Textination Newsline

• Nevertheless - automation, environmental compatibility and energy efficiency increase machine imports

China's textile and clothing industry is modernizing. High-quality textile machines are in demand. But because of the trade dispute with the USA, investments are also postponed.

How the trade dispute between the USA and China affects its business is currently being discussed by China's textile and apparel manufacturers - and in particular by the companies located in the high-quality sector: Of the approximately USD 119 billion, that they sold abroad in 2018, about two thirds went to the United States.

According to the American Apparel & Footwear Association (AAFA), 41 percent of the clothing sold in the USA, 72 percent of the shoes and 84 percent of the accessories come from China. On the other hand, the producers of intermediate products or textiles are less or hardly affected by the punitive tariffs, because here the dependence on the USA is not quite as great. Apparel manufacturers in Vietnam and Bangladesh, for example, generally are also buying in China.

Following previous punitive tariffs on Chinese imported goods, in September 2018 the USA imposed a 10 percent punitive tariff on a wide range of other Chinese imported goods, including goods from the textile and clothing industry. On January 1. 2019, the tariffs should originally be raised to 25 percent, but at the beginning of December 2018 US President Trump and China's President Xi agreed not to increase the tariffs until March 1^st 2019.

Companies are reluctant to invest
It is hardly possible to make predictions about the outcome of the conflict. In view of the uncertainty, many of the companies affected are therefore waiting for the time being. German textile machine manufacturers are also feeling the effects of this, whether due to lower demand for machines from Germany or locally. According to a representative of the German Engineering Federation (VDMA) in Beijing, many investments have been stopped.

But apart from the upheavals, the modernization process of the Chinese textile and clothing industry is far from complete. Gone are the days when the numerous street markets in China were flooded with cheap clothes. They're hard to find these days. Their manufacturers either had to modernize or have since disappeared from the market.

Number of Chinese textile and clothing companies down sharply
China's textile and clothing industry has been through tough years of consolidation and modernization. In fact, between 2013 and 2017 alone, the number of predominantly private-sector companies in the sector fell by almost 11 percent to around 33,500.

Chinese customers don't want any more junk - and can usually afford better. According to the Chinese National Bureau of Statistics (NBS), they spent about RMB 1,371 billion; equivalent to about USD 207 billion; (1 USD = about 6.6114 RMB, annual mean rate 2018) on clothing and shoes in 2018. This is 8 percent more than in the previous year.

Rising personnel costs force automation
On the one hand, consumer demand has grown and led companies to invest in better machines, on the other hand, the constant pressure on personnel costs has forced them to automate their processes. Between 2010 and 2017, the number of employees in the sector fell from 10.9 million to 7.8 million.

Many have tried (and are trying) to escape the pressure by relocating their companies - for example to the interior of the country, where the wages are lower, or to cheaper foreign countries. However, the great migration movement did not take place, as most of them see themselves too strongly interwoven with their suppliers. Some are also skeptical about the move to the West, arguing that it would only be a temporary solution - and that sooner or later the wages there would follow.

Traditionally, the industry has concentrated on the provinces of Guangdong, Fujian, Zhejiang and Shandong. There, the average gross monthly wages of urban workers rose between 2013 and 2017 (latest available figures) by between 38.9 per cent (Fujian) and 48.5 per cent (Guangdong) - with significantly lower inflation rates.

*) only companies with an annual turnover of more than RMB 20 million are included.
Source: National Bureau of Statistics (NBS)

Environmental legislation and energy efficiency as additional investment drivers
The industry also has to deal with a generally stricter environmental legislation, which increasingly is being implemented. Added to this is the growing importance of the energy efficiency aspect.

Both are good news for German textile machinery manufacturers, according to VDMA estimates. As a result, the market for high-tech machines is expanding and the resulting demand is still far from being met by local production. China imported USD 4.2 billion worth of textile machinery in 2018, an increase of 6.7 percent over the previous year. A further customer potential arises from the growing importance of technical textiles.

According to Chinese customs statistics, German suppliers supplied textile machinery worth USD 1.1 billion to China in 2017 (latest available data) - a whopping 28.3 percent more than in the previous year. Despite this success, however, they had to cede their previous leading position as the main supplier country to Japan. However, this statistic shows only one side of the medal. Almost all well-known manufacturers are now represented in China with their own production facilities - and no figures are available about their activities.

