Rising regional competition causes a slowdown in Chinese fabric exports orders

A worker attends a textile machine inside a silk textile factory in Shaoxing, East China's Zhejiang Province. File photo: VCG

China's textile machine production accelerated while overseas factories were trapped amid the coronavirus pandemic last year, but the trend seems to have turned in recent weeks, Chinese customs data showed. 

Industry practitioners and experts attribute the change to a recent boom of clothing industry in other Asian economies, rising labor costs in China and overseas clients' reluctance to stockpile products. 

In March, China exported $9.7 billion worth of yarn, textiles and other fabric products, compared to exports of $22 billion in the first two months of the year, showing a slight fall on a monthly basis. 

The growth of textiles and related product exports also slowed. In the first three months, the export volume of these products grew 40.3 percent on a yearly basis, compared to a 60.8 percent growth in the first two months of this year, the data showed. 

When it comes to exports of clothing, the trend is the same. From January to March, China's exports of clothing and accessories rose 47.7 percent, compared with a 50 percent growth in the first two months of 2021.This shows that while the whole picture for clothing and fabric exports is good, the growth trend is not as steady as many people had thought, experts told the Global Times, while some industry workers said they are "confused" about the trend.

Shifting orders

One reason for the sector slowdown is that some businesses have found that they are losing the orders that swarmed into China in the second half of last year due to the coronavirus-triggered manufacturing standstill. In particular, countries like Vietnam and India are launching their machines again. 

According to data released by Vietnam's General Statistics Office, Vietnam raked in nearly $7.2 billion from exporting textiles and garments in the first quarter of this year, up 1.1 percent on a yearly basis. In March alone, the country's textile and garment exports rose 15.3 percent to reach $2.7 billion. Vietnam's export volume of textile products fell 10.2 percent year-on-year in 2020. 

Ouyang Hong, general manager of fabrics maker Suzhou Jingzhi Textile Technnology Co and Suzhou Yunzhilan Textile Technology Co, said that his client in South Korea shifted an order of about 2 million yuan ($300,000) from his plant to a factory in Vietnam. 

"The garment industry in Southeast Asia is rising again and is snatching business away from us," he told the Global Times, adding that many fabric companies he knows are speeding up the export of fabric machines and raw materials to neighboring countries.

According to Ouyang, this is not a good sign for the industry, as the business advantages Chinese companies had last year because of pandemic control might no longer last.

"Price inquiries and orders were frequent in August and September last year," he said, "but now, when we send e-mails to our overseas clients, they often don't reply."

He noted that countries like Vietnam have some advantages in fabrics and clothing manufacturing, particularly in low-end production. For one thing, the cost of labor is much lower than China's.

"A worker in Vietnam could earn 500 yuan per month, while one in China is expected to earn 10 times more. It's like China 20 years ago," he said. 

Challenges remain 

Rising competition from neighboring markets is not the only challenge that domestic companies are facing, industry practitioners say, as rising labor and material costs are cutting into profit margins. 

Jin Xiaobo, CEO of Zhejiang Kaierhai Textile Garments Co, said that the cost of raw materials has soared in China along with the oil price hike and the US' expansive monetary policies, which have squeezed their profit margin. In the past, they could earn about 20-30 percent profit on their products, and now they can only earn around 10 percent. 

"Now we have found that customers are more conservative than they were before the pandemic, meaning that they won't allow us as much leeway to negotiate on prices," he said.

Jin also noted that it is more difficult to hire employees this year, as industries are becoming imbalanced after the COVID-19 crisis, with some industries, like electronics, developing faster and showing greater appeal to workers.  

In general, his company's first quarter sales revenues have risen by 20 percent compared with the fourth quarter last year, but dropped slightly compared with the corresponding period last year.  

"With the rising cost of materials and the unstable exchange rate, we still have confusions about the future," he said. 

Ouyang noted that because of the unstable exchange rate and rising material cost, they are often afraid of receiving orders for fear of incurring losses. His sales revenues dropped by about 30 percent on a yearly basis in the first three months of 2021.

However, experts have said that overseas companies' adjustments in inventory, instead of order shift, has been the underlying reason in China's garment export growth slowdown. 

"The pandemic has in general showed a rebounding tendency around the globe since February, which has quenched some overseas clients' import inclination as they hadn't expected the pandemic to resurge," Chen Jing, vice president of the Technology and Strategy Research Institute, told the Global Times.

But he noted that despite the fluctuation, the fundamental situation of China's garment exports has been "stable".

"Last year's growth, with China's garment companies snatching market share from many overseas countries, is not a normal state. The clothing industry is one with fierce global competition, but China's industrial advantage is still large," he said. 

Industry workers also said that although Asian countries are rising in producing low-end fabrics and clothing products, when it comes to products with added technology values, China's advantages are not to be replaced easily. 

For example, Liu Hongyuan, CEO of compression socks maker Hangzhou Zhongzhi Industry Co, told the Global Times that he felt trade conditions have been "good enough" this year. The company's exports to the US grew by 30 percent in the first quarter, thanks to falling transportation costs, he said. 

Rise of domestic markets 

The garment companies interviewed by the Global Times said that they are now paying more attention to domestic markets to support their business.

Jin, for example, said that they started to attend domestic trade fairs and got in touch with Chinese clients in the second half of last year, and the results have been satisfactory. Around 30 percent of their orders are now placed by mainland customers, while the proportion was only about 5 percent before.

Ouyang also said that they have started to explore domestic markets to a greater extent, including using novel channels such as the popular short video partform douyin.com for commercial promotions.

"In general, I am optimistic about this year's business, because clients' inventory was limited last year due to the pandemic, and this year they should order more," he said.