Textile industry struggling

China's textile and garment industry is struggling with high inventories this year due to lower-than-expected demand and rising production costs, industry experts said Monday.

The total inventory of 51 mainland-listed textile and garment companies amounted to 29.6 billion yuan ($4.73 billion) by the end of June, a 2.1 percent year-on-year increase, data compiled by weekly newspaper Moneyweek showed Monday.

"Manufacturers' overestimation of external and domestic demand has resulted in high inventories," Wang Qianjin, an analyst at webtex.com, a Shanghai-based textile industry information website, told the Global Times Monday.

Exports have been weakening this year. In the first three quarters of 2012, the value of China's textile and garment exports fell by 0.2 percent and 0.7 percent respectively from the same period a year earlier, data from Chinese customs showed.

The country's textile and garment industry is facing the worst situation since 2010, Xia Lingmin, deputy director of the China National Textile and Apparel Council, said at an industry conference earlier this month.

Global economic woes, a slowdown in China's economy and fluctuations in cotton prices as well as increasing labor and energy costs have created challenges for domestic manufacturers, he said.

The high inventories of domestic textile and garment firms have led to a decrease in their net profits. The 51 mainland-listed companies' net profits totaled 2.5 billion yuan in the first half of 2012, down 45.7 percent from a year earlier, Moneyweek said.

Consumers are also complaining about the rising prices of clothes, which is affecting their eagerness to purchase them.

"A Chinese-made winter coat in department stores usually costs more than 2,000 yuan nowadays, while a similar coat made in Vietnam or Cambodia is 30-50 percent cheaper at foreign fashion chains such as H&M and Zara," said Wang Rui, a 29-year-old consumer in Beijing.

"Production costs in China are about 15-30 percent higher than those in other Southeast Asian countries," Sun Liwu, an analyst at consultancy Sublime China Information, told the Global Times Monday.

"Although the cotton price has dropped by 5 percent this year from a year earlier, labor costs rose by 15-20 percent year-on-year, and other operational and financing costs are all rising in China," Sun said.

Increasing competition has also increased the inventories of domestic firms, Wang said.

Zhejiang-based Semir, a domestic casual clothing company, posted a 43.22 percent year-on-year drop in its first-half net profits. The company attributed the slump to its high inventory, which was worth 147 million yuan by the end of June, up 34.4 percent from a year earlier.

Domestic sportswear brands such as Li Ning, Anta and Peak Sports also reported increasing inventories in the first half, according to their interim financial reports.