Asia to take slice of Chinese apparel market
View(s):China continues to remain the undisputed top textile and clothing manufacturer although buyers may look to more promising markets as producers in the Asian region are gearing up to counteract the impact and challenge that have resulted due to the US- China trade war by offering attractive packages for investors to set up in countries like Bangladesh, Vietnam and Cambodia.
This was detailed in a presentation made by Chairman of the Textile Institute Sri Lanka Section Prof. Rohana U. Kuruppu to the Chartered Textile Technologists and the textile industry at large at the seminar by the Textile Institute Sri Lanka Section recently at the Anarva Hotel, Mount Lavinia.
Speaking on the subject of ‘World Textile and Clothing Trade in the Asian Region’ he opened the session stating that China continued until 2018 as the world’s largest textile and clothing producer and exporter but showed a decline in 2018 and this fall was more significant in the current year. However, he believes that China is still the leader in textiles and clothing manufacturing and exporting in the world. China’s economy has grown to very high level and so with their GDP. Therefore, China’s textile products are not ridiculously low.
To add insult to injury, the US-China trade war has caused concerns in the US trade. US has imposed additional tariffs on Chinese goods. Tariffs have increased from 10 per cent to 25 per cent by May 2019. This action has made Chinese textile products non-competitive in the US market. US retailers have voiced their concerns on the increase in price at US destinations. Their concern was the coming holiday season and the increase will have to be passed onto the consumers.
The impact of this scenario is that Chinese textile/clothing products’ prices have marginally gone up. The challenge is to offer products at ‘make cost’ price. At the same time buyers are moving their sourcing needs to low cost producers in Asia and producers closer to their own market. In this context, the producers in the Asian region are getting together to launch a strategic plan to counteract the impact and the challenge that have resulted due to the US-China trade war.
Countries in the Asian region offer attractive packages to convince potential investors to make garments at competitive price. The first in the race is Thailand in spite of them being less competitive in the region. Thailand is offering duty free and 50 per cent tax off for these investors. Most countries are looking for avenues to step up their production to remain competitive. Asian manufacturers are investing in new technology and carrying out research and development to make their products attractive, look new and elegant. ASEAN Economic Community (AEC) a fully integrated textile supply chain to produce and distribute with zero duty from anywhere within the AEC.
Amongst the countries in South East Asia, Cambodia and Vietnam seem promising. Textile and clothing in Cambodia accounted for 67 per cent of their total earnings in 2017. Vietnam has earned US$31,200 million in 2018. Except Cambodia, the largest market for Philippines, Thailand and Vietnam is the US with a 53 per cent share for Philippines, 15 per cent share for Thailand and 39.1 per cent share for Vietnam. Largest market for Cambodia is the EU with a 46 per cent share.
The textile and clothing export for South Asia is also promising with Bangladesh in the lead. Textile and clothing of Bangladesh accounted for 89.7 per cent of total export earnings in 2018. Sri Lanka accounted for 44.7 per cent whilst India had 12.1 per cent.
Bangladesh’s textile and clothing exports reflected a growth in several markets like Australia, Brazil, Canada, Chile, China, the EU, India, Japan, Mexico, Russia, South Africa, South Korea and the US. Bangladesh is facing a threat from the EU to revoke the preferential treatment, if Bangladesh government fails to take swift action to improve the building safety standards and overall labour conditions in the country.
Retailers are concerned about capacity when they shift their sourcing. In these alternative sourcing locations, the buyers’ say, “additional capacity takes time to ramp up”.
Can China be left behind in the effort of looking for new sourcing places? The Asian region may not have the infrastructure to produce the quantities that are needed. Bangladesh and Vietnam may come somewhat closer to China but will not have the wherewithal to compete with China. It is not easy to shift all the production overnight. But of all of the countries offering special packages to attract buyers put together, when it comes to innovation and technology China remains the undisputed leader for many years to come.
In conclusion, he said if Sri Lanka is to be successful in textile and clothing exports, there is a need to have a concerted effort by all stakeholders and there is a dire need to address the small and medium textile and clothing industries and perhaps the large scale too, if Sri Lanka is to accelerate annual earnings. The Sri Lankan industry is very capable of stepping up the production, what it needs is guidance and support.