Related News
Home » Business » Manufacturing
Shake-up of garment firms expected
TEXTILE and garment makers, struggling with slumping overseas demand, tightened credit as are most small and medium-size companies, and soaring costs, find themselves in a shakeout where the survival of the fittest will determine the future shape of the industry.
Export-driven garment makers, once the mainstay of China's economic miracle, have suffered slower growth as the global financial crisis hits demand in overseas markets. Manufacturers who survived the winter still face bleak times ahead.
About 20 percent of the country's hundreds of thousands of small and medium-size textile firms have closed as a result of declining exports and weak domestic demand, according to industry estimates.
One of the survivors, so far, is Ningbo Eurolee Garments Co. The manufacturer, beset by a sharp fall in orders this year, reduced production capacity after the Lunar New Year in late January.
"We expect orders this year will be at least one-third off last year's 30 million yuan (US$4.41 million)," said Leo Shi, a company official.
Eurolee is hoping sales to reach between 20 million yuan and 25 million yuan this year. "But there are no certainties, and it's is hard to predict when economic conditions will show signs of recovery," Shi said.
Though many workers are pocketing less pay, they now have more regular hours and can enjoy the weekends," he said, trying to put a brave face on the company's dire situation. Employees formerly worked late into the night and did overtime to try to fill orders.
This month's five-day East China Fair, one vital barometer of the nation's export market, saw contracts worth US$2.24 billion sealed, a drop of 39 percent from a year earlier. Garment transactions, the biggest component of the fair's trade, fell a third to US$1.25 billion.
Negative growth
China recorded negative growth in both exports and imports in November for the first time since the country's entry to the World Trade Organization in 2001.
In January, China's exports slumped 17.5 percent, the fastest pace in more than a decade, to US$90.45 billion. It was the third straight monthly decline.
"Far fewer new customers came to us this year, while regulars scaled back orders or asked for lower prices," said Tony Yao, an official from Shanghai Twintex Textiles Import and Export Co, "As a result, the company is considering a move to north or central China where labor and land costs are lower."
The tax rebate for textiles and garment exporters have been raised to 15 percent from 14 percent, following two increases last year. The refund is expected to be raised to 17 percent, as the government tries to assist the industry.
Producers and analysts agreed those measures aren't enough to keep the industry from sinking.
"Profit margins are as low as 5 percent in the industry. The higher tax rebate makes no big difference," said Pan Yifan, a partner of Beijing-based Allpku Consulting Co.
Pan said a 1-percentage-point rise in the tax rebate can boost earnings by only about half a percent.
The government has unveiled a series of supporting measures?designed to revive China's so-called "pillar industries" in the face of the economic crunch. The government is urging textile makers to boost brand marketing and upgrade technology to enhance their competitiveness.
"The purchasing power of our foreign customers has eroded, causing our exports to slump," said Timon Wu, manager of Shandong Gaintex Co. "Environmental-friendly and other high-tech textile products such as garments made with bamboo charcoal fiber and pearl fiber were not as well received as last year as customers value price of our products the most."
"As a result, manufacturers said they have to prioritize lower costs in an effort to attract customers who have tightened their belts. Many exporters are increasingly turning to the domestic market."
Home market
"In face of sluggish overseas markets, China has to count on its huge domestic market to sustain its economy," said Li Jianhua, chairman of China Textile Commerce Association.
The government has announced a 4-trillion-yuan stimulus package to boost domestic consumption. It has also advised textile firms to explore the huge rural market.
"The export outlook is austere this year, and it's vital for the industry to make a bigger effort to tap the domestic market," said Yao Jingyuan, chief economist at the National Bureau of Statistics.
Allpku Consulting's Pan said the domestic market is expected to grow by at least 10 percent this year, largely on the back of rural spending.
Large cities are fully competitive with domestic and overseas firms while the countryside is less saturated and has much room to explore. China's 1.3-billion-strong population and its relatively high economic growth are an attractive market to manufacturers, but tapping into it requires some changes in strategy.
"Exporters turning to the domestic market are faced with many new problems," said Yu Yuenan, vice secretary general of China Textile Commerce Association. "They have to build up their brands, change their styles to suit Chinese tastes and develop new marketing channels. All these things take time and money."
The government has pledged to increase loans to firms facing restructuring costs, but details have not yet been announced.
Besides the money crunch, brand building is the major issue facing manufacturers.
"It is difficult to build a brand and the culture behind it," said Eunice Ying, an official with Shanghai Silk (Group) Brand Development Co, "It takes a long time and requires lots of experience. A famous brand like Giorgio Armani has a history of over 30 years, while we started business only seven years ago."
That was when the firm started to make items under its Lily brand. The garment maker opened several specialty stores in the Middle East and plans to expand to Europe soon.
Ying said another problem in cracking the domestic market is because "Chinese consumers prefer popular foreign brands and tend to denigrate domestic brands." He also lamented the lack of patent protection in the home market.
