International textiles buyers are increasingly switching away from China and back to Western suppliers, as rising labor, raw material and energy costs make the world’s dominant producer more expensive.
In Biella, a small town in the foothills of the Alps at the heart of northern Italy’s wool industry, factory owners say a narrowing price difference with China and demands for nimbler production nearer home are winning back higher-end customers.
In the office of his family business Vitale Barberis Canonico, managing director Alessandro Barberis Canonico recounts how one high-profile European client called him recently to say he was giving up on China because of rising costs there and the increased demand for quality — and would need help from Biella for a big collection.
Photo: Reuters
“He had tried his luck going abroad; things did not go well, so he’s now back,” Barberis Canonico said.
GLOBAL LEADER
China remains a world leader in textiles: employing more than 4.6 million people, contributing a tenth of GDP and with exports, including apparel, of US$284 billion in 2015, according to data from China’s National Bureau of Statistics, the Ministry of Industry and Information Technology and the China Chamber of Commerce for Import and Export of Textile and Apparel.
However, wages in China have been rising at an annual compound growth rate of more than 12 percent, outpacing the economy, and are simply no longer cheap enough to compete just on price.
China’s textiles sector also faces increasing costs of inputs, such as cotton and wool, hefty import taxes for basic manufacturing equipment and costlier environmental rules.
The government’s five-year plan for textiles, released in September last year, acknowledged that higher costs are weakening its international advantage and it faces a “double whammy” from developed countries — like Italy — with better technology and developing countries with lower wages.
The labor cost gap between Italian and Chinese yarn narrowed by about 30 percent between 2008 and last year to US$0.57/kg from US$0.82/kg, International Textile Manufacturers Federation data showed.
The hourly wage for a Chinese weaver last year was US$3.52, the federation said, up 25 percent since 2014, though still a fraction of the more than US$27.25 paid in Italy, an increase of 9 percent over the same period.
“When China’s wages are not that low, the process of shipping materials so far to China and then shipping products back to Europe becomes a lot less attractive,” said Shiu Lo Mo-ching (蕭盧慕貞), chairman of Hong Kong General Chamber of Textiles Ltd and CEO of textile manufacturer Wah Fung Group (華峰集團).
“They’d rather take the production back to Europe. This trend has been very obvious,” Shiu Lo said.
That proximity is also an advantage at a time when Western clothing brands are under pressure to offer more collections and customers increasingly want customized looks. Their suppliers need to be closer and faster.
COMPETITIVE EDGE
“In China ... their supply chain is not close and is scattered, giving [Italy] a competitive advantage,” said Ercole Botto Poala, CEO of Italian textile producer Reda.
Italy’s textile imports from China fell 8.7 percent in the first 10 months of last year to 347 million euros (US$370 million), according to SMI, Italy’s textile and fashion association. Its exports to China rose 2.8 percent to 165 million euros in the same period, though total textile exports last year dipped 2 percent to 4.3 billion euros.
For buyers, quality and transparency are also key.
“Before, given [brands] were paying much less, they turned a blind eye to quality,” said Giovanni Germanetti, director-general of Italian yarn and textile producer Tollegno 1900, one of several producers who said that clients were returning for what he described was better value for money.
MIP Milan Politecnico professor Alessandro Brun said that brands are also motivated by concerns over product traceability and want to avoid potential reputational risk.
While suppliers were reluctant to name specific brands they sell to, so as to protect business confidentiality, several international apparel firms are switching to Italian wool fabrics so they can name the mill they source from on labels to differentiate from rivals, producers said.
Italian high-street brand Benetton said it used yarn from Tollegno 1900 in a newly launched Made-in-Italy line of limited-edition seamless wool jumpers.
More than 9,000km from Biella, in the bustle of the biennial Canton Trade Fair, some buyers said they were moving away from China.
“We already buy 60 percent less from China compared with two years ago,” said Olesia Pryimak, who attended the trade fair late last year to source material for her plus-sized fashion firm Opri in Ukraine.
She said her company is turning increasingly to Turkey for fabrics, because of quality, price and proximity to Europe.
Many of the producers and buyers interviewed said it was too soon for data to show the flow out of China.
China’s textile exports to the EU grew a modest 1.4 percent in the first 10 months of last year, but dropped 4.1 percent in October, according to Chinese data.
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