"Three high" compression meager profits Guangzhou trade clothing industry struggling

Every reporter Li Yaxun sent it from Guangzhou on February 16, the day before Lantern Festival, the wet and cold weather in Guangzhou's early spring showed no signs of change. It echoed with the disinterestedness of the foreign trade clothing city of Jinlongpan Guangyuan West Road.

Jinlongpan Foreign Trade Garments City is a foreign trade clothing wholesale market in Sanyuanli District of Guangzhou. A large part of the foreign traders who do foreign trade rely on export sales to make profits.

However, their days are very difficult now. *** The exchange rate and raw material prices have risen steadily, making stall owners worry but have no way to go.

This is not a "foreign business"

Walking in the Sanyuanli District of Guangzhou and the Xiaobeilu Area can often meet many African businessmen. Most of them are doing clothing foreign trade business.

“Before 2007, the business was doing much better.” said Zhang Zhang, who operates foreign trade clothing stalls in Jinlongpan’s foreign trade clothing city. Zhang recalled that before 2007, his main source of business was selling clothes to African customers. At that time, selling a pair of jeans could earn more than 2 yuan. "There aren't many people coming now, and even if they want to buy me, they don't necessarily dare to sell."

The reason why they did not dare to sell was that there was no profit, and profits were stolen away by the escalating exchange rate. Lao Zhang calculated: Before 2007, a pair of trousers African customers willing to buy 28 yuan, and now 1 dollar can only be exchanged for more than 6 pieces of ***, and foreigners in the purchase price is out of the dollar as a standard outcry. The same pair of pants, now the other side only wants 23 yuan.

Ms. Wang, another owner of the Golden Dragon Plate Foreign Trade Garment City, is facing such embarrassment every day. An African customer came to her stall and talked about buying and selling. He thought Ms. Wang's price was unreasonable. He was smart enough to pick up the calculator and press the price he thought was reasonable. Ms. Wang shook her head and said a few "NO" and the sale failed.

Do you persist in the loss or change?

Ms. Wang told the “Daily Economic News” reporter that at present, the price of a regular pair of jeans in Jinlong’s foreign trade clothing city is RMB 20 to RMB 30. In addition to the high exchange rate that makes the business tend to be bleak, the cost of getting the goods has also risen.

Lao Zhang told reporters that the current purchase price of a pair of jeans is more than one more than before. "The price of materials has risen. Workers' wages have also risen. How can pants not increase prices?"

Since last year, China’s inflationary pressure has been increasing. Since October last year, cotton has also joined the tide of price increases, which has directly led to the rising cost of the clothing industry. According to Xinhua News Agency, since the second half of last year, the price of fabrics has increased by more than 60% from the first half of the previous year, which has caused a sharp increase in business pressure.

Zhang pointed at a relatively complex pair of jeans, and said to reporters: “I just don’t have 35 yuan for this trouser, but the ex-factory price is about 30 yuan.” He pointed to a relatively simple pair of jeans: “ This pile, if someone can take it all, I'll be willing to take a 10 yuan, but nobody wants it."

He explained that the cost of such trouser manufacturers is actually more than ten yuan, because some of these pants are awkward, so the manufacturer sold him at 8 yuan. "I'm selling a pair of trousers and I'll earn a dollar." Zhang said that there were once some African guests who had set a large quantity of goods here. After paying the deposit, they found that they could not make money and ran away, and the stockpiled goods were likely to lose money.

Lao Zhang said he was already in a loss. He said that many people in Jinlong Pan’s clothing and clothing city have suffered losses, and some people have switched.

"Daily Economic News" reporter in the clothing city to see, in addition to the first floor and the second floor there are more stalls are still open, the third floor above is the empty shop stands, holding some advertising.

Ms. Wang and Lao Zhang have nothing to do with the losses they may face. "If there is more cash, I may consider starting the factory myself so that I can save the cost in the middle." Lao Zhang thought for a while.

The apparel industry may face shuffling. Even with cash, the days of opening a garment factory are not too good.

The continuously rising cost of raw materials is testing Guangdong's manufacturing industry, which has a lower overall profitability. According to relevant calculations, the profits of Guangdong garment enterprises are generally around 3%, but due to the low bargaining power of domestic companies, most companies choose to “digest” the pressure of price increase in their own way. *** The rise in the exchange rate is undoubtedly worse for garment companies under high cost pressures. Some people calculate that if *** appreciates by 1%, nearly 20% of companies will approach the threshold of profit and loss; if *** increases by 5%, it is estimated that more than half of the companies will face closure.

Liu Yueping, chairman of the Guangdong Clothing and Apparel Industry Association, also said: “The appreciation of *** will bring a serious blow to apparel export processing companies. At present, the profits of domestic garment processing companies are generally within 5%, if the appreciation of *** is 6%, then May cause clothing exporters to lose money."

In this context, Lao Zhang’s clothing city stalls are difficult to survive. It is only that the whole industry is in the extreme embodiment of the end, and upstream garment companies are also facing life and death choices. In addition to the pressure brought about by the cost of raw materials and the high exchange rate, the labor costs that have been rising since last year have been rising. This year, the apparel manufacturing industry, which is in a precarious situation, is being more strongly impacted.

After the Spring Festival, recruitment advertisements can be seen everywhere in the major cities of Guangzhou, Zhongcun and clothing companies. After rising wages last year, prices soared and workers’ expectations for pay increased. In this regard, bosses are struggling between start-up and profitability. The owner of a small garment manufacturing company in Guangzhou said that there is no way to give up the factory.

In fact, after gradually emerging from the haze of the financial tsunami, China's clothing exports have also recovered. Data show that in the first half of last year, the textile and apparel industry accumulated a total value of 88.878 billion US dollars, an increase of 22.09%, of which 53.22 billion US dollars in apparel exports. The year-on-year increase of 16%.

However, hidden concerns cannot be erased by these optimistic figures. Some analysts said that economic recovery has increased foreign orders, but garment export orders generally have low profit margins. Some companies have to protect their capital and even lose orders at the expense of retaining customers. After the appreciation of ***, some export products may turn to the domestic market for sales, which will also increase the competition in the domestic market.

Some industry insiders predict that the “three high” pressure may stimulate the industry to reshuffle. If the company does not carry out industrial upgrading and structural adjustment, it is likely to be eliminated.

However, for these large and small garment manufacturing companies and apparel traders, the salary increase still allows them to do nothing, let alone rely on their own power to upgrade? This is just as if the body is in a bit of a quagmire, but also requires them to take off, easier said than done?