Sources: UN-Comtrade; Calculations by Germany Trade & Invest

Environmental model companies point the way ahead

Already today there are manufacturers with ambitious plans in environmental protection. One of them is the Dongrong Group. Based in Chifeng, Inner Mongolia, the Cashmere company has been selected by the government of the Autonomous Region, together with a dairy company, as a model company for environmental protection. This included President and owner Cheng Xudong having his company - by the way inspired by the German Pavilion at the World Expo in Shanghai 2008 - sealed energetically (albeit not with materials "Made in Germany").

The next big step will be the purification of the company's own waste water. "Cheng describes his goal as follows: "Fish, suitable for consumption in our canteen, should be able to swim in it. The company is already now growing vegetables for the canteen itself. In his efforts it is financially supported by the state. But certainly not all entrepreneurs are so ambitious.

And there is still an old Chinese saying for many companies: "The sky is high - and the emperor is far away". In other words, what the central government decides in Beijing does not necessarily have to be implemented in the huge hinterland. But all these efforts show in which direction the journey goes.

• Deliveries have risen sharply recently

Cheap and used technology dominates at the Dominican market for textile machinery. It is some of the country's problems that give German suppliers some hope.

The good news is that in the first eleven months of 2018 German exports of textile and clothing machinery to the Dominican Republic rose by 580 percent year-on-year, and, according to Eurostat, by 2017 German deliveries had tripled. The bad news: German sector exports reached only EUR 1.7 million in absolute terms. This is considerably less than, for example, in Guatemala with its not much larger technology market.

Representatives of German providers are not surprised about the figures. Cheap equipment from China and other Asian countries are in demand, but above all mainly used machines. Hugo Clavijo of Texquim, who represents the German suppliers Mayer & Cie. (circular knitting machines) and Groz-Beckert (needles), among others in the Dominican Republic, estimates, that just five out of every hundred machines sold are new. Around the turn of the millennium, the market thus became the residual ramp for the declining US textile industry. According to UN Comtrade, around 60 percent of the value of technology deliveries in recent years came from the USA.

The International Textile Manufacturers Federation also registered hardly any shipments of new machines: for 2010 to 2017, the ITMF shows just ten flat knitting machines and eleven (all in 2017) circular knitting machines. Also, for this period 720 Double Heaters for texturing synthetic filaments for yarn production were listed. The ITMF counts the deliveries of 200 textile machinery manufacturers worldwide and thus a large part of the market, albeit not the entire one.

Electricity and water bottlenecks as arguments for expensive machines
Hugo Clavijo currently sees no great chance of a rapid improvement in the sale of expensive German technology. But ironically, it is some of the country's problems that may transform the potential customer interest into concrete procurements: The energy supply for the textile companies is expensive and unreliable, and the companies have to treat their process water themselves. Economical and less repair-prone machines would come into a closer consideration even if the purchase prices were significantly higher. It would also be helpful to enforce environmental standards, which today are largely on paper only.

There is also a need for technology if the Dominican textile and clothing manufacturers expand their capacities due to possible changes in international trade policy, i.e. if clothing customers in the USA would place orders in the Caribbean country instead of Asia. At the moment, however, the Dominican export industry is not using its factories to capacity.

¹⁾ no data on other machines; ²⁾ spinning machines; ³⁾ weaving machines

Source: International Textile Manufacturers Federation

The Dominican textile and clothing industry, which, according to the central bank, generated 11 percent of the country's total export revenues with clothing from free zones in 2017, is not fully vertically integrated: it mainly imports yarns, which then is mainly being knitted but also woven or otherwise processed and then assembled into finished clothing. It often produces T-shirts and other knitwear with a high cotton content. And this is "the cheap stuff," as Clavijo says.

There is a limited production of synthetic yarn in the Dominican Republic which, according to Hugo Clavijo, is limited to two companies: The Korean company Youm Kwang textures filaments in the country, while the US company A&E (American & Efird) produces sewing thread from imported filaments.

Four export producers as important technology customers
The Dominican textile sector is said to consist of about two equal segments. A dozen medium-sized companies and a large number of garage companies supply the domestic market. In addition, four companies produce for export in the country's free zones: Gildan (Canada), Hanes (USA), Willbes (Korea) and the local Grupo M, which has been working in a 50/50 joint venture with Brandix from Sri Lanka since the beginning of 2017. The procurement of machines in foreign companies is not decided by the local management, but by the corporate headquarters, according to representatives.

