Three Pressures Beset Small And Medium Sized Textile And Garment Enterprises

In May 21st, small and medium-sized enterprises in Guangdong's clothing and footwear industry were in trouble, causing widespread concern in the industry.

Small and medium-sized enterprises are in deep trouble. Why do they find themselves in a predicament? After many interviews, they know that raw materials have plunged sharply, labor costs have risen and exchange rate appreciation has led to uncompetitive quotations, and foreign direct pfer to Southeast Asia. However, internal competition has been aggravated by competition, which is a double reason for the large and medium sized garment factories and shoe factories in Guangdong in a semi shutdown state.

Enterprise status:

Xintang is the world famous jeans production base.

Zhan Xueju, President of Xintang, said that there were two thousand or three thousand large and small jeans factories in Xintang, and more than 65% of their products were sold overseas. For various reasons, overseas orders are much less now.

According to Zhanjia he, vice president of the General Chamber of Commerce of Zengcheng Federation of industry and commerce, his company used to make extra orders, and at the peak time it could produce 30~40 tons of cowboy clothing every month, but now there are only 30 thousand to 40 thousand orders per month.

He said that the order from the United States was the largest, but it was almost absent recently because it was the United States.

Mr. Liang is the owner of a large and medium-sized enterprise in Xintang.

Guo Zhenhua, owner of Zhongshan three township Bao Fu plastic and plastic products factory, also said that many foreign merchants shifted their orders for middle and low end shoes to Vietnam, Bangladesh and Indonesia. Only a few of the first tier brand shoes that were difficult to produce were still in China.

Zhan Jia He said that due to the shrinking of the outer sheet, small and medium-sized processing plants began to shift their focus to the domestic market.

The Costa garment factory in Dalong Road, Xintang, has been specializing in the domestic market. According to Yan Dunquan, one of its partners, in the past, about 1000000 pieces of jeans had been produced in the past year, and now only 30 thousand out of a month.

Pressure 1: labor costs rise

Talking about the reasons for the current predicament, one of the biggest complaints is the rise in labor costs and recruitment difficulties, and the two is soaring raw materials.

After interviewed a number of small and medium enterprises in Xintang, I realized that despite the rise in labor costs, recruitment difficulties remained widespread.

Zhanjia said that the factory's wages rose 15% last year, and this year it has increased by 17%. It is just that the labor cost has increased by more than 30% in the past two years. However, it can not solve the problem of recruitment difficulties. Many workers are reluctant to look forward to it in the factory. They prefer not to spend money on the temporary production of a single bag of goods.

According to Li Yongqiang, director of cutting bed at a garment factory, in 2008, the processing price of a denim garment was about 1.8 to 1.9 yuan / piece. Now, processing price has risen to 3 to 3.2 yuan / piece, up 70%, but it still can't keep people.

According to its estimate, about 1/4 of the workers who know around are in the "grass roots" state.

According to Zhou Jianping, director of a garment factory, there are nine factories in ten factories that are very light in business. They can't get a single list, even if they get the order, it's also very troublesome, because the workers are loose, and the quality and delivery date are not enough.

Pressure two: raw materials are soaring and single dare not answer.

The rising price of raw materials is also one of the most important reasons for the small and medium-sized enterprises to get into trouble.

Zhanjia said that the price of cotton yarn was very stable in previous years, the cost of garment processing plants was easy to control, the market was expected to be stable, and sales were stable. But from the second half of last year, the price of cotton yarn has gone up and down, which has brought great pressure to garment manufacturers.

For example, the cotton yarn with better quality was only 18 thousand yuan / ton the year before, and the highest price rose to 43 thousand yuan / ton last year, and it is still as high as 37 thousand yuan / ton.

Zhan Jia He said that when the price of cotton yarn increased, orders were few and goods went slowly. Now the price of cotton yarn is falling and business is not good. Because the market has a wait-and-see mentality, the goods are moving slowly.

In the financial crisis, the exchange rate and cotton price are very stable. The cost can be expected and the price is controllable. But now, because of the artificial rise, cotton prices have skyrocketed and plunged, and the risks are great.

Guo Zhenhua said that in the past year, the cost of rubber has increased by about 100%, cloth has increased by 30%, labor has also risen by about 10%, and the total production cost of footwear has increased by 30% to 40%.

Chen Wusi also admitted that although the product price increases, but far less than the cost increase, profit margins are getting smaller and smaller.

"According to the present situation, the company's factory in Zengcheng can only live for 3~5 years, and it must be relocated or pformed as a whole."

Pressure three: RMB appreciation and export profit reduction

While prices of labor and raw materials have soared, the rise of the renminbi against the US dollar has also brought pressure on export oriented small and medium-sized enterprises. Since last June 19th, the RMB has been decoupled from the US dollar and has been on the road of steady appreciation. Up to now, its appreciation has exceeded 5%.

Guo Zhenhua said that the export profits of low end shoes are only about 0.2 dollars, and the profits of middle and high-end shoes are only about 1 U.S. dollars or so. While shoes are generally sold for about half a year from development quotations to shipments, in this half year period, if the appreciation rate of the RMB is as high as 3% left and right, then enterprises will not have money to earn.