In 2010, textile and garment export companies that experienced a positive shift are expected to face significant challenges in the coming year, including "low growth and high costs." At a symposium held by the China Cotton Textile Industry Association, Wang Qiang, a senior analyst from First Textile Network, highlighted that the export environment for 2011 will be influenced by several unfavorable factors, such as rising production costs, increased exchange rate volatility, and the lingering impact of the European debt crisis.
According to data from the China Cotton Textile Industry Association, China's textile exports between January and October this year reached $161.53 billion, marking a 23.13% increase compared to the same period last year. This follows a negative growth of -10% in 2009, showing a clear recovery trend. However, despite the impressive numbers, experts remain cautious about the long-term outlook.
Wang Qianjin, an industry analyst, pointed out that while the current export performance appears strong, the underlying situation is not as promising. In the first ten months of this year, China’s total textile exports surpassed the previous year’s level, with estimates suggesting that the full-year value could reach nearly $200 billion—setting a new record for recent years. With China's textile and apparel industries holding over 30% of the global market share, the sector is beginning to show signs of saturation.
At the same time, domestic production costs have been rising sharply. According to the HSBC PMI survey, which tracks manufacturing trends among small and medium enterprises, the average input cost in November rose to a 28-month high. The cost of textile raw materials has increased significantly this year, with some materials like cotton seeing price hikes of over 30% to 80%. Labor costs in key regions such as the Yangtze River Delta and Pearl River Delta have also surged, with wage increases ranging from 20% to 40%. Additionally, government policies on energy conservation and emissions reduction have led to higher environmental compliance costs for businesses.
These rising costs have squeezed profit margins for many export-oriented companies. Small and medium-sized enterprises, in particular, are struggling to absorb these increases. Wang Qiang noted that although the overall industry performed well this year, one-third of companies accounted for more than 90% of the sector's profits, leaving most firms with very low or even negative margins, making it difficult to sustain operations.
Currently, the majority of China’s textile export companies are SMEs. Data from the China Cotton Textile Industry Association shows that large-scale textile enterprises accounted for 62.83% of total textile exports in 2010. As the industry moves toward larger-scale operations, Wang Qianjin predicts that by 2015, this proportion could rise to 75%, signaling a wave of consolidation and the potential elimination of many smaller players.
Looking ahead, Wang Jinjue believes only two types of companies will survive in the international market: those with an average profit margin above 5%, and those with strong bargaining power, allowing them to pass on rising costs through price increases. For the rest, the road ahead will be increasingly challenging.
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