Chinese companies are cutting jobs and relocating factories overseas or to lower wage regions of China. In their report, the Chinese textile industry, which exported US$176 billion in 2007 and directly employed some 20 million workers, is now facing a slow downward trend.

　 　Production figures for January-February 2008 show a 5.7% increase in production over the same period in 2007, compared to a 19% increase in 2007, the lower growth rate since 2003. In Guangdong, the southeastern province closer to Hong Kong and the centre of China's export industry, production fell by 11.30 per cent in January-February this year, partly due to the snowstorm and the Chinese New Year holiday in February, but at the same time demand from the US and Europe was also falling.

　　William Lowry, a major US buyer of Chinese clothing and textiles, said in an interview at one of China's larger import/export fairs in April 2008 that Chinese products were not as competitive as they could be.

　　He said, "I'm thinking of buying from other countries. The reduction in Chinese tax rebates and the devaluation of the dollar have resulted in Chinese products being 20 per cent more expensive than they used to be." It is therefore no surprise that, according to a recent industry survey, close to 50 per cent of China's cotton textile industry is looking to switch jobs as expanding costs and the appreciation of the Chinese renminbi squeeze corporate profits.

　 　Little did Mr Lowry know that the situation would be different from previous years and that he would want to source cheap textiles from other countries and that, in fact, the supply of cheap goods would be quite limited. India is also telling its own story. With the appreciation of the Indian rupee, the soaring cost of fuel and the soaring price of cotton, Indian textile companies are running out of options and are either sourcing high priced raw materials for their products or facing closure. For example, MH Textile Mills Limited in Ahmedabad is continuing to increase its selling price by 15-20%, resorting to drastic cost-cutting measures to save the business, including laying off nearly 500 workers.

　　In addition, MH Textile Mills has reduced the average age of its workforce from 55 to 48 years, utilised more cost-efficient equipment, saved almost 25% on electricity costs and moved to a paperless working environment using full computerisation. Even textile giants, such as Arvind Textile Mills, are taking active steps to reduce costs.

　　We have all now entered an era of cost reduction, with textile mills adopting innovative technologies, improving power efficiency, saving fuel, compressing labour and linking remuneration to net sectoral productivity growth.