Garment makers' inventories surge

The inventory of 22 listed Chinese garment makers totaled 38.18 billion yuan ($6.13 billion) in the third quarter. Around 90 percent of it is increasing, said Hexin Flush Network Services Ltd.

According to the Zhejiang-based financial data supplier, Youngor Group's inventory ranked highest at 23.95 billion yuan. Hongdou Group Co Ltd came second place with 3.98 billion yuan.

Garment makers' operating incomes have consequently declined. Five companies out of the 22 showed negative revenue growth in the third quarter, including Jiangsu Sanyou Group Co Ltd, which suffered a year-on-year decline of 17.31 percent. Zhejiang Semir Garment Co Ltd slipped year-on-year 11.86 percent.

China National Textile and Apparel Council gave two reasons for the high inventories. First, Chinese clothing brands have developed too fast in recent years but the purchasing power of potential customers has not increased, leading to an oversupplied market. Second, some clothing companies elected to go into massive production to reduce costs, leading to the homogeneity of products, something that would-be buyers do not like.

"Many clothes producers have been expanding rapidly to take advantage of China's consumption upgrade, which is one of the causes of market oversupply," said Steven Li, an industry analyst and an associate with Lunar Capital Management.