in the first half, increased from 85.60% in 2004. Though, Hong Kong's trading houses started diversifying sales to other areas in the last years. As a result in the first half, re-exports of cotton denim fabrics to Bangladesh got doubled. Shipments reported 3.8 million kilos, with Bangladesh turning out as the second destination. Its contribution of total re-exports increased from 4.70% to 7.10%.

Chinese denim falling to keep up

In comparison, sales to Cambodia and Vietnam decreased 14.40% and 6.10% at the same time. Shipments to Indonesia increased 65% while re-exports to the United States soared, but from awfully low levels. Shipments to the US market only calculated to 1.70% of total shipments in the first half. In provisos of resources, Japan dropped with a limited 8% growth in Hong Kong's re-exports of Japanese denim fabrics. Though, Pakistan received contributions of the Hong Kong market with a 166% raise in trading of Pakistani denim that only calculated to 0.70% of total re-exports.

Tendency and factors observed in China's denim industry

The prospect of some denim garment suppliers in China is doubtful. Stiffed competition and possible US protection measures may noticeably affect companies that embarked on capacity enhancements. These companies might not be capable to regain their investments in additional machinery, which they purchased to enhanced capacity and become more gung ho.

Small suppliers that spotlight on low-end production will be the mainly influenced by the new government-imposed export tax. In the intensely competitive free-market environment, increasing prices to balance lost profits could change to lost orders.

Many low-end suppliers are shifting to the value chain, targeting production on midran

Under the MFA quota system, each supplier country poised to its limits on the volume of textiles and clothing that may be imported from each individual nation with which it trades. From about 60 different countries, U.S. quotas comprised of 2,400 products. It was anticipated that the removal of these quotas will mainly be advantageous to Chinese (and to a smaller amount to Indian) producers, who are capable to challenge their international competition due to its combination of an undervalued currency, low wages, and outright labor domination. In an incongruous twist, the majority of developing countries, who insisted on the phase-out of the MFA as resources to raise their exports of textiles and clothing to well-off countries, insisted on an extension of quotas or some other system that can assure them any share of prosperous country markets provided the projection of China's awesome supremacy. China, with the help of some other large developing countries, chucked these demands made by Turkey, and a bloc of African, Asian, Latin American and Caribbean Basin countries.

The profit of China is not only on its benefits in wages. It also profits from a large trained and dynamic workforce, propinquity to inexpensive quality resources, and encouraging government policies, such as subsidized lines of credit and exchange rate manipulation. These aspects, jointly in low wages, will create China, the most chosen supplier for many retailers, particularly after 2008, when the likelihood the United States to impose safeguards on Chinese products is removed.

It is likely to make a sense of the consequence the end of all WTO textile and apparel quotas by analyzing what happened when quotas on some products, covering dressing gowns and luggage were zeroed in 2002 as part of the quota system phase-out. This change gave a 53 percent decrement in the average price per square meter that China got for its exports in those categories, from US$ 6.23 before to US$ 3.12 after quota removal. China's market contribution in these items increased from 2002 to 2004, up 888 percent in luggage and 1,179 percent in dressing gowns. Overall, China now states 72.3 percent of the U.S. apparel import market in all products where quotas were raised in 2002.

Denim market of China

China is the world's leading supplier of denim garments, having 30% of global production. The country exported US$1.8 billion worth in 2004. With quotas removal, demand is projected to rise by more than 20% in 2005. But a government-imposed export tax and looming US and EU to protect threaten growth.

Nearly all denim garment producers in China make jeans, and most of them also provide shorts, skirts, dresses and shirts. Many companies provide jeans as their main product line. In some companies, jeans are produce of about 90 percent of its total production. Jeans and shorts report for 64 percent of the denim garment exports by suppliers Jackets report 16 percent, skirts and dresses 13 percent and shirts 7 percent.

According to Global Lifestyle Monitor, average consumption of denim apparel in 2003 was observed in U.K.-12.9, Japan-12, Hong Kong-11.8, Italy-10.8, China-7.9 and India-3.1 items. But, in general consumption of denim apparel items remains highest in the U.S., Germany and Colombia and lowest in India and China. Though, most industry experts believe denim consumption in Asia (most particularly China) to explode over the next several years as income increases and wardrobe dictates vanish.

