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Textile industry fights in gloomy

By Diao Ying (China Daily)
Updated: 2008-05-12 10:41

"Too expensive," a buyer from the US at a trade show in Guangzhou says shaking his head in disapproval when told 100 zippers would cost him $2.1. Watching the buyer walk away, Ye Yiren, a sales manager of the zipper company, sighs: "I have already offered him the lowest price possible."

Given the soaring metal prices in the world market and the rising labor cost in China, the $2.1 for 100 zippers, or about 0.1 yuan apiece, is already dirt cheap. But Ye says foreign buyers can always find even cheaper rates with small Chinese traders.

The company Ye works for, SBS Zipper Manufacturing Co Ltd, is the world's second largest zipper maker, next only to Japan's YKK Co. It is one of the many Chinese manufacturers, textile makers in particular, that are feeling the chill of a slowdown in the US economy, faster yuan appreciation, removal of export tax rebates, and a general transformation of China's manufacturing industry.

To reduce the soaring trade surplus and curb energy-intensive industries, China last year reduced export tax rebates on textile products and garments. On top of that, the yuan appreciation has picked up pace since the second half of 2007 and recently crossed 7 to the US dollar, dragging down the earnings of exporters. The onset of a recession in the United States has also made consumers in that country, major buyers of Chinese-made clothes and garments for long, a hesitant lot and Chinese exporters are in a bind as American buyers demand even lower prices while costs keep rising at home.

The mood in the textile business is thus decidedly gloomy, with many of the players in the industry saying this is going to be the toughest year ever.

Zipper maker SBS, though not in the textile business per se, is inextricably linked to the industry. Some 70 percent of its buyers are domestic textile companies, requiring zippers for the trousers, coats and handbags they make and export. With the textile industry taking a hit, their demand for zippers has fallen, denting SBS.

"We've seen business decline in the domestic market since the end of last year," says Huang Weihua, vice general manager of the company. "Textile companies often cancel their contracts even while we are making their zippers, because their contracts have been cancelled. Also, when foreign customers bargain down the prices of garments from China, textile manufacturers in turn force us to cut zipper prices."

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