Chinese garment producers are adopting new strategies to protect already low margins from rising costs.

Monartex, a jacket supplier based in China's east coast Fujian province, will open an office in Germany next year to target retailers and brand owners directly.

"We want to go out and look for final buyers directly instead of going through traders," general manager Steven Zou told just-style.

The company, which exports 80-90% of its jackets to Europe, is facing rapidly rising costs, mostly from growing wages. Monartex workers typically earn RMB1875 (US$250) per month, compared with about RMB1000 in some interior provinces.

And wages are rising about 15% each year, forced up by growing competition for workers among all factories in China's coastal provinces.

Beijing has cut taxes for the rural population in a bid to improve their living standards, reducing the numbers prepared to seek work in the big cities in the south.

"One way of dealing with this is to put prices up. Another is to improve quality," says Zou. "We want to use quality as a weapon so we are using better quality fabric."

Other firms say they are investing in designers to improve their margins. "You have to invest in designers and technology if you want to make higher profits," says Liu Xin, general manager at Anhui Garments Import and Export Co.

Monartex has seen sales increase by around 30% annually in the last three years, following a shift to higher quality products and new customers.

But it also wants to raise funds on the stock market to invest in strengthening its brand for the local market.

"I think the local market has a better future than exports. Export costs just keeping getting higher and higher and prices are going lower and lower," said Zou.

By Dominique Patton.