Export-driven garment makers, once the mainstay of China's economic miracle, have suffered slower growth as the global financial crisis hits demand in overseas markets. Manufacturers who survived the winter still face bleak times ahead.
About 20 percent of the country's hundreds of thousands of small and medium-size textile firms have closed as a result of declining exports and weak domestic demand, according to industry estimates.
One of the survivors, so far, is Ningbo Eurolee Garments Co. The manufacturer, beset by a sharp fall in orders this year, reduced production capacity after the Lunar New Year in late January.
"We expect orders this year will be at least one-third off last year's 30 million yuan (US$4.41 million)," said Leo Shi, a company official.
Eurolee is hoping sales to reach between 20 million yuan and 25 million yuan this year. "But there are no certainties, and it's is hard to predict when economic conditions will show signs of recovery," Shi said.
Though many workers are pocketing less pay, they now have more regular hours and can enjoy the weekends," he said, trying to put a brave face on the company's dire situation. Employees formerly worked late into the night and did overtime to try to fill orders.
This month's five-day East China Fair, one vital barometer of the nation's export market, saw contracts worth US$2.24 billion sealed, a drop of 39 percent from a year earlier. Garment transactions, the biggest component of the fair's trade, fell a third to US$1.25 billion.
Negative growth
China recorded negative growth in both exports and imports in November for the first time since the country's entry to the World Trade Organization in 2001.
In January, China's exports slumped 17.5 percent, the fastest pace in more than a decade, to US$90.45 billion. It was the third straight monthly decline.
"Far fewer new customers came to us this year, while regulars scaled back orders or asked for lower prices," said Tony Yao, an official from Shanghai Twintex Textiles Import and Export Co, "As a result, the company is considering a move to north or central China where labor and land costs are lower."
The tax rebate for textiles and garment exporters have been raised to 15 percent from 14 percent, following two increases last year. The refund is expected to be raised to 17 percent, as the government tries to assist the industry.
Producers and analysts agreed those measures aren't enough to keep the industry from sinking.
"Profit margins are as low as 5 percent in the industry. The higher tax rebate makes no big difference," said Pan Yifan, a partner of Beijing-based Allpku Consulting Co.
Pan said a 1-percentage-point rise in the tax rebate can boost earnings by only about half a percent.
The government has unveiled a series of supporting measures?designed to revive China's so-called "pillar industries" in the face of the economic crunch. The government is urging textile makers to boost brand marketing and upgrade technology to enhance their competitiveness.
"The purchasing power of our foreign customers has eroded, causing our exports to slump," said Timon Wu, manager of Shandong Gaintex Co. "Environmental-friendly and other high-tech textile products such as garments made with bamboo charcoal fiber and pearl fiber were not as well received as last year as customers value price of our products the most."
"As a result, manufacturers said they have to prioritize lower costs in an effort to attract customers who have tightened their belts. Many exporters are increasingly turning to the domestic market."
Home market
"In face of sluggish overseas markets, China has to count on its huge domestic market to sustain its economy," said Li Jianhua, chairman of China Textile Commerce Association.
The government has announced a 4-trillion-yuan stimulus package to boost domestic consumption. It has also advised textile firms to explore the huge rural market.
"The export outlook is austere this year, and it's vital for the industry to make a bigger effort to tap the domestic market," said Yao Jingyuan, chief economist at the National Bureau of Statistics.
Allpku Consulting's Pan said the domestic market is expected to grow by at least 10 percent this year, largely on the back of rural spending.
Large cities are fully competitive with domestic and overseas firms while the countryside is less saturated and has much room to explore. China's 1.3-billion-strong population and its relatively high economic growth are an attractive market to manufacturers, but tapping into it requires some changes in strategy.
"Exporters turning to the domestic market are faced with many new problems," said Yu Yuenan, vice secretary general of China Textile Commerce Association. "They have to build up their brands, change their styles to suit Chinese tastes and develop new marketing channels. All these things take time and money."
The government has pledged to increase loans to firms facing restructuring costs, but details have not yet been announced.
Besides the money crunch, brand building is the major issue facing manufacturers.
"It is difficult to build a brand and the culture behind it," said Eunice Ying, an official with Shanghai Silk (Group) Brand Development Co, "It takes a long time and requires lots of experience. A famous brand like Giorgio Armani has a history of over 30 years, while we started business only seven years ago."
That was when the firm started to make items under its Lily brand. The garment maker opened several specialty stores in the Middle East and plans to expand to Europe soon.
Ying said another problem in cracking the domestic market is because "Chinese consumers prefer popular foreign brands and tend to denigrate domestic brands." He also lamented the lack of patent protection in the home market.
- About Us
- |
- Terms of Use
- |
- RSS
- |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证:沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证:31120180004
- |
- 网络视听许可证:0909346
- |
- 广播电视节目制作许可证:沪字第354号
- |
- 增值电信业务经营许可证:沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.