China's Clothing Retail Market is Set to Soar
July 3, 2014

The competitiveness of the Chinese clothing industry is set to weaken over the next few years as costs rise. As a result, export growth could falter, according to Issue No 168 of Textile Outlook International from the global business information company Textiles Intelligence.

Rising costs in China are already forcing an increasing number of Western apparel brands and retailers to cut back on their sourcing from China and have their apparel manufactured elsewhere. In response, the Chinese government is pursuing a policy of encouraging growth in the domestic clothing market in order to take up slack in its manufacturing sector caused by this apparent loss in competitiveness.

The rise in costs in China stems in part from significant increases in fuel and shipping costs. Also, wage rates have risen to the point where they are higher than in many other Asian countries. Wage costs are set to increase further, given the Chinese government's commitment to raise minimum-wage rates by an average of 13 percent per annum during 2011-15.

In most cases, the companies that are cutting back on having their apparel produced in China are relocating manufacturing processes to other low-cost countries - mostly in Asia. The strongest growth in European Union clothing imports in 2013 was in imports from Bangladesh, Cambodia and Pakistan, while the strongest growth in the United States clothing import market was in imports from Bangladesh, Sri Lanka and Vietnam.

The potential for growth in China's domestic market is huge. Consumer expenditure per head on clothing in China is extremely small - despite significant expansion in recent years. In 2012, it was only US$290 in urban areas and just US$63 in rural areas compared with an average of around US$1,400 in Germany, the United Kingdom and the United States.

If expenditures per head in China were to climb to US$1,400, then domestic demand for clothing would be US$1,560 billion per annum greater than it is at present.

This additional demand would more than compensate for any likely fall in exports, given that it equates to about nine times China's clothing exports to all destinations in 2013.

China is currently the top importer of raw wool worldwide as well as the top importer of U.S. raw wool.

Reprinted in part from Textile Outlook International