The four export producers are said to be vertically integrated from yarn processing onwards. Grupo M supplies about one fifth of its fabrics, knitwear, etc. to processors, while the other three industry giants manufacture these preliminary products completely by themselves. According to Comtrade (SITC chapter 84), three quarters of the clothing exports go to the USA, the remainder predominantly to the neighboring Haiti.

For US clothing customers, the nearby Dominican Republic offers fast and cheap transport routes as well as the advantageous customs regime of the DR-CAFTA trade agreement. According to Hugo Clavijo, however, Dominican clothing exporters must obtain their intermediate products from the USA in order to benefit from all customs relief. Producers for the Dominican domestic market, on the other hand, are using yarns and fabrics from China, Pakistan or other third countries that offer lower production costs.

USA dominate machine deliveries
The Dominican market for textile and clothing machinery has stagnated in recent years: For 2017, UN Comtrade estimated imports - there is no significant domestic production - at USD 36 million. That was as much as 2014 and around USD 10 million more than around 2010.

According to Comtrade, Germany was ranked sixth in the import ranking with an average share of 2.0 percent between 2015 and 2017. Eurostat, whose (export) data deviate considerably in some cases, noted stagnating industry deliveries from the European Union to the Dominican Republic for the first eleven months of 2018 in addition to the high growth for Made in Germany.

^*) SITC 724 without household sewing machines (724,33), household washing machines (724,.71), machines for dry cleaning (724.72), leather processing (7248), parts of household washing machines (724.91).
Source: UN Comtrade.

Austria's most important public exhibition in the high-quality furniture and furnishing sector, "Wohnen & Interieur" at Messe Wien, is in the starting blocks for the coming spring. From 9 to 17 March 2019, organizer Reed Exhibitions will once again open the four exhibition halls, A to D, for the 18th edition of the fair. Structured subject areas and a focus on design worlds refresh the established exhibition format.

It is said that the personality of the people is reflected in their own four walls. One is aware spending the majority of the time indoors. And here we should feel comfortable, quasi "native", relaxed - and some even speak of a "therapeutic" effect of the living environment on the individual. Inspira tions and trends for your own four walls can be seen in a wide range at Austria's largest interior design trade fair, Wohnen & Interieur, including advice, trade fair offers and immediate purchase.

At home connected with nature
The more hectic the world appears out there, the more important becomes an oasis of peace in your own four walls. And as people become more and more aware of themselves, concepts such as sustainability and environment gain in importance.
Everyone is talking about "Natural Living" this year - natural materials are very much in vogue, wood dominates the popularity scale. Pollutant-free tanned leather, cork, natural fibers from coconut and sisal to cotton and linen are in demand. Also, in the spirit of a "green stamp", preference is given to local products, a topic in which Austrian manufacturers with top-quality and likeable products are on top and present themselves accordingly at the W & I.    

Trend colors convey a sense of life
Life-affirming, happy coral red - Living Coral - radiates warmth and brings energy, comfort and security. Also important are delicate Ice Cream Colors, which can be ideally combined with each other and especially with natural wood tones. But also, exciting wall colors as well as striking statement wallpapers and wall tattoos are new favorites. Alternatively: wallpapers with a touch of vintage. Fabrics in gold, honey and brown tones correspond to blue nuances of turquoise, royal and petrol as well as pink and red shades.

Little space - plenty of room for ideas  
"Mindful architecture" addresses mindful design that harmonizes body and mind. And "Slow Living" brings peace to mind, this is based on clear forms, preferably universities and dispenses with unnecessary frills. Flows from the fields of design, fashion, society, politics and anthropology are expressed in the living environment - practical furniture increasingly plays a role: intelligent furniture solutions, foldable furniture, from the dining table to the bar table, from the stool to the side table and stackable shelf variants are used in urban scenes, Where living space is becoming more and more precious and therefore more limited, the challenge for planning professionals and interior design professionals. Furniture becomes multifunctional applicable and versatile, without much effort, of course.

Upcycling to „Smart Living“
And again, the topic of sustainability emerges, a consciousness without a warning finger: Recycled materials come to life or old furnishings are "revamped" and shines in new splendor.
"Smart Living", the digitization in your own household, from safety and comfort through to energy management, is entering all generations - this market is rapidly expanding worldwide.

• Final Release

The latest edition of DOMOTEX – the world’s leading showcase for carpets and floor coverings (January 11 to 14) – has underscored its reputation as the sector’s biggest and most important hub for business, innovations and trends. Over 1,400 exhibitors from more than 60 nations came to Hannover to kick off a successful new year of business. With close to 90 percent of all attendees having decision-making authority, the caliber of the show’s visitors remained extremely high – a fact confirmed by exhibitors. Due to growing market concentration, DOMOTEX recorded a slight dip in attendance. According to the exhibition survey, the order situation of exhibitors remained constant, while the purchasing volume per visitor went up. About 70 percent of all DOMOTEX attendees once again came from abroad – a clear sign of the flagship fair’s international appeal. In terms of visitor backgrounds, attendance was notably up on the part of wholesale and retail professionals. The figures also revealed an increase in attendance by architects, interior designers and contract business professionals. In addition, DOMOTEX 2019 saw an increase in the amount of display space sold.

“Thanks to its strong international drawing power, DOMOTEX serves as the sector’s definitive global marketplace. The positive and optimistic outlook on the 2019 business year that was tangible in the trade fair halls proves the success of this year’s exhibition,” said Dr. Andreas Gruchow, the Managing Board member in charge of DOMOTEX at Deutsche Messe.

“Manufacturers and customers as well as partners, architects and designers from all over the world come together to network at DOMOTEX, spawning new business relationships and collaborative opportunities previously not deemed possible,” remarked Sonia Wedell-Castellano, the new global director for DOMOTEX, adding: “That’s what this year’s theme of Create’N’Connect is all about.”

Upbeat mood among exhibitors
Fabian Kölliker, Head of Marketing at the Swiss Krono Group, voiced early praise for the professional nature of the event: “We are very satisfied with the number, quality and internationality of attendees. Even after day two of the fair, we are already extremely happy with our success so far.”

The Balta Group has remained faithful to DOMOTEX since the origin of the fair. As Marketing Director Geert Vanden Bossche reports: “The rug business is a global business and this is the best place to connect with people and customers from around the world. In only four days we can meet with a lot of customers, giving a good return on our investments.”

For Myriam Ragolle, Managing Director of Ragolle Rugs, DOMOTEX represents the ideal opportunity to present the new products to a worldwide audience within just a four-day period: “It is impossible to achieve that by traveling. We can also make contacts with new customers from all over the world. This makes DOMOTEX unique.”

Exhibitors from the skilled trades also expressed keen satisfaction with the run of the show: “Here at DOMOTEX 2019, we have once again succeeded in impressing a trade audience from Germany and abroad,” said Julian Utz, CEO of Uzin Utz, adding: “The show’s international focus gives us access to exactly the right potential customers.” As he pointed out, Uzin Utz is strongly focused on Asian and Arab-speaking markets. “So the strong turnout by customers from these regions is a real boon for us.”

The benefits of attending DOMOTEX
Susanne Gerken, a Color & Trim designer at Volkswagen, came to DOMOTEX 2019 to catch the latest trends and check out innovative materials. As she pointed out, color trends and issues such as sustainability, recycling and new material lifecycles are all equally applicable to the automotive industry, and her takeaway was much more than just new impressions: “At DOMOTEX I picked up several ideas I can use to great advantage in my work.”

In contrast, business matters were the prime objective for Alex Hosseinnia, CEO of Dallas Rugs in Dallas, Colorado: “My line of work is all about buying and selling,” he said, adding that what he liked about DOMOTEX was the way it made it easy for him to meet up with suppliers, and that it was an ideal place to discover the latest trends and fashions, for example colors and patterns, that were “likely to be showing up in U.S. retail channels in the course of the next year or two.”

“CREATE’N’CONNECT” at DOMOTEX 2019
The inspiring “Framing Trends” showcase in Hall 9 proved its worth. In its second year, it once again featured impressive displays of innovative products by manufacturers, artists, designers and students. International architects, designers, planners and influencers were particularly appreciative of “Framing Trends” as the beating heart of the event. The new showcase has proven to be highly effective at bringing visitors together and spawning lively interaction and business dialogue.

Under the motto of “Gaining Ground”, the “Treffpunkt Handwerk” skilled trades hub in Hall 13 proved popular among interior designers, parquet and floor layers, painters and varnishers. The hands-on demo area gave flooring experts an opportunity to see innovative floor treatment and finishing tools and machinery in action while comparing notes with fellow professionals.

Digital tools for sales and marketing in the floor covering industry
A key topic at the event involved solutions for the digital presentation of carpets and floor coverings. The new digital solutions ran the gamut of VR and AR applications, including visualization aids for every aspect of the marketing mix, plus innovative software which makes it easy for customers to discover and choose their favorite designs and collections while providing retailers with new options for digital product presentation and sales.

• HEIMTEXTIL IS ALREADY SHOWING TODAY HOW WE CAN SLEEP BETTER TOMORROW

According to doctors specialising in sleep, we already know almost everything there is to know about sleep. However, studies show that the quality of this regeneration process is deteriorating all the time. How can we prevent this from happening? The upcoming Heimtextil (8-11 January, Frankfurt am Main) will supply solutions to this with the new ‘Sleep! The Future Forum’. Here, international experts will present the latest findings and textile innovations for a restful night. The world’s leading trade fair for home and contract textiles brings together around 800 producers of textiles in the bed segment. Of these, 140 international industry leaders will be represented in the ‘Smart Bedding’ segment alone in hall 11.0, which will be presenting the latest sleep systems, mattresses, bedding and smart sleep technology. In addition, the new ‘Sleep! The Future Forum’ in the foyer of hall 11.0 will provide a platform for knowledge transfer, exchange of experiences and networking relating to a good night’s sleep. International experts will provide an overview of the current state of research and the latest findings on the ‘Future of sleep’ in the four subject areas of digital, sport, hotels and sustainability.

‘We sleep too little’
It is not without reason that many experts are declaring sleep to be the latest lifestyle trend after nutrition and fitness: numerous current studies prove that we are sleeping ever more badly despite increasing knowledge. ‘You don’t always notice sleep deprivation straightaway but you do become less attentive’, says Prof. Ingo Fietze, Head of the Interdisciplinary Sleep Medicine Centre at the Berliner Charité and chair of the German Sleep Foundation. At ‘Sleep! The Future Forum’, Fietze will talk about ‘The power engine of sleep’. ‘From a scientific point of view, we already know a great deal about our night’s sleep. The big problem is that we don’t sleep enough and don’t give sleep the importance it deserves’, says Fietze.

In order to improve our night’s sleep, there are now a number of smart gadgets available: intelligent pillows, noise-reducing high-tech earplugs and sleep trackers – these are all designed to help banish bad sleeping habits and consolidate healthy ones. Given that consumers can quickly get lost in this maze, the Schlafonauten, who call themselves Germany's biggest YouTube channel on the topic of sleep, are ready to help. ‘We test products that promise a calmer night to see how effective they are’, says Schlafonaut Fabian Dittrich. He will present the latest test results in the knowledge forum as part of an interview (‘Smart innovations – the practical test’).

Sleep like a (sports) professional
Another speaker knows the sleeping habits of professional athletes very well: Nick Littlehales, sleep coach of five-time World Cup footballerCristiano Ronaldo and four-time Formula 1 world champion Lewis Hamilton, will present his findings from his 22 years as a sleep coach for top athletes (‘Redefining Sleep in Elite Sport’). ‘Athletes and professionals in world sports are facing the growing demands of a globalised 24-hour society’, says Littlehales. This is also increasingly true for non-athletes, says Littlehales, who is certain that his sleep tips for professionals will also be useful for normal mortals.

The night's rest as an experience
Sleeperoo founder Karen Löhnert will show that you can sleep comfortably in the most unusual places during her lecture ‘Sleeperoo - The Night, The Place and You’ at the ‘Sleep!’ forum. She will be introducing the world’s first ‘Design Sleep Cube’. The sleeping capsule known from the start-up TV show ‘Höhle des Löwen’ is currently nominated for the German Innovation Award 2019. It allows the user to spend the night in exotic places such as a museum, a bunker or a pier in the Baltic Sea. ‘I'm a big fan of adventure nights, from tree houses to tepees; but unfortunately I've only been able to find a few local accommodation offers of this type and they don't come with quality guarantees’, says Löhnert. With her sleep cube, she wants to make sleep experiences with a high standard of amenities possible for the first time. In the Sleep Cube, the user lies on a comfortable 1.60 metre wide and 2 metre long mattress, while three large panoramic windows and the roof provide a view of the surroundings and the sky.

Even classic hotel stays have now become a focus of research. Vanessa Borkmann from the Fraunhofer Institute for Industrial Engineering IAO will talk about the importance of sleep in hotels in Frankfurt am Main in January (‘The importance of sleep during a hotel stay – a special experience thanks to innovation’). ‘Healthy sleep is particularly important in hotels’, says Borkmann, who wants to show how the effect of rest in the hotel bed can be improved, for example through the design of the sleeping environment, the behaviour of the guest themselves or technical innovations.

