Days of Communist China cheap denim factories are over-Telegraph

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2/26/11, "The end of China's cheap denim dream," UK Telegraph, Malcolm Moore

"Sitting on a bale of denim in an idled factory, 24-year-old Wei Xiaofeng has a message for the West - the era of Chinese factories churning out

• dirt-cheap goods is over.

For years, her company, along with thousands of others in China, has helped British high street stores to offer cheaper and cheaper fashion - jeans that cost less than £10 or t-shirts for £3 -

• and turned the likes of Zara, H&M and Topshop into global giants.

But now the system has broken down. Mrs Wei's company is in crisis and has stopped taking orders from the West.

"We are still getting orders from abroad - all the factories are," she said. "But no one is taking them because we would make a loss. The foreigners do not want to pay a reasonable price.

• We have not made any profits for two years."

The Sea Mountain Clothing company, set up seven years ago by Mrs Wei and her 34-year-old husband Tian Yi, is one of around 5,000 jeans-making factories in Xintang, a southern Chinese town that has become the

• denim capital of the world.
  

If you own a pair of jeans, there is a strong chance that it was stitched in Xintang, or that its denim was woven there. A sleepy farming town 30 years ago, it is now home to a million factory workers and turns out 260 million pairs of jeans a year -

• more than a third of the world's supply.

The town's geography maps out an anatomy of the denim trade. Along the wide arterial motorways leading out of Xintang are the large factories, some capable of producing 60,000 pairs a day for the likes of Calvin Klein, Levi's, Lee and Wrangler.

Their technology is world-class - good enough for even the more esoteric and high-end denim labels like True Religion, Evisu and Diesel that were once only made in Japan or Italy.

Meanwhile, along the main streets in the city centre, every shopfront also belongs to a denim company. In each window sits a boss, inviting in prospective buyers with cigarettes and walnut shell-sized cups of strong Chinese tea. Upstairs,

• floor after floor is filled with rows of workers sewing together jeans.

The side streets are taken up with the accessories of the trade: button and rivet shops, stores selling zippers, and long rows of businesses selling yards of denim, with trucks buzzing between them to load and unload bales of the dark blue fabric.

Finally there are the dusty suburbs. Here, family workshops spill out onto the road, with groups of women clustered around piles of jeans, stitching on labels, using heat guns to burn off loose threads and bagging them for sale.

"The local environment has suffered. Last year Greenpeace released a satellite image showing the run-off from the large cotton dyeing plants colouring all of the town's water, and much of the Pearl river, a deep indigo.

Xintang whirred into life 30 years ago, when Huang Lin, a businessman living in Hong Kong, saw the potential of moving his jeans business to the mainland. Other firms quickly blossomed and soon every country in the world began taking advantage of Xintang's

• seemingly endless pool of cheap and hard-working labour....

Now, however, the Chinese factories have hit a wall. The workers who were once happy to work for as little as £30 a month now want ten to 15 times that sum.

Young men with the latest mobile phones and foppish hair cuts stood around two outdoor pool tables on the streets of Dadun avenue, gambling on the games.

• Their factory is only paying them for six hours a day in a bid to trim its costs.

More and more workers are choosing not to travel to the South to find work, preferring to try their luck at one of the new factories or construction projects popping up

• in inland China, where life is cheaper and they can be closer to their families.
  

"It is becoming impossible to find people to work," said Han Zhongliang, a 46-year-old factory boss from Hubei. "I have been here ten years and I used to have 30 to 40 employees. But this year I will be lucky to find 20 who can do the job are willing to work for the wage we offer: 5,000 yuan (£490) a month. If things keep on like this, there won't be any labour at all in South China in five years time.

• Since the Olympics, it has just been worse and worse for our business."

Many other factories have already shut down. On the street where Mrs Wei's factory sits, only four of the 17 factories are open. In one desolate room, a former factory boss sat on a stool in shame: having lost all of his family's money, he was too ashamed to return home for the Chinese New Year holiday.

• Other bosses complained that new labour laws have empowered workers far too much, and that the government has no love for the polluting denim industry, and offers no help....

Meanwhile, the price of cotton has sky-rocketed to levels not seen for 30 years. Floods in Pakistan and Australia,

• an export ban from India and now
  

the wave of revolutions across the Middle East has made cotton unaffordable.

Already, designers have begun lacing their jeans with polyester in order to offset costs - a trend that explains the spread of new jeans with a

• "shiny" finish on the high street.

"Last July, cotton cost 70 cents a pound," said Richard Atkins, a denim expert in Hong Kong and former creative director of All Saints, a high-end clothing brand. "Last week, it was three times that price. I tried to place an order with a denim mill for one million yards and they told me they could not accept it because the

• cotton is now worth more than the denim."

The margin between success and failure in the denim business, and in the clothing trade in general, is razor thin. During the fat years, manufacturers could make 10p to 20p on each pair of jeans.

• Now they make 5p if they are lucky.

The shockwaves rippling out of Xintang have already started to be felt. H&M, the giant Swedish clothes store, saw the profit margins that it makes on its clothes "collapse" at the end of last year, according to city analysts. Next and Primark have both warned

• they plan to raise their prices.

Nor is there any alternative, realistically, to manufacturing in China.

Vietnam, Cambodia, the Philippines, and Indonesia may be cheaper, but

• they cannot compete when it comes to infrastructure and scale.

As a result, Mr Atkins, the Hong Kong-based denim expert, warns that high street fashion have may have to slow down in pace a little. ...

"Companies should be very scared, as throwaway fashion is now dead," he claimed. "For years they wanted to get more and pay less. They have

• pillaged the system in China. But now they are going to suffer.""

via Jim McTeague, Barrons