Higher costs put the squeeze on low end

A Lastest News about Sourcing in China

Last updated: 7 Jul 2011

Makers of entry-level finished goods are receiving fewer orders as buyers shift sourcing to lower-cost countries in Asia.

Because of rising costs and the yuan's appreciation, China's export manufacturers are losing low-value orders to competitors in Vietnam, India and other countries in Asia. Production of higher-value items, however, remains unfazed.

 

The garments industry, in particular, has been hit hard by the constant increases in raw material and labor costs, and the strengthening currency, which together raised manufacturing outlay 15 to 25 percent. At present, Vietnam-made apparel is 30 percent less expensive. In addition, EU import duties from Vietnam are lower than in China.

 

Most factories in Vietnam, however, are suitable alternatives only for large-volume orders of basic apparel. Production of more complicated designs is often kept in China. Eighty percent of orders at Jiaxing Mengdi Import & Export Co. Ltd now consist of such styles. Further, whereas the MOQ used to be larger and for just one design, order quantities are now lower and comprise several styles and items. Typically, small-volume orders for T-shirts mean 1,000 to 2,000 pieces. Large-volume orders are for at least 10,000 pieces.

 

Moreover, delivery lead times are longer in Vietnam. What would normally take two months in China can extend to six months in that country.

 

While the situation is very similar in the cookware industry, makers are less worried. For one, buyers have been sourcing cookware from Vietnam and India for a long time. In fact, some India companies were set up in the 1990s, much earlier than many factories in China. But while stainless steel cookware in India and Vietnam is 50 to 60 percent less expensive, many such models are only 0.3 to 0.4mm thick. In contrast, typical releases from China are 1.8mm thick. Cookware maker Yaward Industrial Development Ltd said suppliers there rarely provide FDA and LFGB certification, and models may not be PTFE and PFOA-free.

 

 


Read the full report at Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.


Posted: 06 January 2011, last updated 7 July 2011

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