Present performance of Denim

According to official data, China's exports of denim fabrics considerably increased in the first half of 2005. China's exports of cotton denim fabrics (HS 520942) were increased 17.80% in volume terms in the first six months of the year to 193 million square meters to Hong Kong's denim's harshly rose direct exports to Korea, Russia, Cambodia India also increased. Prices were increasing at the time, in line with value added content. Shipments even increased at the same time to 30 million, giving rise in average price to US$ 1.71 per square meter. China's exports to Hong Kong increased 25% in volume terms, now reporting 38.80% of total shipments of cotton denim fabrics.

Greater demand within China

A greater chunk of those fabrics shipped to Hong Kong normally turn back to the mainland where they are utilized by apparel factories. The sudden increase in first half sales to the SAR (Special Administrative Region) provides the important contribution of Hong Kong's trading houses in the denim business in China. With the end of quotas on denim apparel, demand for denim fabrics was evidently robust in the first half in the PRC. According to official data, direct sales to other regions were also harshly increased in the period, somewhat because of to an increment in clothing production in these countries or a decrement in domestic output. Shipments to Korea were increased 62% over the period, as a clear indication of diminishing Korean denim production. In comparison, a 132% jump in exports to Russia more possibly gives an increment in Russian apparel output. Other denim suppliers may also have mislaid market contributions, such as Taiwanese manufacturers.

Exports to India, Turkey and Cambodia: Increasing

China's shipments to India and Turkey boosted at the same time. Contributions of these areas in total denim exports from China are very low. Prices increased in line with better quality and more value added content. In China like to another place, the quality of fabrics is enhancing and is being more advanced.

Though, its exports to Cambodia were increased to 51% in volume terms. The high valued fabrics send to Japan at US$ 2.69 per square meter while low-priced products were bought by Bangladesh (US$1.54), Russia (US$1.49) or Mexico (US$1.31).

Denim fabric re-exports of Hong Kong

Hong Kong's trading in cotton denim fabrics kept increasing in the first half, improved by higher sales to China and to other low-cost countries such as Bangladesh. Hong Kong's denim exporters are gaining benefits from the rebound in Asian clothing production in the post-quota period. Unit values decreased in part of the year in partly because of poorer cotton prices.

Hong Kong's re-exports of cotton denim fabrics (HS 520942) were increased more than 32% in volume terms in the first part of the 53,700 tons. Re-exports had already rose 23.80% in 2004 to 85,600 tons. Shipments only increased 28.40% in US$ terms in the first six months after average unit price was down more than US$4.79 per kilo.

China's share increased in re-export from HK

Not unexpectedly sustained to invite the large part of Hong Kong trading activities in denim fabrics. Re-export to the mainland of China were increased 43% in the first half after rising by 35% China's share of re-exports a little increment from 60.70% increased to 61.8% as a result.

The key fraction of denim fabrics that are re-exported by Hong Kong's traders actually- sourced from China. China completed 88.60% of total re-exports from Hong Kong in the first half, increased from 85.60% in 2004. Though, Hong Kong's trading houses started diversifying sales to other areas in the last years. As a result in the first half, re-exports of cotton denim fabrics to Bangladesh got doubled. Shipments reported 3.8 million kilos, with Bangladesh turning out as the second destination. Its contribution of total re-exports increased from 4.70% to 7.10%.

Chinese denim falling to keep up

In comparison, sales to Cambodia and Vietnam decreased 14.40% and 6.10% at the same time. Shipments to Indonesia increased 65% while re-exports to the United States soared, but from awfully low levels. Shipments to the US market only calculated to 1.70% of total shipments in the first half. In provisos of resources, Japan dropped with a limited 8% growth in Hong Kong's re-exports of Japanese denim fabrics. Though, Pakistan received contributions of the Hong Kong market with a 166% raise in trading of Pakistani denim that only calculated to 0.70% of total re-exports.

Tendency and factors observed in China's denim industry

The prospect of some denim garment suppliers in China is doubtful. Stiffed competition and possible US protection measures may noticeably affect companies that embarked on capacity enhancements. These companies might not be capable to regain their investments in additional machinery, which they purchased to enhanced capacity and become more gung ho.

Small suppliers that spotlight on low-end production will be the mainly influenced by the new government-imposed export tax. In the intensely competitive free-market environment, increasing prices to balance lost profits could change to lost orders.

Many low-end suppliers are shifting to the value chain, targeting production on midrang

2 as part of the quota system phase-out. This change gave a 53 percent decrement in the average price per square meter that China got for its exports in those categories, from US$ 6.23 before to US$ 3.12 after quota removal. China's market contribution in these items increased from 2002 to 2004, up 888 percent in luggage and 1,179 percent in dressing gowns. Overall, China now states 72.3 percent of the U.S. apparel import market in all products where quotas were raised in 2002.

Denim market of China

China is the world's leading supplier of denim garments, having 30% of global production. The country exported US$1.8 billion worth in 2004. With quotas removal, demand is projected to rise by more than 20% in 2005. But a government-imposed export tax and looming US and EU to protect threaten growth.

Nearly all denim garment producers in China make jeans, and most of them also provide shorts, skirts, dresses and shirts. Many companies provide jeans as their main product line. In some companies, jeans are produce of about 90 percent of its total production. Jeans and shorts report for 64 percent of the denim garment exports by suppliers Jackets report 16 percent, skirts and dresses 13 percent and shirts 7 percent.

According to Global Lifestyle Monitor, average consumption of denim apparel in 2003 was observed in U.K.-12.9, Japan-12, Hong Kong-11.8, Italy-10.8, China-7.9 and India-3.1 items. But, in general consumption of denim apparel items remains highest in the U.S., Germany and Colombia and lowest in India and China. Though, most industry experts believe denim consumption in Asia (most particularly China) to explode over the next several years as income increases and wardrobe dictates vanish.

Present performance of Denim

According to official data, China's exports of denim fabrics considerably increased in the first half of 2005. China's exports of cotton denim fabrics (HS 520942) were increased 17.80% in volume terms in the first six months of the year to 193 million square meters to Hong Kong's denim's harshly rose direct exports to Korea, Russia, Cambodia India also increased. Prices were increasing at the time, in line with value added content. Shipments even increased at the same time to 30 million, giving rise in average price to US$ 1.71 per square meter. China's exports to Hong Kong increased 25% in volume terms, now reporting 38.80% of total shipments of cotton denim fabrics.

Greater demand within China

A greater chunk of those fabrics shipped to Hong Kong normally turn back to the mainland where they are utilized by apparel factories. The sudden increase in first half sales to the SAR (Special Administrative Region) provides the important contribution of Hong Kong's trading houses in the denim business in China. With the end of quotas on denim apparel, demand for denim fabrics was evidently robust in the first half in the PRC. According to official data, direct sales to other regions were also harshly increased in the period, somewhat because of to an increment in clothing production in these countries or a decrement in domestic output. Shipments to Korea were increased 62% over the period, as a clear indication of diminishing Korean denim production. In comparison, a 132% jump in exports to Russia more possibly gives an increment in Russian apparel output. Other denim suppliers may also have mislaid market contributions, such as Taiwanese manufacturers.

Exports to India, Turkey and Cambodia: Increasing

China's shipments to India and Turkey boosted at the same time. Contributions of these areas in total denim exports from China are very low. Prices increased in line with better quality and more value added content. In China like to another place, the quality of fabrics is enhancing and is being more advanced.

Though, its exports to Cambodia were increased to 51% in volume terms. The high valued fabrics send to Japan at US$ 2.69 per square meter while low-priced products were bought by Bangladesh (US$1.54), Russia (US$1.49) or Mexico (US$1.31).

Denim fabric re-exports of Hong Kong

Hong Kong's trading in cotton denim fabrics kept increasing in the first half, improved by higher sales to China and to other low-cost countries such as Bangladesh. Hong Kong's denim exporters are gaining benefits from the rebound in Asian clothing production in the post-quota period. Unit values decreased in part of the year in partly because of poorer cotton prices.

