China’s stalled economy, a continued currency crisis in Europe and an ongoing shift in sourcing strategies were highlighted in CBX Software’s “Retail Sourcing Report” for the second quarter released Tuesday.

The global manufacturing sector remained in a soft growth patch at the end of the second quarter, with June seeing a mild deceleration in the rate of output expansion to a near two-year low, the report surmised.

Among the emerging markets, output fell slightly in China and Russia, but rose in India, Mexico and Vietnam. Brazil’s severe downturn in manufacturing production continued, the report noted.

In India, a five-year policy framework for promoting exports of goods and services was unveiled, while Pakistan set a five-year “Textile Policy” last year, with plans to double textile exports to $26 billion. Part of the plan is based on the European Union’s removal of tariffs under the EU’s GSP-plus program. The same is true for Indonesia.

The Philippines saw foreign-direct investment reach an all-time high of $6.2 billion in 2014, up 65.9 percent year-over-year.

Countries that made significant gains in the Global Competitiveness Index included Bangladesh, Indonesia, the Philippines and Vietnam, while China remained relatively flat. The U.S. topped the list that ranks countries based on their competitiveness across measures such as government regulation, labor-market efficiency, education and infrastructure.

Freight rates on Asia-European trade lanes have hit record lows. Average rates for 2015 for the Asia-to-Europe routes, the busiest in the world, are $697 per Twenty-foot Equivalent Units compared with $1,170 last year. Faced with below-cost rates, carriers are implementing rate increases from July and will also reduce capacity, CBX said.

With the West Coast port dispute resolved and terminal operations back to normal, Asia-North America trade lanes have stabilized. Overcapacity is still an issue, as it is on most trade lanes, impacting prices and stability. Container shippers unveiled rate increases that took effect in June.

The report noted that the dollar is expected to gain strength as an interest-rate hike approaches in September. Developments in the Greek saga are likely to support higher levels of volatility in the euro. Chinese policy reforms, including liberalization of the yuan, are pressing ahead, which most likely mean steady currency appreciation.

“The euro faces ongoing uncertainty in the face of the Greek crisis, yet a positive relationship between the euro and dollar has emerged, especially for the euro, which has performed better in recent months,” said the report.

Cotton prices are expected to trade down on expectation of weak sentiment in international markets and news of sales from China’s stockpile. Prices are expected to stay in the range of 64 to 67 cents, depending on U.S. crop conditions and production estimates. China’s expected imports were lowered from 6 to 5.75 million bales. Wool prices fell through the second quarter on low demand, a trend that’s expected to continue.

While China’s economy may be growing at its slowest pace in six years, global brands are readily expanding their supply chains to other low-cost destinations in Asia.

Vietnam is now the world’s fourth-largest garment exporter and is working to increase its share of exports, with major expansion plans for its garment industry and several free-trade agreements — some already signed and some in the works, including the ongoing Trans-Pacific Partnership negotiations. Some of Vietnam’s improvement can be attributed to the recent progress made in the country’s labor laws, better worker representation and efforts to increase safety awareness, the report stated.

“Environmental concerns are becoming increasingly prominent as countries adopt and enforce more stringent environmental regulations,” the report said. “The Indian environmental authorities disrupted supply chains by ordering the closure of nearly 900 textile units for their failure to install effluent treatment facilities, while Vietnam recently rejected an investment proposal worth $200 million, deeming the proposed textile and dyeing plant ‘environmentally unsound.’”

Meanwhile, China released an “Action Plan for Water Pollution Prevention and Control,” and authorities warned of an imminent crackdown on illegal discharges and falsification of monitoring data.

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