| Zhutang (祝塘) town is one of the bases of China's knitting industry. With years of experience in original equipment manufacturing (OEM), Zhutang town in East China is advancing itself by developing more sophisticated products, e.g. flax fibre, and brand building. |
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| Zhutang knitting industry features product diversity |
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With a population of 60,000 people, Zhutang covers a land area of 56km2 in the southeast district of Jiangyin (江陰) city, Jiangsu province. The town was recognised as a "Famous Knitwear Town in China" by the China Knitting Industry Association in 2006.
Zhutang's textile and apparel industry possesses totally 250,000 spindles, of which 50,000 are cotton spinning spindles. Moreover, 12 rotor spinners were purchased from overseas, and 36 automatic winders were imported from Germany, Italy and other foreign nations. The textile and apparel industry employs more than 36,000 workers, providing more than 70% of the employment in the town.
The local textile and apparel industry is chiefly built up with small and medium sized enterprises (SMEs), making the private sector a major force of economic development of the town. These enterprises exported textile and apparel goods exceeding US$1 billion in value last year, of which goods worth US$210 million were directly exported by these enterprises. "These SMEs have formed the cornerstone of Zhutang's success," said He Jianhua (何建华), Secretary of CPC Committee of Zhutang town.
More than 760 textile and apparel enterprise are based in Zhutang. Among them, 43 are entirely owned by foreign investors or joint ventures between Chinese and overseas businessmen. About 176 enterprises reported an annual sales value exceeding
RMB10 million, whereas 24 enterprises registered an annual sales value over RMB50 million. Leading enterprises in the town include Maoda (茂達), Beide (贝德), Sangyang (桑阳)and Xinfeng (新丰) with exports to Europe, North America, Japan, the Middle East, Southeast Asia and Africa.
Following the global economic ups and downs in recent years, these textile and apparel enterprises have realised that a balance of domestic and foreign markets is favourable to the business development in varied economic environments.
"Enterprises earn slim profits in OEM processing. Moreover, the production activity does not respond swiftly to risks in the market. Zhutang's knitting industry has realised these weaknesses and started the groundwork in product development, product enhancement and brand building, thereby creating their own sustained businesses," said Lu Yunnan (陸云南), director of Sangyang Group (桑阳).
Tapping less crowded market segments
Sangyang Group itself has collaborated with the China Knitting Industry Association to explore the market potential of flax knitwear, which requires a higher level of technology in the manufacture.
"Flax fibre is comfortable to wear in all weathers and is also anti-bacterial, thus finding extensive applications from protective clothing to intimate wear. China has no more than 30 flax producing firms and few of them have an outstanding strength in technology," said Mr Lu.
Sangyang has also completed development of a new functional, medical apparel product, in cooperation with Nanjing University of Chinese Medicine. The product is now under test. He explained that profit margin of clothing commodities is limited and the company has to branch out into higher-end market segments.
Mounting costs pressing the industry
Rising material prices have been a major concern for textile producers in Zhutang. "Cotton yarn is sold at RMB200 per ton, putting great pressure onto local producers. We also felt the impact and have had to increase prices mildly by RMB2 to keep it acceptable to clients. Meanwhile, we worked hard to maintain sales, which witnessed a 20% growth in the first half of this year," said Ren Gang (任剛), general manager of apparel manufacturer Hengde (恒德).
The impact of production cost hikes is reflected by the fact that a small increase was registered in the profit and tax among the town's textile and apparel enterprises in the first half of 2010 despite there was a jump in sales, according to Mr Lu. The sharp increase in sales in the first half was partly due to a fill up of inventory by buyers. A positive but cautious business outlook in the second half and even next year is anticipated, he added.
Last but not least, labour cost has become an issue for many enterprises and it is getting more difficult to recruit skilled workers, who may prefer to work near their hometowns in Central and West China. These two regions have been progressively urbanised, providing more job opportunity to the local population.
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