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Textile sector faces deflation
( 2002-10-05 10:22 ) (1 )

Prices of Chinese-made textiles and garments have been decreasing since 1998, despite an increase in export volumes.

The continuing trend has disturbed some experts and prompted them to call for government and industry action.

Customs statistics show that in the first half of this year, the export value of garments and associated products was US$16.28 billion, which accounted for more than 60 per cent of the total export value of textile goods.

Although the export value is 4 per cent higher than the same time last year, the unit price fell almost 8 per cent. The decline may lead to diving profits for domestic textile producers, as well as foreign traders.

Industry officials had expected a boom in textile exports after China joined the World Trade Organization (WTO) in December.

"But the price drop offset the increase in quantity of exports," an insider told China Daily.

According to Cao Xinyu, of the China Chamber of Commerce for Import and Export of Textiles, the increase in export values is mostly attributable to the large increase in export volumes.

The rapid development of modern science and technology is one of the factors forcing prices down, in addition to a world wide currency depreciation caused by slower economic development in the United States, Japan and European countries, which has also led to slacker market demand and a declining consumption level.

An imbalance between supply and demand is regarded as another contributor.

Because of the lifting of the textile products quota, scheduled for 2005, and the low technology requirement, a new tide of textile industry investment is rising in China.

But as the market demand for textile products remains unchanged, lowering pricing is a common way to raise competitiveness.

"China's accession to the WTO is a double-edged sword but people are used to singing high praise for the various opportunities and potential rewards it may give us," said an expert who declined to be named.

The country's WTO membership creates some obstacles for the domestic textile market, such as a drop in prices.

More and more multinationals purchase directly from China to reduce their costs, which can easily force down the price.

The weakness of the domestic textile industries' core competitiveness is another factor linked to declining prices.

Facing such a scenario, the government, foreign trade companies and enterprises should take sufficient measures to prevent the situation from becoming even worse, experts said.