BEIJING — The action this summer by China’s central government to step in with new tax policies to boost flagging textile and apparel production was welcomed by the industry, but executives said that small step is inadequate to bandage the bleeding sector.
Across the Pearl River Delta, China’s main manufacturing hub, thousands of textile, clothing and shoe factories have shut their doors in the past year. Vast stretches of what was China’s main production hub are now home to empty factories, with some companies moving to cheaper locations and others having quit the business entirely.
Nearly all have fallen victim to rising production and labor costs, and rapidly increasing prices for raw materials and transportation. Spiraling domestic inflation and a new national labor law that protects employee rights while boosting company costs hit first and hardest the textile and apparel industries, the lower end of manufacturing where profit margins were already slim. Rising internal costs coupled with sagging external demand as the U.S. and other countries weather a difficult economic slowdown have created particularly tough times for China’s textile and clothing makers.
On Aug. 1, the central government implemented an adjustment to the value-added tax, increasing rebates for exports of textiles and clothing from 11 to 13 percent and giving the industry at least an emotional boost.
“Before this, the whole industry felt like it had been abandoned, but the implementation out of this policy gave the industry a little bit more confidence,” said Xiao Jiancheng, secretary general of the Guangdong Home Textile Association. “As for its real impact on profits, that will not be seen very quickly.”
As the industry limps along, the government has been markedly silent about further potential plans to help clothing and textile manufacturers shore up their businesses or move into other production sectors.
Cao Yinyi, vice director of the China Chamber of Commerce for Import & Export of Textiles, said China’s exports of textiles dropped 20 percent during the first five months of this year compared with 2007. Cao said part of the problem has been that China’s manufacturing base has been built on large-scale production heavily reliant on the American market. As such, the industry has not been able to absorb the downturn as it might have with a more broadly diversified consumer base. Chinese companies are looking to domestic markets and emerging markets in the Middle East and elsewhere as potential customers.
Still, the U.S. market downturn has had a major impact in China. For the first half of the year, manufacturers wondered if or when the government would step in with preferential tax policies or other measures to help. In the first six months of the year, China’s Producer Price Index, the main measure of raw material and factory production tool costs, rose 7.6 percent over a year earlier.
Around the same time the tax move was unveiled, Premier Wen Jiabao visited the Pearl River Delta and was photographed in a shoe factory trying to reassure workers that the country’s industry base could survive by becoming more competitive. His appearance, widely reported in state-run media, seemed timed to inspire industry confidence.
Still, Wen did not announce any new measures nor promise anything on the horizon to shore up the manufacturing industries. Further, the Aug. 1 VAT tax rebate change was half the amount the industry had requested. Economists say the lack of swift and strong government response to sagging textile and apparel production likely has to do with long-term policy to encourage more innovation and higher-value industries.
“The textile industry has become an unfashionable industry for some policy makers,” said Ding Li, an industrial economic researcher with the Guangdong Academy of Social Sciences.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews