Speculation about US and EU restrictions in the line coupled with government-imposed export taxes, which were abolished only late last year, were also among the reasons behind the move to produce more midrange and high-end designs.

The bilateral agreement with the EU in September 2005 and the US in November came as a relief to China makers because sleepwear is not included in the list of categories with import limits.

But the volatile export environment has already affected many companies' expansion plans, leading them to take a more cautious outlook for the year. Instead of investing in the construction of new or bigger factories, many suppliers are opting to upgrade their existing facilities instead.

Apart from the possibility of new quotas, suppliers had to deal with rising production expenses as a result of the continuing labor shortage and higher raw material costs.

The labor shortage was initially limited to Guangdong province, but is now widespread in Zhejiang and Jiangsu, which are the main production hubs for sleepwear.

Many of the industry's skilled workers are enticed to work in other sectors by companies offering higher wages and better benefits. Makers are thus forced to match such job offers with higher pay, better housing and training for their employees, consequently raising operating expenses.

The rising cost of synthetic fabric largely used in designs, plastic and lace trims, and other garment accessories has decreased companies' profit margins further.

Because of these factors, as many as 40 percent of sleepwear makers in China will be increasing product prices between 5 and 10 percent in coming months. But the majority will keep prices stable in efforts to maintain competitiveness.

Some established makers are trying to pull down operating expenses by investing in automated machinery and vertical integration, while the bulk of suppliers are increasing R&D capability to improve designs and increase the variety of styles offered.

To boost competitiveness, many companies are expanding their product lines, improving buyer services or enhancing product quality through the use of new types of fabric.

Models made of functional fabric such as modal and Tencel have been released, increasing softness and luster in sleepwear. The use of natural materials such as silk, linen and bamboo blends has also become popular, providing designs with better breathability and anti-bacterial features.

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