Time was when the Chinese clothing industry was all about exports. Nowadays, though, rising costs, savvy competitors, and growing domestic clothing sales mean low wage south Asian countries are eyeing Chinese market share. But will they be able to force their way in?
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In any race to supply China’s huge home market with clothes, Chinese manufacturers clearly have a big advantage.
But with the government in Beijing keen to shift Chinese clothing production towards higher end added-value items for export, there is clearly an opportunity for lower cost makers abroad to seize China market share.
Indeed, some south Asian producers are already shipping to China, taking advantage of the removal of World Trade Organization-sanctioned quota restrictions in 2005.
Md Shamsul Haq of the Bangladesh Knitwear Manufacturers & Exporters Association told just-style.com: “We are already exporting high quality synthetic fabrics sportswear to China.”
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A China Chamber of Commerce for Import and Export of Textiles (CCCIET) delegation visited Bangladesh this month (March).
Its vice-chairman Cao Xin Yu told a press conference in Dhaka: “Our domestic demand for textiles and apparel are growing at a rate of 20%. Bangladesh might explore the export market of textiles and apparel there.”
In the short term, there have been problems for the Bangladesh industry in expanding its footholds, notably through political turmoil within Bangladesh: “Our overall exports growth has not been significant in 2007,” said Haq.
In the medium term, however, assuming political stability is secured (Pakistan exporters face similar difficulties), a growing Chinese clothing and textile market could stimulate export sales from the subcontinent.
MK Pantaki, director of the Clothing Manufacturers Association of India, told just-style.com that the Chinese government’s imposition of export taxes on low-end garments (to discourage their production and export) had created an opening.
Meanwhile, Haq added: “China is now concentrating on capital intensive and technology friendly synthetic fabrics, while countries like Bangladesh are managing to export more cotton-based items to other countries.”
Competitive advantage
India too has a competitive advantage regarding the manufacture of cotton products, and its exports to China might pick up once local exporters start staging garment shows in China.
Vijay K Agarwal of India’s Apparel Export Promotion Council sees this happening in one or two years.
But here too there are local problems hindering exports, notably currency appreciation.
In 2007, the Indian Rupee rose 11% against the US dollar, stalling a previously hopeful China export outlook.
Indian exports to China in the last year stood at mere US$3m, and out of these, knitted garments – mainly T-shirts – amounted to US$770,000.
Despite this setback, the long-term opportunities are clear.
“China is certainly going to be a market for imported garments,” Agarwal told just-style.com.
In his view, however, India was likely to sell a more limited range of fashion products than lower cost Bangladesh (and south east Asia competitors Cambodia and Vietnam).
Confident China
In the meantime, the Chinese clothing industry is being bullish about seeing off foreign competitors on its home turf.
Sun Huaibin, spokesman for the China National Textile & Apparel Council, an industry association, said he had no official figures for the amount of garments imported by China and judged it to be “so limited, you can ignore it”.
Only for luxury brands is there substantial demand for foreign goods, he claimed.
Mike Mikkelborg, general manager of sourcing and design services firm SourceGo and a China-based garment factory, also estimated Chinese clothing imports to be “very, very little”.
And, naturally, Chinese manufacturers would have a natural advantage in any battle to supply growing domestic markets.
With a US recession gathering pace, “the export market is getting worse so we have to develop the domestic market,” said Paul Zheng, general manager of Beijing Guanghua Textile Group, which sells mostly to Europe.
Last year it got its first orders from the local market.
Mikkelborg added that despite rising production costs in China, the country still has unrivalled advantages in terms of “fast replenishment of new styles” as well as quality.
“Production costs are still low enough for Chinese producers to sell here. And China has put so much investment into the industry. The capacity here is still high. The benefits from importing right now would be so little,” he stressed.
Joint ventures
So, low wage Asian economies will find it tough to export clothes and textiles to China. But one way in might be through joint ventures with offshoring Chinese manufacturers exploiting lower wage economies themselves.
Several Chinese garment makers have already invested in facilities in Cambodia to get around quotas placed on exports by Europe.
And the acting president of the Dhaka Chamber of Commerce and Industry (DCCI), Salahuddin Abdullah, urged the visiting Chinese team to establish textile joint ventures in Bangladesh, reported Bangladesh’s Financial Express newspaper.
”We have cheap labour. Our textiles are growing with a good pace. We need joint ventures with Chinese entrepreneurs to give further impetus to the sector,” he added.
By Dominique Patton in Beijing, Raghavendra Verma in New Delhi, and Keith Nuthall.
