China’s Textile Industry Slumps Amid Slowing Global Economy

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July 10 – China’s textile and garment exports have significantly plunged, resulting in a 3.7 percentage decline in the growth rate from September to May. China Customs attributes the slowdown to the rapidly appreciating RMB, increasing production prices, in addition to an export rebate rate cut and the slowing global economy.

Xinhua reported that textile and garment exports—worth US$66.2 billion at the beginning of 2007—saw a growth rate drop of 0.2 percent last year. Under strain, Chinese exporters have moved large portions of their mainland production to the central and western regions where labor costs are relatively lower.

During the first five months of 2008, central provinces like Henan, Hunan, and Sichuan, saw a 30 percent increase in their textile and garment output as they began to appeal to domestic textile enterprises more.

China is not the only Asian country which has experienced a decline in exports growth. Vietnam’s textile exports have also failed to meet expectations so far this year. Although earnings amounted to US$4 billion in the first six months of 2008, a 17.7 percent year-on-year increase, they equaled only 42.9 percent of fiscal year goals.

Cambodia has also had a rough year thus far. Its apparel industry has become the most important sector of manufacturing for the industry, accounting 82 percent of the country’s total exports and contributing around 14 percent of Cambodia’s GDP. As Fibre2fashion.com reports, Cambodia has enjoyed impressive returns in other industrial and agricultural sectors of its economy but anticipates a lower economic growth rate overall in 2008. The core reason would be the poor performance of its garment companies in the face of worldwide market trouble.

Less than four years ago, Cambodia struggled as a contender in the global textile industry. Today, the country is surpassing its long-time competitor, Vietnam, to become the leading investment destination for China’s textile firms, according to China Knowledge Newswire.

According to Qing Yu, CEO of the top Chinese textile enterprise Hongdou Group, numerous Chinese textile firms have expanded into Cambodia. “The investment environment and condition of Cambodia is better than that of Vietnam.” Many Chinese textile manufacturers are choosing the country following visits to Vietnam and other neighboring countries, Qing says.

Cambodia currently has approximately 300 textile factories and 350,000 employees in the garment industry. The apparel business is the country’s greatest source of income. The International Monetary Fund visited Phnom Penh last month to introduce revised macroeconomic polices intended to revitalize sluggish textile exports.