"A Textile Capital of China is Hobbled by the Downturn"

(Article taken from the New York Times on February 27, 2009)

Shaoxing, China is a coastal city 100 miles southwest of Shanghai that took off in the 1980's as small businesses producing chemical fibers took over its rice paddies. Since the 80's, Shaoxing has become one of the world's largest textile centers. It's 20,000 textile and garment factories were bustling, always bustling with workers at least 6 days of the week producing goods sold at big American retailers such as Wal-Mart and Gap. Now with the economic downturn, textile companies are struggling to survive and many factories in this Chinese city are being forced to shut down as owners face mounting debts and bankruptcy. Beijing issued a dire warning in December: As many as two-thirds of the country's apparel and textile companies could go broke in 2009. Some companies have seen a third of their orders being cut within the last few month while others have seen even larger losses. Beijing has been paying close attention to the troubles facing the textile and apparel industry- it is a $450 billion industry that employs over 20 million workers-making it crucial to China's economy.

With this said, the government has already issued a $586 billion economic stimulus package to help keep factories open. Beijing has also responded with a series of measures to aid textile producers, including: tax credits & rebates, forcing state-owned banks to approve low-interest loans to factory owners, lowering of water fees, and more. However, the struggle is being further complicated by a new labor law along with fierce competition pushing up young migrant workers wages by more than 30 percent in the past 2 years along with fabric and textile buyers from America and Europe coming to expect cheaper prices, year after year. Experts warn that what happens in cities like Shaoxing "could be a barometer of China's trading might, and a window into its social conditions". With millions of migrant workers losing their jobs in a string of coastal towns, Beijing is becoming increasingly concerned about social and political unrest.

Industry officials are staying optimistic stating that "China's textile industry will continue to thrive because of textile-cluster cities like Shaoxing that dominate a particular end of the business by specializing and competing fiercely on price". I believe such attributes of China's textile industry are what they must focus on to be able to even possibly survive the worst economic downturn in three decades for this Asian country.

Within the apparel/textiles industry it is important to understand the recent trends in globalization and to be observant of the effects that the economy is having on a global level and to relate how this affects this industry and the retail sector as a whole.