Guangdong'S Garment Industry Is Struggling

On a weekday afternoon, the Dalang Woollen Trade Centre was silent in the spacious hall, and merchants were lazily resting in their shops.

"Now business is normal," said Xiao Ruijin, an investment adviser to the center.

This is probably because we are reforming the fair.

"Da Long Mao trade center is located in Dongguan, covering an area of 120 thousand square meters.

Dongguan is a manufacturing city in southern China's Guangdong province.

Mr. Li, the owner of a shop, retorted, "it has been so cold here.

"Just a few weeks later, the trade center will convene an annual trade fair. It seems that he is not particularly concerned about the present silence.

Last year's Fair attracted 51 thousand Chinese and foreign buyers.

The trade center of the big town testified the willpower and confidence of the local town government.

Here we have produced an industry with more than 100 million annual production capacity of woolen products, of which 40% are exported overseas.

The business here is obviously deserted, and the clothing industry in Guangdong is facing enormous pressure.

According to the data of Guangdong Province, clothing export volume decreased by 31% from January to July this year, to 13 billion 300 million US dollars.

Exports of plastic products, toys and luminaires are also stagnating or declining.

During the same period, US demand was weak, and retail sales in the US in July and August declined.

In the first 7 months of this year, Guangdong's overall export growth to the US slowed to 6.3%.

However, it is hard for us to blame the United States for this industry predicament.

Guangdong did not publish country specific data for specific export categories.

In the changing apparel industry, US orders may not be reduced so much that they can all be pferred to provinces with lower inland costs or other Asian countries.

From a national perspective, China's clothing exports increased by 2.6% over the same period last year, suggesting that Guangdong's weakness was partly offset by other provinces.

At the end of last year, the plight of Guangdong's clothing industry began to appear - far before the development of the financial crisis to the present scale of Wall Street - at that time, small manufacturing enterprises in the Pearl River Delta region began to fail.

Because of soaring production costs and depreciation of the US dollar against the renminbi, these small businesses find that they can no longer compete with larger and more efficient competitors in southern China and elsewhere.

What is even more puzzling is that the total export volume of Guangdong has been growing at an awesome speed, increasing by 17% between January and July this year.

Guangdong's exports account for 1/3 of the country's total exports.

One of the reasons for the elasticity of Guangdong's exports is its diversification and influence.

A province that can produce any product for any market has a very good hedging advantage.

The continued strong demand for home electronics and high-tech products offset the weakening effect of the garment industry.

Steven &S226, Fraser (Steven Fraser), head of regional sales at Hendon Semiconductors, Australia, points out that China's home appliance export enterprises that purchase integrated circuits from his company do not show signs of slowing down.

Overall, the fact that the euro has strengthened and Guangdong's exports to Europe have increased by 27% has made up for the weakness of the US dollar and the weakening of the US market.

Even some textile business executives are optimistic about the recovery of the industry, especially those with larger scale.

"As a result of industry consolidation, our revenue growth is very good," said the chief executive officer of a large garment manufacturer in Hongkong. "There is a serious squeeze on profit margins, but the main ones are the smaller ones.

"He doesn't want competitors to know about his company's business.

Now, he added, the buyers' orders are now decreasing, but the number of manufacturers receiving orders has also decreased.

The end result is that larger and more flexible factories have more business.

In addition, the initial production is often low, but if the design is popular, there will be a large number of subsequent contracts.

Undoubtedly, the elimination of smaller enterprises (especially those with low value-added industries) is the Chinese government's intention all along.

Even the footwear industry in Guangdong is ultimately upgrading its value chain.

The ranking of shoes in Guangdong disguise many unscrupulous sweatshops.

In the first 6 months of this year, the number of footwear exports in Guangdong dropped by 16%, but the export volume increased by 10%.

In July this year, Premier Wen Jiabao and vice president Xi Jinping visited the Pearl River Delta region, which triggered speculation that the government might help export enterprises by raising export rebates.

"Actually, we got more orders from the United States," said Zhang Huarong, chairman of Huajian group. "Our profit margin has more than doubled as a result of strengthened management.

Huajian group is a large shoe manufacturer headquartered in Dongguan. It is one of the destinations of Wen Jiabao's visit.