Apparel Sourcing Intelligence - Worldwide

Chinese inflation. Will it hurt China more than its customers?

China’s apparel industry spokespeople are getting louder and louder about how uncompetitive exports of their country’s clothes are getting. Du Yuzhou’s been telling the world how much money many Chinese apparel and textile clothing factories are losing for a few months now, and the international press has just caught up

Is it just me being a cynic, or is it a total coincidence prominent Chinese are so vocal about all this just as US activists start lobbying against quota elimination at the end of this year and the EU is monitoring many Chinese clothing imports on a daily basis with a view to deciding about anti-dumping duty?

Be that as it may, there’s no doubt Chinese clothes are getting dearer for many customers. And, with its domestic clothing sales up nearly 30% at the end of 2008, and sales to the US accounting for only 8% of Chinese clothes production, Chinese manufacturers have real alternatives to selling below cost (if they really are anyway) to Japanese, American or European chains.

But it’s not just China where this is happening. Inflation is soaring in most of the developing economies that supply rich countries with clothes: indeed in Vietnam, it’s gone from near-insignificance a year ago to twice China’s level this January. Add that to the past year’s decline of the dollar (and the pound) against most emerging-market currencies, and many Western buyers are facing serious inflation from many of their sources.

China’s where the issue’s best documented right now. But the message is clear throughout the world. After 15 years of constant clothing price falls, inflation’s back.

And buyers will do as great deal better managing their wsay through an inflationary world than trying to find non-existent suppliers who’ve avoided inflation or bare prepared to work at a loss. In sourcing these days, when China sneezes, the world apparel industry catches a cold.