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WWDStyle issue 04/12/2011

BEIJING — Chinese textile manufacturers attending the Intertextile trade show said rising raw material prices, the potential for further appreciation of the yuan and increasing consumer inflation rates continue to be ongoing concerns and are the main culprit for lukewarm sales in recent months.

This story first appeared in the April 12, 2011 issue of WWD. Subscribe Today.

Ivan Yang, vice president of Zhejiang Yaoguang Textile, said business has been off, and that “maybe in two months the orders will come, but not now.”

Yang said few clients had visited his stall at this year’s trade show, noting that costs for the company’s fabrics had increased 30 percent since last October. He said he hopes demand will pick up sometime around May after American retailers gauge consumer reaction to higher prices in stores for the spring season.

A similar disappointing feeling was felt throughout the fair, which ended its three-day run at the China International Exhibition Center here on April 1.

“Business is not going well,” said Jimmy Jiang, a sales executive with Firstextile Co. Ltd., a manufacturer based in Jiangsu Province near Shanghai, which specializes in yarn-dyed poplin, dobby and stretch. “Many orders have been lost.”

Jiang said the manufacturer is struggling to fill orders for its core customers, which include American and British brands that often refuse to raise their target prices in accordance with the rising cost of raw materials.

“We will decrease our price to try our best to match [theirs],” he said. “That means we have little profit, but we have to keep our long-term relationship with them.”

Firstextile has had moderate success selling cheaper blends of cotton and polyester to Americans, while British companies still prefer 100 percent cotton, Jiang said.

Brightly colored synthetics, including polyester and rayon, were among the most common samples on display at the three-day event. Dark, wool blends were also dominant. A small, but noticeable, number of vendors displayed eco-friendly fabrics made out of bamboo or recycled cotton.

Rising labor costs paired with inflation and the potential for further appreciation of China’s currency are also worrying manufacturers. Scores of factories across the country have been forced to cut back or close in recent months as workers demand better salaries to match the growing cost of living.

“It is a big problem,” Jiang said. “If we do not increase our wages, many workers will leave, and then there will be no one to make the fabric.”

Some manufacturers at the trade show were quoting prices in yuan instead of dollars in anticipation of further appreciation of the Chinese currency, a move that would ensure they would not lose money if the dollar becomes even weaker against the yuan, according to Kaled Alabi, who runs a fabric wholesale business in Syria. Alabi said a number of factories chose not to participate this year due to concerns that material costs would rise even further, and money would be lost on orders locked in at certain prices now.

He noted that there were fewer foreign buyers at the show, many not coming due to turmoil in the Middle East or because they are starting to turn to other regions to buy fabric due to higher prices from China. Alabi also cited concerns with the quality of Chinese-made materials, as well as issues with on-time delivery as reasons why some international buyers are looking to other markets for sourcing.

European manufacturers were slightly more upbeat. Chinese brands are buying more materials from places such as Italy and France as they attempt to lure more domestic customers.

Andrea Castelli, chief executive officer of Italian fabric manufacturer Andreazza & Castelli, said orders from China are slowly growing. This was his second time at the Intertextile show in Beijing.

“It is still very small, but it is increasing,” he said. “The main problem is there are not so many local brands that can afford [our fabrics], so at the end the percentage of high-end fabrics is still quite low.”

Anthony Cuthbertson, creative director for David Lawrence and Jigsaw, which are owned by the Sydney-based Webster Holdings, attended the trade show to source samples for winter and the end of spring 2011. He was searching for polyester from Japanese and Korean manufacturers, jacquards from the Italians, and cotton and linen from the Chinese.

He said one of the main concerns for sourcing out of China surround delivery dates of products. The company’s factory, located around Shanghai, purchased cotton in bulk when the commodity was at a low last year, he said, which helped to fend off the full brunt of the material price hikes.

“We have not suffered as much,” he said. “The Australian market is pretty healthy.”

Still, price increases in silk and cotton, as well as rising salaries for employees on the Mainland, has meant the company has had to look for ways to streamline.

“The consumer doesn’t want to pay more,” Cuthbertson added.

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