Hong Kong's re-exports of cotton denim fabrics (HS 520942) were increased more than 32% in volume terms in the first part of the 53,700 tons. Re-exports had already rose 23.80% in 2004 to 85,600 tons. Shipments only increased 28.40% in US$ terms in the first six months after average unit price was down more than US$4.79 per kilo.

China's share increased in re-export from HK

Not unexpectedly sustained to invite the large part of Hong Kong trading activities in denim fabrics. Re-export to the mainland of China were increased 43% in the first half after rising by 35% China's share of re-exports a little increment from 60.70% increased to 61.8% as a result.

The key fraction of denim fabrics that are re-exported by Hong Kong's traders actually- sourced from China. China completed 88.60% of total re-exports from Hong Kong in the first half, increased from 85.60% in 2004. Though, Hong Kong's trading houses started diversifying sales to other areas in the last years. As a result in the first half, re-exports of cotton denim fabrics to Bangladesh got doubled. Shipments reported 3.8 million kilos, with Bangladesh turning out as the second destination. Its contribution of total re-exports increased from 4.70% to 7.10%.

Chinese denim falling to keep up

In comparison, sales to Cambodia and Vietnam decreased 14.40% and 6.10% at the same time. Shipments to Indonesia increased 65% while re-exports to the United States soared, but from awfully low levels. Shipments to the US market only calculated to 1.70% of total shipments in the first half. In provisos of resources, Japan dropped with a limited 8% growth in Hong Kong's re-exports of Japanese denim fabrics. Though, Pakistan received contributions of the Hong Kong market with a 166% raise in trading of Pakistani denim that only calculated to 0.70% of total re-exports.

Tendency and factors observed in China's denim industry

The prospect of some denim garment suppliers in China is doubtful. Stiffed competition and possible US protection measures may noticeably affect companies that embarked on capacity enhancements. These companies might not be capable to regain their investments in additional machinery, which they purchased to enhanced capacity and become more gung ho.

Small suppliers that spotlight on low-end production will be the mainly influenced by the new government-imposed export tax. In the intensely competitive free-market environment, increasing prices to balance lost profits could change to lost orders.

Many low-end suppliers are shifting to the value chain, targeting production on midran

rding to official data, China's exports of denim fabrics considerably increased in the first half of 2005. China's exports of cotton denim fabrics (HS 520942) were increased 17.80% in volume terms in the first six months of the year to 193 million square meters to Hong Kong's denim's harshly rose direct exports to Korea, Russia, Cambodia India also increased. Prices were increasing at the time, in line with value added content. Shipments even increased at the same time to 30 million, giving rise in average price to US$ 1.71 per square meter. China's exports to Hong Kong increased 25% in volume terms, now reporting 38.80% of total shipments of cotton denim fabrics.

Greater demand within China

A greater chunk of those fabrics shipped to Hong Kong normally turn back to the mainland where they are utilized by apparel factories. The sudden increase in first half sales to the SAR (Special Administrative Region) provides the important contribution of Hong Kong's trading houses in the denim business in China. With the end of quotas on denim apparel, demand for denim fabrics was evidently robust in the first half in the PRC. According to official data, direct sales to other regions were also harshly increased in the period, somewhat because of to an increment in clothing production in these countries or a decrement in domestic output. Shipments to Korea were increased 62% over the period, as a clear indication of diminishing Korean denim production. In comparison, a 132% jump in exports to Russia more possibly gives an increment in Russian apparel output. Other denim suppliers may also have mislaid market contributions, such as Taiwanese manufacturers.

Exports to India, Turkey and Cambodia: Increasing

China's shipments to India and Turkey boosted at the same time. Contributions of these areas in total denim exports from China are very low. Prices increased in line with better quality and more value added content. In China like to another place, the quality of fabrics is enhancing and is being more advanced.

Though, its exports to Cambodia were increased to 51% in volume terms. The high valued fabrics send to Japan at US$ 2.69 per square meter while low-priced products were bought by Bangladesh (US$1.54), Russia (US$1.49) or Mexico (US$1.31).

