Profits fall despite soaring clothing exports

In July, the monthly export value of textile and garments from China hit a record high of US$25.9bn, up 25% year-on-year, according to China Customs.

It was not a surprise given that China earned US$122.7bn in the first half of 2011, almost equivalent to the whole amount it made in 2005. Orders from the European Union (EU) contributed 19.8% in the first six months of 2011, followed by the US and Japan with 13.2% and 9.7% respectively.

However, sales hikes do not necessarily mean big profits, noted Li Yu, general manager at Tianjin-based New Textiles, whose revenues rose 30% year-on-year in the first half of 2011.

"The increase was not from growing orders, but the unit price we had to raise due to the soaring cost," he said, referring to inflation, rising labour costs and the appreciating Chinese yuan, now CNY6.39 against US$1. "Actually our orders plunged 7% in the first half of 2011," Li said.

As a state-owned company, New Textiles does not worry about surviving, unlike many small and medium-sized private manufacturers.

For example, 14,447 companies in Zhejiang province bordering Shanghai, including many garment makers, stopped working in August over thinning orders, according to the Zhejiang government.

A report by Shenzhen-based Huatai United Securities predicts orders will fall in the second half of 2011 because of shrinking demand in developed countries.