CICC Research Institute: rising labor costs have recently become widespread concern. Textile and apparel industry as the traditional labor-intensive, low-margin industries, the inevitable wave of this round of salary increases affected. Through various sub-sectors of textile and garment analysis, comparison of upstream and downstream industry chain, business scale and profit margins and other factors, the following conclusions:
  1. Upstream manufacturers, distributors impact of rising labor costs than brand managers. Since most of the first two do not have its own brand, relying on OEM or "Ban Xiangzi" type of distribution of value-added retail to earn lower profits, but operations require a lot of cheap labor to support can be achieved. On the contrary, most of China's domestic brands for the mid-range or low, can continue to improve product value to enhance the retail average price, so costs can be conductive to the consumer, less impact on performance.
  2. On the brand management business, the sales scale result in significant operating leverage, to a certain extent be able to withstand the negative impact of wage increases. In a similar business model, the larger, faster-growing brands operating companies less affected by the salary changes.
  3. Net profit of enterprises affected by the low rate of relatively large wage increases.
For these reasons, we can see the risks of production and distribution of large enterprises, should avoid high labor costs low profit margins of companies, such as Yue Yuen, Weiqiao Textile, Texwinca, such as Po Sheng. Meanwhile, the proposal concerned about the brand operators, recommend Men (Lee Lang, seven wolves (002 029)), sportswear (Li Ning, Anta, China movement), women (Belle) and so on.
  Source "China Textile Network"
  Editor: Yan Zhu