Denim fabric re-exports of Hong Kong

Hong Kong's trading in cotton denim fabrics kept increasing in the first half, improved by higher sales to China and to other low-cost countries such as Bangladesh. Hong Kong's denim exporters are gaining benefits from the rebound in Asian clothing production in the post-quota period. Unit values decreased in part of the year in partly because of poorer cotton prices.

Hong Kong's re-exports of cotton denim fabrics (HS 520942) were increased more than 32% in volume terms in the first part of the 53,700 tons. Re-exports had already rose 23.80% in 2004 to 85,600 tons. Shipments only increased 28.40% in US$ terms in the first six months after average unit price was down more than US$4.79 per kilo.

China's share increased in re-export from HK

Not unexpectedly sustained to invite the large part of Hong Kong trading activities in denim fabrics. Re-export to the mainland of China were increased 43% in the first half after rising by 35% China's share of re-exports a little increment from 60.70% increased to 61.8% as a result.

The key fraction of denim fabrics that are re-exported by Hong Kong's traders actually- sourced from China. China completed 88.60% of total re-exports from Hong Kong in the first half, increased from 85.60% in 2004. Though, Hong Kong's trading houses started diversifying sales to other areas in the last years. As a result in the first half, re-exports of cotton denim fabrics to Bangladesh got doubled. Shipments reported 3.8 million kilos, with Bangladesh turning out as the second destination. Its contribution of total re-exports increased from 4.70% to 7.10%.

Chinese denim falling to keep up

In comparison, sales to Cambodia and Vietnam decreased 14.40% and 6.10% at the same time. Shipments to Indonesia increased 65% while re-exports to the United States soared, but from awfully low levels. Shipments to the US market only calculated to 1.70% of total shipments in the first half. In provisos of resources, Japan dropped with a limited 8% growth in Hong Kong's re-exports of Japanese denim fabrics. Though, Pakistan received contributions of the Hong Kong market with a 166% raise in trading of Pakistani denim that only calculated to 0.70% of total re-exports.

Tendency and factors observed in China's denim industry

The prospect of some denim garment suppliers in China is doubtful. Stiffed competition and possible US protection measures may noticeably affect companies that embarked on capacity enhancements. These companies might not be capable to regain their investments in additional machinery, which they purchased to enhanced capacity and become more gung ho.

Small suppliers that spotlight on low-end production will be the mainly influenced by the new government-imposed export tax. In the intensely competitive free-market environment, increasing prices to balance lost profits could change to lost orders.

Many low-end suppliers are shifting to the value chain, targeting production on midran

osted at the same time. Contributions of these areas in total denim exports from China are very low. Prices increased in line with better quality and more value added content. In China like to another place, the quality of fabrics is enhancing and is being more advanced.

Though, its exports to Cambodia were increased to 51% in volume terms. The high valued fabrics send to Japan at US$ 2.69 per square meter while low-priced products were bought by Bangladesh (US$1.54), Russia (US$1.49) or Mexico (US$1.31).

Denim fabric re-exports of Hong Kong

Hong Kong's trading in cotton denim fabrics kept increasing in the first half, improved by higher sales to China and to other low-cost countries such as Bangladesh. Hong Kong's denim exporters are gaining benefits from the rebound in Asian clothing production in the post-quota period. Unit values decreased in part of the year in partly because of poorer cotton prices.

Hong Kong's re-exports of cotton denim fabrics (HS 520942) were increased more than 32% in volume terms in the first part of the 53,700 tons. Re-exports had already rose 23.80% in 2004 to 85,600 tons. Shipments only increased 28.40% in US$ terms in the first six months after average unit price was down more than US$4.79 per kilo.

China's share increased in re-export from HK

Not unexpectedly sustained to invite the large part of Hong Kong trading activities in denim fabrics. Re-export to the mainland of China were increased 43% in the first half after rising by 35% China's share of re-exports a little increment from 60.70% increased to 61.8% as a result.

The key fraction of denim fabrics that are re-exported by Hong Kong's traders actually- sourced from China. China completed 88.60% of total re-exports from Hong Kong in the first half, increased from 85.60% in 2004. Though, Hong Kong's trading houses started diversifying sales to other areas in the last years. As a result in the first half, re-exports of cotton denim fabrics to Bangladesh got doubled. Shipments reported 3.8 million kilos, with Bangladesh turning out as the second destination. Its contribution of total re-exports increased from 4.70% to 7.10%.

