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Bangladesh’s Role in China’s Evolving Cotton and Textile Market by Jim Lambert.

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Presentation on theme: "Bangladesh’s Role in China’s Evolving Cotton and Textile Market by Jim Lambert."— Presentation transcript:

1 Bangladesh’s Role in China’s Evolving Cotton and Textile Market by Jim Lambert

2 Introduction Work at Globecot as China Analyst and Editor-in-Chief of Globecot News Network How I follow the China market: – Economic Indicators – Production – Trade Understanding these three factors puts perspective on the bigger picture—China’s economic evolution

3 Why Bangladesh Can Compete with China Three major reasons: – End of the China price – Strategic shift to domestic consumption – Decreased competitiveness

4 China’s Major Textile & Cotton Producing Areas Guangdong Fujian Textile mills concentrated in coastal provinces Current migration to inland, resource based provinces Fixed asset investment in Henan, Hebei and Anhui has increased rapidly in past years Shandong, Zhejiang and Jiangsu are still key textile provinces Serve large population centers

5 End of the China Price Reduced price deflation Global apparel prices eroded from 2000 till 2005; China cut prices under pressure from global retailers Exporters absorbed much of the cost till mid 2005 Textile market had become freer and exporters couldn’t withstand exposure to such volatile price fluctuations

6 End of the China Price (cont) Increase in manufacturing and labor costs, coupled with heavy investment in modern equipment Rise of manufacturing cities, giving retailer quick turnaround Transformation to value added shifted lower cost items to Bangladesh, Vietnam etc Taken together, we’ve seen a rise in both domestic and export prices

7 China: 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.

8 Switch to Domestic Consumption Domestic market became more attractive b/c of potential growth Retail sales are growing 20 to 25% a year – Doubling every 3-4 years China price created oversupply in domestic market Lack of brand recognition; only way to get business was to lower prices End of 2005, apparel prices were down 2% year-on- year; FH 2006 were down another 2.5%

9 China Consumer Price Index: Apparel Only, Jan ’05 – Feb’07 Note: Dec ’07 CPI Apparel +/- Increase Not Yet Released.

10 Switch to Domestic Consumption (cont) In 2007, approximately 75% of total apparel/textile output will be consumed domestically In five years, this could be as high as 90% By 2015, could be larger importer of textiles, perhaps a net importer of finished apparel – Already huge importer of yarn; might become the same for cloth Leads us back to domestic retail sales

11 China Retail Sales, 2001 - 2006 3.95 trillion 4.19 trillion 4.90 trillion 5.641 trillion 6.66 trillion 7.841 trillion 1.65 trillion

12 China: Retail Sales, 2001 – 2007 US Retail Sales in Feb were $370 billion. China in Feb was $93.5 billion. Just about 25 percent.

13 Decreased Competitiveness Appreciating currency; up 5% since end of dollar peg in July 2005 Higher wages – Textile official recently lamented about Pearl River Delta wages up 50% Continued reduction of VAT export rebates – Weaning out the industry – Strong will survive – Will eventually be zero Already outsourced basic cut and sew; what else is to come

14 China: Monthly Cotton Yarn Trade Jan. 2005 – Feb. 2007

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