Presentation on theme: "Bangladesh’s Role in China’s Evolving Cotton and Textile Market"— Presentation transcript:
1Bangladesh’s Role in China’s Evolving Cotton and Textile Market by Jim Lambert
2IntroductionWork at Globecot as China Analyst and Editor-in-Chief of Globecot News NetworkHow I follow the China market:Economic IndicatorsProductionTradeUnderstanding these three factors puts perspective on the bigger picture—China’s economic evolution
3Why Bangladesh Can Compete with China Three major reasons:End of the China priceStrategic shift to domestic consumptionDecreased competitiveness
4China’s Major Textile & Cotton Producing Areas Textile mills concentrated in coastal provincesCurrent migration to inland, resource based provincesFixed asset investment in Henan, Hebei and Anhui has increased rapidly in past yearsShandong, Zhejiang and Jiangsu are still key textile provincesServe large population centersFujianGuangdong
5End of the China Price Reduced price deflation Global apparel prices eroded from 2000 till 2005; China cut prices under pressure from global retailersExporters absorbed much of the cost till mid 2005Textile market had become freer and exporters couldn’t withstand exposure to such volatile price fluctuations
6End of the China Price (cont) Increase in manufacturing and labor costs, coupled with heavy investment in modern equipmentRise of manufacturing cities, giving retailer quick turnaroundTransformation to value added shifted lower cost items to Bangladesh, Vietnam etcTaken together, we’ve seen a rise in both domestic and export prices
7China: Monthly Textile and Apparel Exports, 2005 - 2007 China’s total textile and apparel exports reached US$147 billion dollars in 2006, a 25% year-on-year rise. Customs confirms average export price increased 10.4 percent. Further increases in 2007.
8Switch to Domestic Consumption Domestic market became more attractive b/c of potential growthRetail sales are growing 20 to 25% a yearDoubling every 3-4 yearsChina price created oversupply in domestic marketLack of brand recognition; only way to get business was to lower pricesEnd of 2005, apparel prices were down 2% year-on-year; FH 2006 were down another 2.5%
9China Consumer Price Index: Apparel Only, Jan ’05 – Feb’07 Note: Dec ’07 CPI Apparel +/- Increase Not Yet Released.
10Switch to Domestic Consumption (cont) In 2007, approximately 75% of total apparel/textile output will be consumed domesticallyIn five years, this could be as high as 90%By 2015, could be larger importer of textiles, perhaps a net importer of finished apparelAlready huge importer of yarn; might become the same for clothLeads us back to domestic retail sales
12China: Retail Sales, 2001 – 2007US Retail Sales in Feb were $370 billion. China in Feb was $93.5 billion. Just about 25 percent.
13Decreased Competitiveness Appreciating currency; up 5% since end of dollar peg in July 2005Higher wagesTextile official recently lamented about Pearl River Delta wages up 50%Continued reduction of VAT export rebatesWeaning out the industryStrong will surviveWill eventually be zeroAlready outsourced basic cut and sew; what else is to come