Chinese denim falling to keep up

In comparison, sales to Cambodia and Vietnam decreased 14.40% and 6.10% at the same time. Shipments to Indonesia increased 65% while re-exports to the United States soared, but from awfully low levels. Shipments to the US market only calculated to 1.70% of total shipments in the first half. In provisos of resources, Japan dropped with a limited 8% growth in Hong Kong's re-exports of Japanese denim fabrics. Though, Pakistan received contributions of the Hong Kong market with a 166% raise in trading of Pakistani denim that only calculated to 0.70% of total re-exports.

Tendency and factors observed in China's denim industry

The prospect of some denim garment suppliers in China is doubtful. Stiffed competition and possible US protection measures may noticeably affect companies that embarked on capacity enhancements. These companies might not be capable to regain their investments in additional machinery, which they purchased to enhanced capacity and become more gung ho.

Small suppliers that spotlight on low-end production will be the mainly influenced by the new government-imposed export tax. In the intensely competitive free-market environment, increasing prices to balance lost profits could change to lost orders.

Many low-end suppliers are shifting to the value chain, targeting production on midran

in the first half, increased from 85.60% in 2004. Though, Hong Kong's trading houses started diversifying sales to other areas in the last years. As a result in the first half, re-exports of cotton denim fabrics to Bangladesh got doubled. Shipments reported 3.8 million kilos, with Bangladesh turning out as the second destination. Its contribution of total re-exports increased from 4.70% to 7.10%.

Chinese denim falling to keep up

In comparison, sales to Cambodia and Vietnam decreased 14.40% and 6.10% at the same time. Shipments to Indonesia increased 65% while re-exports to the United States soared, but from awfully low levels. Shipments to the US market only calculated to 1.70% of total shipments in the first half. In provisos of resources, Japan dropped with a limited 8% growth in Hong Kong's re-exports of Japanese denim fabrics. Though, Pakistan received contributions of the Hong Kong market with a 166% raise in trading of Pakistani denim that only calculated to 0.70% of total re-exports.

Tendency and factors observed in China's denim industry

The prospect of some denim garment suppliers in China is doubtful. Stiffed competition and possible US protection measures may noticeably affect companies that embarked on capacity enhancements. These companies might not be capable to regain their investments in additional machinery, which they purchased to enhanced capacity and become more gung ho.

Small suppliers that spotlight on low-end production will be the mainly influenced by the new government-imposed export tax. In the intensely competitive free-market environment, increasing prices to balance lost profits could change to lost orders.

Many low-end suppliers are shifting to the value chain, targeting production on midrange and even high-end denim garments. These suppliers are spending more in R&D in arrange to expand more upscale products.

These things have also given many midsize companies to vertically integrate production and enhance production output. Many leading companies already carry out all production processes in -house. Doing so has offered these leading companies a little more space to captivate unforeseen additional costs, such as export taxes.

In projecting the growth in cotton products from China, one only requires to have a glance at the past. After the third stage of quota phase-out (January 1, 2002), U.S. imports of cotton products no-longer subject to quota climbed noticeably, due to largely to increasing shipments from China. From 2001 to 2004, the import volume (SMEs) of newly quota free cotton products increased 69.6%. Though, apart from China, world shipments actually decreased 8.4%, while Chinese shipments boosted by 483.9%. As the volume of Chinese imports increased so rapidly, the cost per SME for these categories decreased 45.9%, a turn down the rest of the world was incapable to compete. So, China's contribution of world shipments of cotton products newly integrated into quota-free trading increased from 24% in 2001 to 53% in 2004. With China's improved capacity for apparel production now there is a less motive not to anticipate likewise growth in Chinese shipments of products from which were lifted in January 2005.

