Under the MFA quota system, each supplier country poised to the limits on the volume of textiles and clothing which may be imported from each individual nation with which it trades. From about 60 different countries, U.S. quotas comprised of 2,400 products. It was anticipated that removing these quotas will mainly be beneficial to Chinese (as well as a smaller amount to Indian) producers, who definitely are competent to challenge their international competition because of its mixture of an undervalued currency, low wages, and outright labor domination. In an incongruous twist, the majority of developing countries, who insisted on the phase-out of the heavyweight denim fabric as resources to boost their exports of textiles and clothing to well-off countries, insisted on an extension of quotas as well as other system that will assure them any share of productive country markets provided the projection of China’s awesome supremacy. China, through the help of a few other large developing countries, chucked these demands produced by Turkey, along with a bloc of African, Asian, Latin American and Caribbean Basin countries.
The gain of China is not only on its benefits in wages. In addition, it profits from the large trained and dynamic workforce, propinquity to inexpensive quality resources, and encouraging government policies, including subsidized lines of credit and exchange rate manipulation. These aspects, jointly in low wages, will create China, by far the most chosen supplier for many retailers, particularly after 2008, if the likelihood the usa to impose safeguards on Chinese products is removed.
Chances are it will make feelings of the consequence the conclusion of WTO textile and apparel quotas by analyzing what went down when quotas on some products, covering dressing gowns and luggage were zeroed in 2002 as part of the quota system phase-out. This change gave a 53 percent decrement in the average price per square meter that China got because of its exports in those categories, from US$ 6.23 before to US$ 3.12 after quota removal. China’s market contribution during these items increased from 2002 to 2004, up 888 percent in luggage and 1,179 percent in dressing gowns. Overall, China now states 72.3 percent of the Usa apparel import market in every products where quotas were raised in 2002.
Denim market of China – China is the world’s leading supplier of denim garments, having 30% of global production. The nation exported US$1.8 billion worth in 2004. With quotas removal, demand is projected to rise by greater than 20% in 2005. But a government-imposed export tax and looming US and EU to protect threaten growth.
Almost all denim garment producers in China make jeans, and many of them offer shorts, skirts, dresses and shirts. Many companies provide jeans as their main product line. In some companies, jeans are produce of around 90 percent of their total production. Jeans and shorts report for 64 percent of the denim garment exports by suppliers Jackets report 16 percent, skirts and dresses 13 percent and shirts 7 percent.
According to Global Lifestyle Monitor, average usage of denim apparel in 2003 was observed in U.K.-12.9, Japan-12, Hong Kong-11.8, Italy-10.8, China-7.9 and India-3.1 items. But, generally consumption of stretch denim fabric manufacturers remains highest in the Usa, Germany and Colombia and lowest in India and China. Though, most industry experts believe denim consumption in Asia (most particularly China) to explode within the next a long period as income increases and wardrobe dictates vanish.
Present performance of Denim – Based on official data, China’s exports of denim fabrics considerably increased inside the first 50 % of 2005. China’s exports of cotton denim fabrics (HS 520942) were increased 17.80% in volume terms in the first six months of the year to 193 million square meters to Hong Kong’s denim’s harshly rose direct exports to Korea, Russia, Cambodia India also increased. Prices were increasing during the time, in line with useful content.
Shipments even increased concurrently to 30 million, giving rise in average price to US$ 1.71 per square meter. China’s exports to Hong Kong increased 25% in volume terms, now reporting 38.80% of total shipments of cotton denim fabrics.
Greater demand within China – A better slice of those fabrics shipped to Hong Kong normally reverse to the mainland where they are employed by apparel factories. The sudden rise in first half sales to the SAR (Special Administrative Region) provides the important contribution of Hong Kong’s trading houses in the denim business in China. With the end of quotas on denim apparel, need for denim fabrics was evidently robust within the first half within the PRC. Based on official data, direct selling to other regions were also harshly increased inside the period, somewhat because of to an increment in clothing production in these countries or a decrement in domestic output. Shipments to Korea were increased 62% on the period, being a clear indication of diminishing Korean denim production. In contrast, a 132% start exports to Russia more possibly gives an increment in Russian apparel output. Other denim suppliers may also have mislaid market contributions, including Taiwanese manufacturers.
