China’s Rising Costs Key Issue at Interstoff

Buyers and suppliers cited higher labor prices and less skilled workers as causes for concern.

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HONG KONG — Buyers and suppliers at the Interstoff Asia textiles fair here said rising labor costs in China were becoming an increasingly heavy burden on them.

This story first appeared in the October 23, 2012 issue of WWD.  Subscribe Today.

Manufacturers expressed concern over the increasing cost of production as a result of rising minimum wages and the need to provide better benefits to workers in Mainland China. Meanwhile, a decreasing supply of skilled factory laborers also weighed on their minds.

China does not set one uniform minimum wage. Instead, provincial, municipal or regional authorities determine them. The annual minimum wage rose 45 percent in Beijing to $2,140 and 32 percent in Shanghai to $2,440 from 2009 to 2011, according to a presentation by human resources management consultant Towers Watson.

“Rising wages are affecting us,” said Brenda Xu, a marketing-department manager at apparel and fabric supplier Concord Star, based in China’s Jiangsu province. “We now need to increase workers’ salaries, which results in a higher production cost on our end.”

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Linda Liu, a project manager from Hong Kong-based Early Light Industrial, a company in the manufacturing, property, automotive and jewelry industries, said rising labor costs were a significant issue. Minimum wages keep increasing in Mainland China, said Liu, whose department produces clothes for dolls. Meanwhile, younger people are becoming less inclined to work in factories, so the pool of skilled workers is shrinking. To keep the existing skilled labor, factories must provide more attractive terms of employment.

“In addition to there being fewer skilled workers, the salaries are increasing,” she said. “We could pass on these costs to our clients, but the client has a limit in terms of pricing, too.”

But ballooning labor costs did not translate into bad news for all. Ringo Yeung, owner of Hong Kong textile trader Wing Hon, said there was now more opportunity for him to bargain.

“Their production costs have increased, and it’s more difficult for them, so they need more orders,” he said, referring to textile manufacturers.

While last year textile prices were a significant concern due to high cotton prices, buyers reported seeing only a negligible increase this year. Liu estimated the prices that exhibitors quoted at the fair were 7 to 8 percent higher than those last year, a rise that she said was not significant. Yeung said prices had not risen much since last year.

As for trends, a team led by Kai Chow, creative director for trend and forecasting company Doneger Creative Services, forecast that the coming season would bring bouclés and basket weaves in neutrals; shiny floral jacquards, knits and mohair in pastel colors; taffeta, lacquered jacquards, matelassés, burnished brocades, coated fur and velvets in deep, dark gemstone colors, and compact jerseys, tweeds, plaids, checks and plush in bright red, cobalt blue and red-orange mixed with blacks and browns.

Yeung said he saw many functional fabrics, such as sweat-absorbing or antistatic materials.

Attendance seemed light, with half of the stalls appearing empty on the afternoons of the first and last days. Fair organizer Messe Frankfurt said 6,527 visitors attended and about 200 exhibitors showed at the fall edition of Interstoff Asia Essential at the Hong Kong Convention & Exhibition Centre, which ended its three-day run on Oct. 5.

“The attendance is less than I thought it would be,” said Liu, who was on her 10th visit to Interstoff.

Attendees said lower-than-expected visitor numbers were a feature not only of Wednesday but of recent editions of the event. Between 6,000 and 8,000 visitors went to the fall shows from 2006 to last year. The spring edition attracted slightly more visitors, between 7,000 and 9,000. Exhibitor numbers for fall and spring editions of the fair have fluctuated between 200 and 270 for those years.

During the fair, Mainland China was on an eight-day “Golden Week” holiday to celebrate National Day, and Hong Kong was just emerging for its first day of work Wednesday from a long weekend of Mid-Autumn Festival and National Day celebrations.

Wilmet Shea, trade fairs group manager at Messe Frankfurt Hong Kong, said attendance to the fall fair had remained stable, around 6,000, for several years.

“There hasn’t been a big drop,” she said.

In spite of the talk about turnout rates, it is not the deal clincher for some.

“The number of people is not so important,” said Samuel Lee, chief executive officer of Texmill, a South Korean textile supplier. “It’s the quality of the customer that counts.”

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