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Sourcing shifts from China to other destinations

As labour costs in China continue to rise, the country's apparel and textile industry is witnessing export orders move to other sourcing destinations as foreign buyers seek lower-cost manufacturers. This move could be especially damaging for smaller, low-end Chinese manufacturers, leaving China-based orders increasingly concentrated amongst larger companies, according to a report from the China Cotton Textile Association (CCTA). 


“Small to medium manufacturers said their orders dropped sharply during the first quarter of the year, while big manufacturers said they had enough orders to keep them busy,” explains CCTA. In Guangdong province, for instance, the nation's major export-oriented production base, only 22.3 per cent of about 4,600 local manufacturers said they have sufficient orders. While more than 66 per cent said they only had orders for three months' work, according to a survey published in March by the Guangdong Association of Garment and Garment Article Industry (GAGGAI).


The study also revealed that of 4,647 local manufacturers in the province, 574 local manufacturers reported a combined operating loss of 573.40 billion Chinese Yuan, up 13.2 per cent from 2012. That said, the nation's largest province for textile and apparel exports is still making money, as it reported combined profits of 25.8 billion Chinese Yuan, up 19.95 per cent year-on-year.


Also, according to a 2013 report by US consulting company McKinsey, proximity sourcing is becoming more important for certain European and American clothing brands, pushing them to look for manufacturers closer to home than China. As a result, a growing number of big Chinese textile companies are moving parts of their businesses overseas. A recent example has been the Zhejiang province-based Keer Group Co's plans to invest 218 million dollars in building a cotton yarn plant in South Carolina.


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