With exports reaching an estimated US$370 million in 2004, China produces sunglasses in fashion, sports and children's models. While low-end and midrange models still dominate output, the number of high-end designs being offered is increasing, even as quality and innovation in all price ranges improve.

More China suppliers are realizing that offering the world's lowest prices is no longer enough to ensure survival. As a result, R&D expenditure is rising as the country's 300 or so exporters compete to launch designs with special features. Of the 73 suppliers featured in this report, 71 percent plan to boost R&D spending in 2005.

Even in Wenzhou, China's main hub of low-end production, more suppliers over the past couple of years have enriched their lines by investing in development of value-added models.

China sunglasses makers see frames, not lenses, as the main selling point of their products. To gain an edge over the competition, makers are enhancing R&D work on models with unique-looking frames, including wraparound, oversized, translucent and patterned versions.

Fashion sunglasses are the country's biggest line, accounting for about 50 percent of export output. Sports sunglasses make up a third and children's models account for the rest. Models with both plastic and metal frames are offered. Most sunglasses are unisex designs, although some designs specifically for men or women are manufactured.

OEM orders are the core business of the industry. China suppliers produce sunglasses for such wellknown companies as Wal-Mart, Guess, Disney, Polaroid and Marks & Spencer. Most makers currently do not offer in-house labels. But as more makers enhance their design capability, we see the number of them with in-house brands increasing.

We also see continued solid growth for the industry as a whole. A 12 percent expansion in China's sunglasses exports is projected for 2005, and our survey findings support this. Some 85 percent of companies interviewed in this report anticipate higher sales in the coming year. Growth will be fueled largely by increased demand in the European Union.

In reaction to higher material and operating costs, many suppliers plan to inflate product prices in 2005. Soaring international petroleum prices are having an impact on the cost of plastic frame and lens materials used by China sunglasses makers. Other operational challenges are eating into makers' profit margins, too, creating a situation conducive to price increases.

Suppliers in many of China's coastal cities are contending with a shortage of skilled workers. During the past two decades, people from rural northern and interior provinces flocked to factory jobs in booming metropolitan areas of Zhejiang, Fujian and Guangdong provinces. But those workers are now opting to return home, where economic growth is offering them opportunity for convenient local employment. In response to the labor shortage, sunglasses makers now have no choice but to attract workers with higher wages.

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