rise? Not up? All questions

Chinese apparel export companies are finally seeing the benefits of their efforts. At the recently concluded Autumn Canton Fair, the quoted prices for apparel export orders rose by approximately 30% year-on-year, with some products experiencing price increases as high as 40%. While this seems reasonable, I believe that for many companies, the period following these price hikes may not be smooth sailing. Whether to raise prices or not has become a tough decision. Compared to the sharp increase in raw material costs, the rise in end-market prices has been delayed. At an industry conference at the end of last year, Yang Shibin, chairman of the China Knitting Industry Association, expressed concern over the mismatch between upstream and downstream pricing. He pointed out that cotton prices have surged too quickly, while finished product prices have not kept up. He argued that there is no effective transmission of cost increases downstream, and sustained high raw material prices are unsustainable. This view was widely accepted within the industry, including by leaders of the China Cotton Textile Industry Association. However, cotton prices remained remarkably strong this year, not only failing to decline but continuing to climb. Raw materials are just one of many challenges. This year, textile and garment companies have faced even more severe labor shortages and rising energy costs. At every industry event, "cost" remains a central topic. The external environment for export companies has further worsened this situation. During the China Textile and Apparel Trade Fair in New York in July, an exhibitor bluntly stated, “Foreign companies are pushing down our prices significantly.” At that time, many export firms were still reluctantly absorbing the rising costs. By the time of the Paris edition of the same trade fair in September, some exhibitors began to push for higher prices from foreign buyers, and by November, the price hike became a reality. The long buildup behind this change, in my view, reflects the struggles and anxieties of clothing companies. According to a recent report on the economic performance of the knitting industry, rising costs and the appreciation of the RMB are now approaching the limits of what enterprises can endure, which could lead to fewer orders. Although this year’s export situation is much better than last year, consumer demand in developed countries continues to shrink, with a growing preference for low-end products. At this point, the test of raising prices is hard to predict. The trend of order relocation has intensified since 2008, and it is now unavoidable. It’s time for textile and apparel exporters to make a careful decision about their future direction. Industrial restructuring and deeper industry insights have been called for many years, and now both internal and external factors have made this issue more urgent than ever.

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