Rising labor costs drag down Zhejiang's garment-making industry

Updated 2017-03-09 09:59:20 Global Times

Fraying at the seams

The garment-making sector in East China's Zhejiang Province is undergoing a difficult time as its profits continue to shrink. Some factories have closed, while others have held on by the skin of their teeth. Garment makers said rising labor costs are primarily to blame. One expert said the decline of lower-end manufacturing is inevitable, but new industries will rise to replace them.

After a wave of shutdowns swept through the garment-making industry in Zhuji, East China's Zhejiang Province, Ren Zhiyu was relieved his company managed to weather the storm.

"Most of the clothing factories in Zhuji are original equipment manufacturers (OEM)," Ren told the Global Times on Monday. "In the last two years, with high product inventories and rising competition, many local garment producers, including well-known names like the Zhejiang Kai'er Clothing Co, started to hit the skids, and some of them had to terminate their business."

Zhuji is more than 200 kilometers away from Shanghai.

According to a report of the China Central Television in September 2016, the number of clothing companies in Zhuji had shrunk to 200-300 from a peak of about 650.

Ren's company, which manufactures women's clothing, has felt the strain. After two years in the business, he watched as capacity overtook demand, making it increasingly difficult to make money.

In 2016, he decided to entirely cut his cloth manufacturing business to focus on cloth materials. Currently, his company mainly produces jacquard materials for a stable of clients including H&M and Etam.

Garment makers are struggling across Zhejiang.

A garment company owner surnamed Wei said that he opened his factory around 2000 in Xiaoshan -district in Hangzhou, provincial capital of Zhejiang. But shrinking profits forced him to give up the -business around 2013.

"When we first started, we could earn about or on an dress. Now we can only earn a few cents," said Wei, whose company used to export women's clothing to the U.S. and Europe.

"I didn't think it was worth holding on to the business once its profit margin shrunk to such a negligible level," Wei told the Global Times on Monday.

Wei said that many companies in Xiaoshan, also in Zhejiang, face the same problem.

A garment factory owner surnamed Lu told the Global Times on Monday that her plant is also struggling. Established in 1996 in Quzhou, Zhejiang, the factory primarily makes suits, shirts and business attire.

Lu said her factory no longer has a cost advantage over competitors in countries such as Cambodia and Vietnam. Lu's company exports 40 percent fewer products than a few years ago and she has had to cut the number of workers at her factory to 50 from nearly 140 in 2013.

If profits remain low, Lu "may close the factory in a few years," as she told the Global Times.

Still, the situation isn't as bleak for every garment maker in the province. Members of Fashion Ningbo, a local garment industry association, have done OK in recent years, said one of the association's employees who didn't want to be named.

"Some, like those that make children's clothing, may have a bit of difficulty, but most have adopted successful strategies to adapt to the changes in the industry," she told the Global Times on Monday. "There haven't been any large-scale shutdowns as far as I know."

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