China's textile industry costs continue to rise, resulting in the loss of international customers

Rising labor, raw materials and energy costs make the price advantage of China's former world factories no longer obvious, and more and more international textile buyers are gradually turning to European suppliers.

Alessandro Barberis Canonico, the owner of the small town of Biella in the northern Italian wool industry center, said that due to the narrowing of the spread between China and the near-more flexibility, more high-end customers are being acquired. He recalled: A well-known European customer said that due to rising costs and demand for quality, he decided to give up China, so Biella needed a large number of fabrics.

Despite this, China is still a major textile producer. According to China's National Bureau of Statistics, the Ministry of Industry and Information Technology, Chinese textile import and export Chamber of Commerce data show that in 2015, about 460 million people in the textile industry, including textiles including apparel exports of $ 284 billion, accounting for annual GDP 10%. However, China’s annual compound annual growth rate of salary is over 12%, which is higher than the economic growth rate and no longer has a price advantage.

Meanwhile, China's textile industry is facing cotton, wool and other raw material prices, high import duties basic production equipment, costly environmental treatment costs. The five-year plan of the textile industry announced by the Chinese government last year pointed out that high costs are weakening international advantages. At the same time, China is also facing "double-sided" attacks on developed countries such as Italy and those in developing countries with lower wages.

Attractive decline

According to the International Textile Manufacturers Federation (ITMF), the gap between yarn labor costs in Italy and China narrowed by 30% between 2008 and 2016, from $0.82/kg to $0.57/kg. In 2016, the average hourly wage of Chinese weavers was $3.52 per hour, up 25% from 2014. At the same time, Italian weavers earned an hourly wage of $27.25 per hour, up 9% from 2014.

Xiao Lumu, CEO of the Hong Kong Textile Chamber of Commerce and CEO of the textile manufacturer Huafeng Group, said: "When China's wages are no longer so low, the attraction of transporting raw materials to China and then transporting the products back to Europe is no longer the same. They would rather return to Europe. Production, and this trend is already obvious. At the same time, consumers hope that Western clothing brands will provide a richer product range, and the demand for customization is also increasing. The closer the suppliers are, the better."

Ercole Botto Poala, CEO of Italian textile manufacturer Reda, said: “In China, the distance between suppliers is not very close and very fragmented, which provides a competitive advantage for (Italy).”

According to the Italian Textile and Fashion Association SMI, Italy’s Chinese textile imports fell 8.7% to 347 million euros in the first ten months of last year. At the same time, Italian textile exports to China increased by 2.8% to 165 million euros, but textile exports fell 2% to 4.3 billion euros.

Quality and transparency

Giovanni Germanetti, head of Italian textile and fabric manufacturer Tollegno 1900, said that higher cost performance drives customers back to Europe. “Before, given that the (brand) is willing to pay very little, they are blind to quality.”

Alessandro Brun, a professor at Politecnico di Milano, said that brands (returning to European suppliers) are also considering product transparency and avoiding potential reputational risks. According to the manufacturer, in order to protect trade secrets, some suppliers are reluctant to announce which brands supply fabrics, and many international clothing companies choose Italian wool fabrics so that they can mark the name of the factory on the sign and distinguish it from competitors. For example, Benetton, the Italian high street brand, said that the company's new Italian-made limited edition seamless wool sweater fabric comes from the Tollegno 1900.

Customer continual loss

The China Canton Fair, which is 9000 kilometers away from Biella, is no longer in the market, and some buyers say they are gradually giving up China. Olesia Pryimak, who owns the large-size fashion company Opri in Ukraine, said: "Compared to two years ago, the number of products we purchased from China has been reduced by 60%."

Olesia Pryimak revealed that due to the quality , price and closer to Europe, the company is increasingly purchasing fabrics in Turkey.

Many of the producers and buyers surveyed said that the data showed a faster drain. 10 months of 2016, China's textile exports to the EU rose 1.4%, but fell 4.1% in October.

Hong Kong spinning mill Novetex Holdings supplies wool and cashmere yarns to international brands such as Burberry and Max Mara. During the peak season, the company hired about 1,100 workers. The company recently said that it is investing more in automation equipment and will cut 2/3 of its workforce within two years. Milton Chan, director and CEO of the company, said: "The whole cake has become smaller, and many agents and smaller companies have gone bankrupt."