Exports to India, Turkey and Cambodia: Increasing. China’s shipments to India and Turkey boosted simultaneously. Contributions of such areas overall denim exports from China are very low. Prices increased in accordance with better quality and much more useful content. In China like to another place, the standard of fabrics is enhancing and it is being more complex.
Though, its exports to Cambodia were increased to 51% in volume terms. Our prime valued fabrics send to Japan at US$ 2.69 per square meter while low-priced products were bought by Bangladesh (US$1.54), Russia (US$1.49) or Mexico (US$1.31).
Denim fabric re-exports of Hong Kong – Hong Kong’s trading in cotton denim fabrics kept increasing inside the first half, improved by higher sales to China as well as other low-cost countries like Bangladesh. Hong Kong’s denim exporters are gaining advantages of the rebound in Asian clothing production in the post-quota period. Unit values decreased in portion of the year in partly as a result of poorer cotton prices.
Hong Kong’s re-exports of cotton denim fabrics (HS 520942) were increased more than 32% in volume terms in the first portion of the 53,700 tons. Re-exports had already rose 23.80% in 2004 to 85,600 tons. Shipments only increased 28.40% in US$ terms within the first 6 months after average unit price was down a lot more than US$4.79 per kilo.
China’s share increased in re-export from HK – Not unexpectedly sustained to invite the larger element of Hong Kong trading activities in denim fabrics. Re-export to the mainland of China were increased 43% inside the first half after rising by 35% China’s share of re-exports a bit increment from 60.70% increased to 61.8% because of this.
The real key fraction of denim fabrics which are re-exported by Hong Kong’s traders actually- sourced from China. China completed 88.60% of total re-exports from Hong Kong inside the first half, increased from 85.60% in 2004. Though, Hong Kong’s trading houses started diversifying sales with other areas during the last years. Consequently in the first half, re-exports of cotton denim fabrics to Bangladesh got doubled. Shipments reported 3.8 million kilos, with Bangladesh turning out as the second destination. Its contribution of total re-exports increased from 4.70% to 7.10%.
Chinese denim falling to keep up – Compared, sales to Cambodia and Vietnam decreased 14.40% and 6.10% simultaneously. Shipments to Indonesia increased 65% while re-exports to the United States soared, but from awfully lower levels. Shipments to the US market only calculated to 1.70% of total shipments within the first half. In provisos of resources, Japan dropped having a limited 8% development in Hong Kong’s re-exports of Japanese denim fabrics. Though, Pakistan received contributions from the Hong Kong market hiwaqk a 166% raise in trading of Pakistani denim that only calculated to .70% of total re-exports.
Tendency and factors observed in China’s denim industry – The prospect of some denim garment suppliers in China is doubtful. Stiffed competition and possible US protection measures may noticeably affect firms that embarked on capacity enhancements. These firms might not be capable to regain their investments in additional machinery, which they purchased to enhanced capacity and be more gung ho.
Small suppliers that spotlight on low-end production could be the mainly influenced by the newest government-imposed export tax. Inside the intensely competitive free-market environment, increasing prices to balance lost profits could switch to lost orders.
Many low-end suppliers are shifting towards the value chain, targeting production on midrange as well as stretch denim fabric suppliers. These suppliers are spending more in R&D in arrange to expand more upscale products.
This stuff have likewise given many midsize companies to vertically integrate production and enhance production output. Many leading companies already carry out all production processes in -house. Accomplishing this has offered these leading companies a little more space to captivate unforeseen additional costs, such as export taxes.