China seems to be coming back with a bang as the country’s apparel companies have made a good economic start this year with encouraging recovery. For the first time post-pandemic, demand from apparel retailers based in the US and EU sourcing from Bangladesh is now lesser with far higher sourcing from China. US-based apparel buyers are now scaling back sourcing from Bangladesh in certain segments and re-directing it to China and other South Asian countries. As per a QIMA report, a leading global testing, inspection, certification and compliance company, Bangladesh share fell 10 per cent year-on-year between January and September while China’s went up 14 per cent.
The prosperity index of China’s cotton textile industry is flourishing again and touched 50.5 in August 2023, up 1.5 from in July. Month-on-month growth in August showed, raw material purchasing index was 52.2, up 3.6 over July and the raw material inventory index was 49.6, which is up 0.8 month-on-month with a general production index was 50.1 currently. China’s cotton industry prosperity index is calculated based on numerous indicators from around 500 core cotton textile companies. If the figure is 50 or above it reflects an increase and below that it’s an indication of a dip.
Operating incomes of Chinese companies rise
A recent report by the China-based Zhejiang Huarui Information Consulting Company (CCF) a leading consulting company in chemical fiber and textile industry of 12 major listed apparel companies in China has shown that most have made a positive start this year and are slowly heading towards an economic restart and industry recovery. HLA as the core fast fashion brand under Heilan Group based in Jiangsu Province had the highest operating income in January-September 2023 of around 15.57 billion yuan which was a Y-O-Y- increase of around 13.85 per cent. Other apparel companies such as Semir and Youngor held the second and third highest positions with operating incomes of 8.9 billion yuan and 7.46 billion yuan respectively which was a Y-O-Y decrease of 0.5 per cent and 41.85 per cent.
At the other end of the scale were GRN and Meters/bonwe which ranked last with around 1.07 billion yuan and 837 million yuan respectively which was a Y-o-Y increase of 8.6 per cent and a decrease of 13.5 per cent.
Most of the 12 listed apparel companies in the CCF report have shown good operational development in the first three quarters of this year although the decline in operating income of the 12 companies in Jan-Sep was a bit higher than the first half of the year. Indeed the worst of the pandemic years may just be over, it is still too early for Chinese apparel exporters to be elated in an uncertain economy.
Bangladesh needs to diversify to compete
As Western consumers tighten their purse strings due to inflation and fears of economic downturn, brands and retailers are once again focusing on China as a sourcing and supplier destination due to its well-established manufacturing infrastructure. Bangladesh is simply losing out in this process. The need of the hour for Bangladesh is to branch out into manmade textiles instead of being heavily cotton-oriented.
As per Bangladesh’s Export Promotion Bureau the country’s garment exports in October saw about 14 per cent YoY decline to reach $3.16 billion, the monthly lowest since August 2021 when the segment earned around $2.73 billion. Bangladesh currently holds a 34.7 per cent share in the EU's cotton garment imports, whereas the share for non-cotton garments is 12 per cent. This issue needs to be addressed seriously. Along with readymade textiles, export of footwear, leather, and home textiles, if handled right, could be a turning point for the recovery of Bangladesh’s apparel segment.