Chinese Mills Look to Boost Domestic, European Business

America's economic slowdown and rising production costs in China are prompting Chinese textile makers to look at new markets, with a focus on European...

BEIJING — America’s economic slowdown and rising production costs in China are prompting Chinese textile makers to look at new markets, with a focus on European buyers and domestic customers.

This story first appeared in the April 8, 2008 issue of WWD.  Subscribe Today.

Mainland Chinese producers at the Intertextile Beijing Apparel Fabrics 2008 fair, which ended a three-day run here on March 29, said orders from the U.S. have declined markedly in the last year, and with costs increasing for raw materials and labor, the outlook for sales to American buyers is somewhat grim.

“The U.S. economy is making business more difficult,” said Li Lan, a manager with the Hangzhou HMB Textile Trading Co., which manufactures mainly Tencel and nylon fabrics.

Li said while her company still produces orders for American buyers, much of the focus this year has been on textiles that appeal to European and Japanese markets.

Andrew Sheng, a representative of FoShan City JunCai Textiles Co. Ltd., located in the southern Chinese Pearl River Delta manufacturing hub, agreed U.S. orders have slowed significantly.

“It’s very difficult now with exports to America,” said Sheng, whose company specializes in fabrics such as fine wool used in men’s business and casualwear.

Textile makers said their number-one difficulty in trade with the U.S. is the weak dollar. Adding to the pressure is a rising Chinese yuan that has already appreciated by about 15 percent since the Chinese central bank ended its decade-long strict peg to the dollar in mid-2005. The yuan, now tied to a floating basket of currencies within a narrow trading band, is expected to rise even faster, with analysts saying it should appreciate 10 to 12 percent before the end of 2008. The yuan, which equaled 8.28 per dollar in early 2005, now rests around 7 per dollar and continues to rise.

“Pressure is coming from the exchange rate, so business is not so great right now,” said Johnny Chung, a representative of Shanghai-based Kunshan New Wide Textiles Co., which makes a variety of fabrics used in branded sportswear. “It’s not going to get better in the short term.”

Despite global economic pressures, textile makers came out in full force for this year’s Intertextile fair. According to event organizer Messe Frankfurt Ltd., the exhibition showcased more than 1,100 vendors this year, compared with about 800 in 2007. The mix was more heavily dominated by Mainland Chinese suppliers, with fewer countries represented than last year. Interest in the fair is also growing steadily. Preliminary attendance figures from the three-day event, which ran concurrently with the Yarn Expo Spring 2008, show that about 26,000 people attended, compared with 21,500 last year and 17,300 in 2006.

Many spoke of rising costs for raw materials and labor within China, further tightening cost pressures on Chinese manufacturers. Wages in low-level manufacturing sectors like textile and apparel production have risen steadily in recent years, a trend that shows no signs of reversing, according to research from the Chinese Academy of Social Science. In addition, the new labor law that took effect on Jan. 1 has tightened screws even more, forcing companies to provide certain benefits and terms to workers.

Outsourcing was an issue for some companies at the show. New Wide Textiles has moved several production lines out of China. Though the company maintains factories in China, a good portion of its 7,000 workers are in Cambodia and Kenya, where costs and tax rates remain comparatively low.

Liu Yaozhong, who works in the international trade office of the China National Textile & Apparel Office, said increasing trade friction with the U.S. is of great concern within the industry. Liu said his group is working with counterparts in the U.S. on issues like quotas, labor and environmental standards. Liu pointed to agreements between China and the European Union in which EU buyers only do business with factories of a certain size, cutting out of the equation smaller factories that trend toward labor violations and pollution.

Liu said he sees a positive attitude coming from American buyers on corporate social responsibility and hopes collaboration on that issue can lead to better relations in general.

“The United States should not apply so much political pressure” on China, said Liu. “We welcome a real free trade policy.”

Politics and trade talk aside, vendors focused on showing off new trends in textiles for spring and summer 2009. Many promoted natural fabrics, used in production of business, casual and sportswear. Bamboo, ramie, lightweight cotton blends and naturally antibacterial fabrics had a big presence.

Inside the Shandong Ruyi Group’s exhibit, buyers saw high-end wool and silk blends, along with supersoft, lightweight cottons designed for high-end men’s suits.

“The market really likes fabric that is more functional, environmentally friendly and comfortable,” said the company’s Jiang Wei.