Under the MFA quota system, each supplier country poised to its limits on the volume of textiles and clothing that may be imported from each individual nation with which it trades. From about 60 different countries, U.S. quotas comprised of 2,400 products. It was anticipated that removing these quotas will mainly be advantageous to Chinese (and also to a smaller amount to Indian) producers, who are capable to challenge their international competition because of its combination of an undervalued currency, low wages, and outright labor domination. In an incongruous twist, the majority of developing countries, who insisted on the phase-out of the MFA as resources to increase their exports of textiles and clothing to well-off countries, insisted on an extension of quotas as well as other system that will assure them any share of prosperous country markets provided the projection of China’s awesome supremacy. China, through the help of some other large developing countries, heavyweight denim fabric these demands created by Turkey, and a bloc of African, Asian, Latin American and Caribbean Basin countries.
The net profit of China is not merely on its benefits in wages. It also profits from the large trained and dynamic workforce, propinquity to inexpensive quality resources, and encouraging government policies, like subsidized lines of credit and exchange rate manipulation. These aspects, jointly in low wages, can create China, by far the most chosen supplier for a lot of retailers, particularly after 2008, if the likelihood the United States to impose safeguards on Chinese products is taken away.
Chances are it will make a sense of the consequence the conclusion of all the WTO textile and apparel quotas by analyzing what happened when quotas on some products, covering dressing gowns and luggage were zeroed in 2002 included in the quota system phase-out. This change gave a 53 percent decrement in the average price per square meter that China got because of its exports in those categories, from US$ 6.23 before to US$ 3.12 after quota removal. China’s market contribution during these items increased from 2002 to 2004, up 888 percent in luggage and 1,179 percent in dressing gowns. Overall, China now states 72.3 percent from the U.S. apparel import market in most products where quotas were raised in 2002.
Denim market of China – China will be the world’s leading supplier of selvedge denim wholesale, having 30% of global production. The nation exported US$1.8 billion worth in 2004. With quotas removal, demand is projected to increase by a lot more than 20% in 2005. But a government-imposed export tax and looming US and EU to safeguard threaten growth.
Almost all denim garment producers in China make jeans, and most of them offer shorts, skirts, dresses and shirts. A lot of companies provide jeans as his or her main product line. In a few companies, jeans are produce of about 90 % of its total production. Jeans and shorts report for 64 percent from the denim garment exports by suppliers Jackets report 16 percent, skirts and dresses 13 percent and shirts 7 percent.
Based on Global Lifestyle Monitor, average consumption of denim apparel in 2003 was observed in U.K.-12.9, Japan-12, Hong Kong-11.8, Italy-10.8, China-7.9 and India-3.1 items. But, generally speaking usage of denim apparel items remains highest within the U.S., Germany and Colombia and lowest in India and China. Though, most industry experts believe denim consumption in Asia (most particularly China) to explode on the next a long period as income increases and wardrobe dictates vanish.
Present performance of Denim – Based on official data, China’s exports of denim fabrics considerably increased within the first half of 2005. China’s exports of cotton denim fabrics (HS 520942) were increased 17.80% in volume terms in the first six months of the season to 193 million square meters to Hong Kong’s denim’s harshly rose direct exports to Korea, Russia, Cambodia India xravpl increased. Prices were increasing at that time, in accordance with value added content.
Shipments even increased at the same time to 30 million, giving rise in average price to US$ 1.71 per square meter. China’s exports to Hong Kong increased 25% in volume terms, now reporting 38.80% of total shipments of cotton denim fabrics.
Greater demand within China – A larger slice of those fabrics shipped to Hong Kong normally turn back for the mainland where they may be used by apparel factories. The sudden boost in first half sales towards the SAR (Special Administrative Region) offers the important contribution of Hong Kong’s trading houses inside the denim business in China. With the end of quotas on wholesale denim fabric suppliers, demand for denim fabrics was evidently robust in the first half in the PRC. Based on official data, direct sales with other regions were also harshly increased inside the period, somewhat because of to an increment in clothing production in these countries or perhaps a decrement in domestic output. Shipments to Korea were increased 62% on the period, being a clear indication of diminishing Korean denim production. Compared, a 132% start exports to Russia more possibly gives an increment in Russian apparel output. Other denim suppliers may also have mislaid market contributions, like Taiwanese manufacturers.