.

According to China Customs, Chinese apparel exports from January to June 2012 were US$111.3bn, slightly up 1.6% year-on-year. However, the value of sales to the European Union dropped 12.2% from last year, to US$21.3bn.

Also, the Euro crisis does offer some longer-term opportunities for Chinese suppliers with global ambitions, such as Shanghai Challenge Textile, a Shenzhen Stock Exchange-listed company which specialises in fabric development for high-end sportswear clients in Japan, Australia and the US.

In November 2011, it opened an office in Treviso, Italy, to enter the European market. According to Challenge, the annual operational cost of the office is now affordable - at EUR150,000.

"The cost of hiring local people and office rental is getting less expensive thanks to the financial crisis," says a salesperson at the company.

He admits that the European market is not likely to yield riches in the near future, but "still we think it's worth trying for the long run. After all, now we have our own sales force in the region and it can help us get orders from European clients efficiently," he adds.

And this can only make sense for struggling Chinese companies seeing rivals in other emerging countries gearing up to compete for more market share in developed markets which used to buy most of their clothing from China.

For instance, in August the Thai government said it planned to increase its market share in Japan and ASEAN (Association of Southeast Asian Nations) export markets since the demand in the two regions is rising, while EU sales continue to shrink.

Textile and garment exports from Thailand dropped 15.6% year-on-year in the first half of 2012 to US$3.5bn.

And in January, the Bangladesh Knitwear Manufacturers and Exporters Association (BMEA) held a knitwear exposition in Tokyo. Afterwards, BEMA vice president Mohammad Hatem told Bangladeshi journalists: "We will compete against Chinese manufacturers to get more market share in Japan."