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China loses price advantage in textiles space

Italy’s textile imports from China fell 8.7 per cent in the first 10 months of last year. Narrowing price difference with China means Italy’s wool industry is now having demand from domestic customers. International textile buyers are increasingly switching away from China, and back to Western suppliers, as rising labor, raw material and energy costs make the world’s dominant producer more expensive.

At the same time, China’s textile sector faces rising costs of inputs such as cotton and wool, hefty import taxes for basic manufacturing equipment, and costlier environmental rules. Higher costs are weakening China’s international advantage and it faces a double whammy from developed countries - like Italy - with better technology and developing countries with lower wages.

The labor cost gap between Italian and Chinese yarn narrowed by around 30 per cent between 2008 and 2016. The hourly wage for a Chinese weaver has been up 25 per cent since 2014. The wage in Italy has been up nine per cent over the same period. Western clothing brands are under pressure to offer more collections and customers increasingly want customised looks. Their suppliers need to be closer. In China, the supply chain is not close and is scattered giving Italy a competitive advantage.