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
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
Fujian
Guangdong

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 7.841 trillion 6.66 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