Change is in the air

Cracks in the Chinese textile and clothing export machine have started showing with shipments to the US in the first quarter of this year declining by nearly 10% from the same period in 2007.

A new report from Textiles Intelligence states that the country is losing its competitive edge in this industry on the back of rising input costs, lowering of export tax rebates, new labour laws and other regulations and tighter credit availability.

At least seven Asian countries can now offer lower costs than China which are as high as $1.08/hour in the coastal provinces. In comparison, wage costs in Vietnam, Pakistan, Cambodia and Bangladesh average $0.38/hour, $0.37/hour, $0.33/hour and $0.22/hour respectively.

Additionally, the Chinese government is keen to move to a new economic model. This one will be focused on domestic consumption and exports of high value products. China clearly does not want to be a factory for the world for low end products.

A drift in textiles has in the past signalled the start of a wider change in global manufacturing. I have been increasingly coming across reports of companies looking at alternative locations for products ranging from plastic toys to leather goods. And a question that is also being asked is if the US can bring back jobs from China

China’s diminishing competitiveness and is good news for Indian exporters if they can overcome the many hurdles standing in their way. Indian companies too face rising input and wage costs but probably not on the same scale as China. And the industry needs to find a skilled and productive workforce of the kind that made China an export powerhouse. And even more important, a supportive government policy would go a long way in helping the Indian industry expand its global market share.

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