Transcript Bangladesh’s Role in China’s Evolving Cotton and Textile

Bangladesh’s Role in China’s Evolving
Cotton and Textile Market
by Jim Lambert
Introduction


Work at Globecot as China Analyst and
Editor-in-Chief of Globecot News Network
How I follow the China market:
–
–
–

Economic Indicators
Production
Trade
Understanding these three factors puts
perspective on the bigger picture—China’s
economic evolution
Why Bangladesh Can Compete with
China

Three major reasons:
–
–
–
End of the China price
Strategic shift to domestic consumption
Decreased competitiveness
China’s Major Textile & Cotton
Producing Areas



Fujian
Guangdong


Textile mills concentrated in
coastal provinces
Current migration to inland,
resource based provinces
Fixed asset investment in
Henan, Hebei and Anhui has
increased rapidly in past
years
Shandong, Zhejiang and
Jiangsu are still key textile
provinces
Serve large population
centers
End of the China Price




Reduced price deflation
Global apparel prices eroded from 2000 till
2005; China cut prices under pressure from
global retailers
Exporters absorbed much of the cost till mid
2005
Textile market had become freer and
exporters couldn’t withstand exposure to
such volatile price fluctuations
End of the China Price (cont)




Increase in manufacturing and labor costs,
coupled with heavy investment in modern
equipment
Rise of manufacturing cities, giving retailer
quick turnaround
Transformation to value added shifted lower
cost items to Bangladesh, Vietnam etc
Taken together, we’ve seen a rise in both
domestic and export prices
China: Monthly Textile and Apparel
Exports, 2005 - 2007
16000
Value in Million US$
15000
14000
13000
12000
11000
10000
9000
8000
7000
6000
Jan
Feb
Mar
Apr
May
2005
Jun
2006
Jul
Aug
Sep
Oct
Nov
Dec
2007
China’s total textile and apparel exports reached US$147 billion
dollars in 2006, a 25% year-on-year rise. Customs confirms average
export price increased 10.4 percent. Further increases in 2007.
Switch to Domestic Consumption


Domestic market became more attractive b/c of
potential growth
Retail sales are growing 20 to 25% a year
–



Doubling every 3-4 years
China price created oversupply in domestic market
Lack of brand recognition; only way to get business
was to lower prices
End of 2005, apparel prices were down 2% year-onyear; FH 2006 were down another 2.5%
China Consumer Price Index:
Apparel Only, Jan ’05 – Feb’07
0.5
Year-on-Year % Change
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
Jan05
Mar
May
Jul
Sep
Nov
Jan06
Mar
May
July
Sep
Nov
Jan07
Note: Dec ’07 CPI Apparel +/- Increase Not Yet Released.
Switch to Domestic Consumption
(cont)



In 2007, approximately 75% of total apparel/textile
output will be consumed domestically
In five years, this could be as high as 90%
By 2015, could be larger importer of textiles, perhaps
a net importer of finished apparel
–

Already huge importer of yarn; might become the same for
cloth
Leads us back to domestic retail sales
China Retail Sales, 2001 - 2006
10
9
7.841 trillion
In trillions of yuan
8
6.66 trillion
7
5.641 trillion
6
4.19 trillion
5
4.90 trillion
3.95 trillion
4
3
1.65 trillion
2
1
2001
2002
2003
2004
2005
2006
2007
China: Retail Sales, 2001 – 2007
100 Million Yuan
8,000.0
7,000.0
6,000.0
5,000.0
4,000.0
3,000.0
2,000.0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2001
2003
2004
2005
2006
2007
US Retail Sales in Feb were $370 billion. China in Feb
was $93.5 billion. Just about 25 percent.
Decreased Competitiveness


Appreciating currency; up 5% since end of dollar peg in
July 2005
Higher wages
–

Continued reduction of VAT export rebates
–
–
–

Textile official recently lamented about Pearl River Delta
wages up 50%
Weaning out the industry
Strong will survive
Will eventually be zero
Already outsourced basic cut and sew; what else is to come
Ju
ly
Se
pt
N
o
Ja v
n.
06
M
ar
M
ay
Ju
ly
Se
pt
N
o
Ja v
n
'0
Fe 7
b
ay
M
ar
M
'0
5
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
Ja
n
in tons
China: Monthly Cotton Yarn Trade
Jan. 2005 – Feb. 2007
Exports
Imports