The effect on cotton

The persistent discussion about US safeguard measures against Chinese cotton textile and apparel imports directly influences the market for cotton. With China as the world's leading buyer of cotton and the United States as the biggest seller, any modify textile trade policy could have major implication on cotton. For the 2005/06 marketing year, the USDA estimates that China will import a record 15.0 million bales to fulfill internal mill demand for fiber. Usually, the United States calculated to 55% to 60% of China's cotton purchases, noting that it possible could sell a record 7 to 8 million bales to China in the coming marketing year.

The volume of cotton products exported from Chinese mills would decline and hence new trade restrictions, the volume of cotton demand could like¬ wise decrease, perhaps giving an oversupply of cotton on the U.S. and world mar¬kets, which would put forward a depressed outlook for price.

Export tax forces quality upgrades, higher prices

China denim jean producers are increasing R&D facilities and enhancing production output to gain in competitive edge in the quota-free market. But, because of a new export tax imposed by the government in China, it is estimated that many suppliers will be increasing prices.

Exports in some apparel categories, covering denim jeans, are being taxed amounted to $0.02419 to $0.06049 per item per kilogram. China officials applied the export tariff to motivate suppliers to produce more upscale designs as an alternative of provided the market with low-priced, low value products. The new levy is projected to drive production costs up 3 to 6 percent, but whether or not this added expense will be distributed to buyers according to the size of the supplier.

Though many leading companies can still offer to take up the extra cost, many small suppliers will have no option but to increase product prices in arrange to keep up profit margins.

The export tax is not going to disturb denim jean prices at Jiaxing Union Garments Co. Ltd, a bigger Hong Kong-invested company that produces for Lee. Considering of the impending tax months before it was applied; the Zhejiang province-based company was capable to refresh contracts with clients. Jiaxing Union will also be capable to take up the added cost in cases where the client did not need to renegotiate.

Many companies capable of bearing the additional cost normally are not raising prices for long-term clients. Though, their innovative designs will be provided to projections at a higher price.

But many small and midsize suppliers that had procured extra machinery to enhance production capacity and turn out to more competitive in the quota-free market will now have to reduce manufacturing costs to keep up operations. As the slight margins may not facilitate them to recover the amount invested in new equipment, many will have to increase prices, even for well built clients, to keep on buoyant.

Expansion and new set ups in China

Apart from the size, China denim jean suppliers are increasing R&D facilities to build up more upscale products and enhancing efficiency to reduce the costs. Suppliers, who already established that aims simply on high-volume production of inexpensive products, will evade competitiveness in the international market if they do not compose likewise changes. The foreseeable step of increasing prices to react to costs would make their low-end products unfavorable among buyers' aspects for better-quality designs at only slightly soaring prices.

Many companies like Jiaxing Union and Jiaxing Roma Garment Co. Ltd, are concentrating on R&D on new fabric and fiber blends, superior washing and finishing technology and new ideas. Jiaxing Roma is putting their efforts in brand development, a progress the company glimpses as essential for gaining its goal of receiving huge share of the international market. The company exports nearly 100,000 denim jeans monthly to Japan and South Korea.

Vertically integrated production to increase out put and decrease cost are steps being implemented by China denim jean suppliers. Even before the export tax was applied, many suppliers had already set expansion plans in expectation of the raised orders and increased competition that quota elimination would bring. Furthermore, to procuring latest machinery, many companies are coming with new factories. In many cases, the developments will increase capacity by 50 percent. The extra factory space will be utilized not only to house more sewing machines but also to establish workshops for fabric weaving, washing, finishing and dyeing.

So, the export tax has made it critical for suppliers to gain by all these expansion plans. At present, Shunde Changrun Garment Co. Ltd carries out most washing and finishing processes in-house while subcontracting fabric weaving to local mills. To put together production, the company is setting up a weaving factory in Jiangmen, Guangdong province. The plant, projected to be function by in a short period, will house 50 rapiers with the capacity to weave 300,000 yards of denim fabric monthly.

Currently, Shanghai Gavin International Trading Co Ltd functions through subcontracting of fabric weaving and dyeing but intends to have the capability to conduct these processes in-house in short period. The company produces for Gap of the United States and exports more than 40,000 denim jeans monthly.

Apart from for fabric weaving, Zhuhai New Chengshin Clothing Co. Ltd does all processes in-house. The company has not intending to set up or acquire a fabric weaving m