China's textile industry, after dominating global markets is losing its competitive edge as a result low-end operations are moving to emerging producers. Leo Yung, Director of Central Textiles (HK), feels that in the last two years, rapid expansion of textile investment in several developing countries has lead to oversupply, sparking fears of earnings and survival of many mills in Asia. Yung told the Australian Cotton Conference that China is losing in terms of costs to countries such as India, Bangladesh, and Vietnam. Many mills have been forced to switch from exports to domestic sales, which now comprise 79 per cent of production.

This comes after major migration of textile production from the US, Europe and Japan to developing countries such as China, India, Pakistan, and Bangladesh. More than 70 per cent of world cotton is now consumed in Asian countries. China dominates with 42 per cent share. However, Yuan feels many mills in China which are struggling and may even close down in a couple of years, especially the small ones doing export business.

Oversupply had depressed prices along the entire supply chain, hitting yarn prices in China, India and Pakistan. China was reeling from an 18 per cent rise in the value of its currency since 2005. Added to this is the higher costs of labour, fuel, electricity and chemicals, not to mention a cut in domestic tax rebates, official moves to slow the economy, and pollution curbs.