According to official statistics released by China Customs in September, China's exports to the United Stated declined by 3.7 percent year-on-year. This isn't only about the Sino-U.S. trade war. Fundamental challenges are taking place, including intense transformation in the Chinese textile manufacturing sector.
Large-scale Manufacturing is Fading
"A dozen years ago, very few factories would be willing to manufacture clothing in less than 1000 pieces," Lily Chen, a freelance fashion designer recalls. "Many textile factories made margins depending on massive manufacturing orders and low labor cost."
When Chen was a senior fashion designer for a U.S. fashion brand, she had to work with Chinese textile factories to make products designed by the brand. At that time, it was common for factories to manufacture 10,000 pieces of clothing based on a single fashion model. But Chen says it is no longer the case.
"It's now more risky for these factories to do massive manufacturing with low-end products," Chen notes. "Sometimes, even one mistake in large-scale production can cause factories to lose money."
With the fast-paced change in the fashion world, Chinese consumers have become more mature and rational in a market with a robust variety of brands. On the other hand, rising mall rentals for brand stores, increasing labor cost in factories and the expense of warehousing the accumulated stock of clothing place pressure on the traditional fashion industry.
"No matter how much money a fashion brand makes," Chen cautions. "The stock of unsellable clothing can be the bottleneck for the brand's further development."
Following NEW LOOK and Topshop, both popular U.K. fashion brands that have left Chinese market, U.S.-based Forever 21 officially announced its departure in May, 2019. Meanwhile Meters/bonwe, a Chinese fashion brand established by a Zhejiang entrepreneur, announced that they had closed 1500 stores over the past three years, while the firm reported losses approaching 150 million RMB for the first half of 2019.
As the Chinese manufacturing and fashion markets are swamped with issues caused by high quantities of low-end products, many in the industry undertake new directions.
Innovation Is The New Trend
ISPO is a Munich-based international sports equipment and fashion trade show. The 2019 Shanghai ISPO exhibition showcased many sports products featuring high-technology and human engineering design. TITTALLON skiwear product, which utilizes an air circulation system, explored solutions for a common skiwear issue - how to adjust skiwear to changing body temperatures. In close collaboration with its Chinese partner, FASHION-POWER Group, this Holland-based brand has been producing high-end products scaled to this niche.
"While the traditional clothing manufacturing outlook in China is bleak," Dr. Tim Klatte, the Advisory Partner of Grant Thornton China, comments. "There are opportunities for companies to upgrade their products and move towards and embrace innovation as a method to remain relevant."
As Chinese textile manufacturing experiences a structural transformation, more fashion companies adapt their traditional manufacturing from Original Equipment Manufacturer (OEM) into Original Design Manufacturer (ODM), in which the factory becomes involved in research, design, concept and engineering and attaches the buyers' label.
"Instead of large-scale manufacturing for brands," Chen says. "The factories now prefer to work closely with designers." As a freelance designer, Chen pitches to foreign and domestic fashion brands the high-end product she designs in collaboration with factories.
In small-scale production, many factories in the textile powerhouse region of Zhejiang province have transformed their manufacturing model into innovation. They still take orders for big brands but are establishing factory-owned independent brands.
"It is a trend that Chinese textile industry is heading for an individualistic development style," says Shen Bin, a vice professor in Donghua University. "This is based on a stronger collaboration inside the industry and among supply chains."
Rather than relying on mall sales, fashion brands have explored marketing and sales on a variety e-commerce platforms such as WeChat store, Tmall and other apps. According to iiMedia Research, by the end of 2019, the Chinese fashion e-commerce revenue will reach one trillion RMB. Fashion brands are capitalizing on this trend.
Dyeing To Survive
Notorious for high energy and water consumption as well as chemical waste, textile manufacturing is regarded as the second-most polluting industry next to the petroleum industry. Despite only one-fourth of the world average renewable water per capita, China was late on acknowledging the water shortage and quality degradation.
China saw the first water protection regulation, the Law of the People's Republic of China on Water, which was released in 1988 and amended in 2002. However, the enforcement of water protection legislation has only recently become a priority.
On September 27, 2019, China's Ministry of Ecology and Environment drafted ecological criteria entitled The Standard of Water Waste Emissions for the Textile Industry. It seeks collaboration from the textile industry for comment before the regulations are formally released.
"A large number of high-risk textile manufacturing companies have been forced to limit their production scale or provide rectification," Shen notes. "In the short-term, adding high-tech to enhance clean energy performance does increase production cost but regulations can improve the long-term credibility of Chinese factories."
Seeking to have better clean-energy performance, some textile manufacturing factories have adopted high-tech automation hybrid with traditional production systems to concentrate on "cleaning up" the dyeing process.
Some factories in Shandong, Guangdong and Hunan have been improving their water management, since International Finance Corporation (IFC) launched the China Water Program in 2012. Donghua University, renowned as a top university majoring in the textile industry, has played a vital role in setting up the criteria.
"There is a strong need to deepen the reform in the Chinese textile industry." Shen concludes.
