At the bustling Canton Fair in southern China, second-generation textile manufacturer Pan Jing has drastically marked down her prices.
Tough times for China’s once-booming clothing industry
The sign at her booth says it all: “Stock very cheap, factory for sale ... stock clearance.”
It wasn’t an easy decision to sell the cotton mill started by her father in 1986, a time when China was emerging as the global center for textile and clothing production.
For 32 years, the family has been making household cotton products – from pot holders and oven mitts to dishcloths and towels – and exporting them to the United States and Europe.
More recently, they tried to upgrade their product lines at the 430,000 square foot factory in the southern Guangxi region, adding recycled cotton shopping bags and pillows in the shape of emojis in a bid to bring in more customers.
But rising labor costs and slow growth in overseas demand have left Pan with no choice but to sell the business to a bigger textile manufacturer with a domestic focus, in the hope that new capital can keep it afloat.
“I don’t see a future in continuing to sell these low-value goods,” said Pan, who has been attending the Canton Fair for over a decade. The trade fair, which runs until May 5 in the provincial capital of Guangzhou, is the country’s oldest and biggest export-oriented event.
China’s textile and apparel makers are going through a painful industrial restructuring. While the country is still the world’s largest clothing exporter with enormous production capacity, oversupply at home, high labor costs, and rising global protectionism have all eroded its competitiveness.
Pan’s company brochures for the trade fair over the years reflect the changes in the industry. Six years ago, the tagline was “To be proud of Made-in-China,” while last year’s was “Low-carbon and environmentally friendly cyclical development.”
This year, there’s just a flier advertising the stock clearance.
China’s market share by value in the global textile and clothing industry fell from 38.6% in 2015 to 35.8% in 2016, with a downward trend in major apparel importing regions such as the US, European Union and Japan.
Since 2014, exports of Chinese textiles and clothing have declined sharply: from about $236 billion in 2014 to $206 billion in 2016, according to the World Trade Organization.
Meanwhile, labor costs in China have been rising steadily. The minimum wage in the southern boomtown of Shenzhen is now about $336 per month – more than double the rate in some Southeast Asian countries.
Although analysts say Chinese textile and clothing makers are at low risk from the looming trade war between China and the US, given that they export so little to America compared to other sectors, US brands are starting to diversify their sourcing.
A survey of 34 executives from leading US fashion companies last year found that, for the first time, fewer US brands were looking to China for products, even though the country remains the top sourcing destination for the industry worldwide.
For many US brands, a third of their products now come from China, a third from Vietnam, and the rest is from other countries, said the US Fashion Industry Association, which conducted the survey.
But Sheng Lu, assistant professor of fashion and apparel studies at the University of Delaware, said “made in China” products were not losing their price competitiveness because of overall supply chain efficiency.
“It is also important to recognize that China is playing an increasingly important role as a textile supplier for apparel exporting countries in Asia,” Sheng said.
According to Sheng’s research, Bangladesh’s textile imports from China, measured by value, rose from 39% in 2005 to 47% in 2015, and similar trends could be seen in Cambodia, Vietnam, Malaysia and other developing countries in Asia.
China still has a part to play – but it’s too late for Pan Jing’s cotton mill.
Additional reporting by Jane Li