Women's undergarment
suppliers in China are in a state of tremendous flux. The industry
was gearing up for phenomenal growth in 2005, when all textile quotas
are fully eliminated. Suppliers, however, are wary of explosive
growth because of a number of factors.
China's exports to countries that used to impose quotas on women's
undergarments, primarily the United States and the European Union,
have surged in the months after quotas were lifted, but total shipments
have declined as a result of US safeguards and government-imposed
export taxes.
To prevent the US and EU from applying safeguards on sensitive
categories, the government in China has taken measures to curb a
sudden surge in exports to these markets, such as setting export
taxes. The initial tax implemented at the beginning of the year
covers some 100 apparel categories, including women's undergarments.
A second levy, which is up to 400 percent more than what was previously
imposed, was implemented in June but does not apply to women's undergarments.
Under the policy, exports of slips and underpants are taxed at
US$0.024 per piece. Although bras are not included in the categories
to be taxed, the levy still applies for sets with panties.
While the tax has little effect on most apparel categories that
are being levied, it is a burden for low-end underpants. The levy
accounts for about 9.6 percent of a typical low-end underpant's
cost. Since the average profit margin for most low-end makers is
less than 10 percent per piece, most of these suppliers will face
bankruptcy if they continue offering low-end products at the same
price. To survive, many have passed all or most of the additional
cost to buyers, while a few have shifted to more upscale manufacturing.
In fact, total exports of panties and girdles decreased 3 percent
in the first three months of 2005 to 409.2 million pieces, with
average prices up 34.8 percent from US$0.30 to US$0.40 per piece.
Because these products account for the majority of total women's
undergarment exports, the sharp decline in shipments has significantly
affected overall exports in Q1 2005, which went down 17 percent
to 760 million pieces at a value of US$420.5 million.
However, exports of panties to the United States in the same
period surged 1,169 percent to 19 million pieces. Because of the
phenomenal increase in exports, the US imposed a safeguard, capping
growth of underwear imports from China to 7.5 percent.
The US previously imposed a safeguard on China-made bras, 22
months after quotas on the product were lifted in January 2002.
Exports of bras to the US grew 291 percent in this period, prompting
the safeguard to be implemented in December 2003.
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