Sustainable sleep
More and more people are using natural materials and sustainably produced textiles in their bedrooms. The lecture block ‘Sleep & Sustainability’ is therefore dedicated to the material properties of textiles and the quality of their processing as well as the auditability of sustainable procurement and production standards. This is how Hendrik Albers, buyer of home and household textiles, bedding & mattresses at OTTO, and Dr Juliane Hedderich, managing director of the Down and Feather Associations in Mainz, describe the growing importance of nature conservation, environmental protection and animal welfare in the bedroom (‘Sustainable good advice - Convincing with the right arguments when it comes to animal welfare and quality’). ‘In the past, criteria such as weight, moisture wicking and filling power has played an almost exclusive role in the choice of bedding, but now the ethical component is increasingly coming into play’, says Hedderich. Consumers are placing ever greater importance on certificates and seals which prove that the processed down and feathers did not originate from live plucking or foie gras production. Hedderich and OTTO buyer Albers present the quality seal ‘DOWNPASS 2017’, which guarantees controlled animal husbandry and adherence to animal protection criteria.

"The future belongs to those who see possibilities before they become obvious." Oscar Wilde

We wish you just that for 2019 - a year of possibilities:

• Conquer undiscovered terrain for a secure foundation that holds the future.

• Discover new ways to extend your success.

• Meet people who can become combatants and allies.

• And experience every day a smile that comes back to you.

Whatever we can contribute - we are at your side.
Your Textination Team

• Online sales increase

Warsaw (GTAI) - More and more clothing and shoe companies are merging in Poland. Demand is growing, but the price pressure is increasing. Customers appreciate the quality of German brand products.
Sales of clothing and footwear in Poland are rising steadily. However, the price war is becoming increasingly fierce: off-price shops offering branded goods at low prices, online shops and outlet centers are putting pressure on retailers and lowering the average returns.
Demand will receive an additional boost at the end of the year, as clothing and shoes are popular Christmas gifts. According to a survey by the consulting firm Deloitte, Polish families want to spend an average of EUR 271 on the occasion of the 2018 season, - 6 percent more than in 2017. German branded products are highly valued for their quality.

Source: Euromonitor International

The US chain TK Maxx already operates 43 off-price stores in Poland. The assortment includes various goods - from household goods to clothing - which are greatly reduced. Neinver from Spain currently operates four outlet centers under the name "Factory" in Poland. There are two in Warsaw and one each in Krakow and Poznan.
Neinver plans to use the commercial park Futura Ursus in Warsaw commercially in the future. In total, there are a good dozen outlet centers in Poland. On the site of the Galeria Rumia shopping center in the town with the same name northwest of Gdynia, the Pomerania Outlet center is planning to open at the end of 2019 with 80 shops.
The German online retailer Zalando is with its shopping club Zalando Lounge for special offers present in Poland, It has set up a logistics center in Olsztynek (Hohenstein), primarily for further expansion in Europe with this concept. Discount chains such as Biedronka and Lidl are also offering inexpensive clothing.

Sector consolidates
The growing pressure of competition and prices is leading to further consolidation among domestic companies in the sector. Various mergers are emerging. The Vistula Group will take over its competitor the men's outfitter Bytom already in 2018. The antitrust authority UOKiK has already approved the merger. From 2020 on the Group expects this to generate additional revenue of around EUR 1.9 million to EUR 2.3 million annually.
The acquisition of the apparel company Simple Creative Products S.A. (Gino Rossi Group from Slupsk) with its brand Simple for upmarket women's clothing by Monnari Trade S.A. cracked in November 2018. Simple is represented with 63 salons and Monnari with 163 stores in Poland.
OTCF, a company specializing in sportswear, owns the sports brand 4F with over 200 stores in Poland. OTCF has a strong presence abroad. Gino Rossi owns a total of around 90 shoe salons in Poland, Lithuania, Latvia, the Czech Republic and Slovakia.

Market leader LPP expands
The largest clothing company, LPP from Gdansk, continues to expand. It opened its 20th store in September 2018 with the name of its largest brand Reserved in Germany. The LPP's shops are located in the capitals of the federal states and other commercial metropolises. LPP has set up its latest store in the Zeil shopping mile in Frankfurt. According to its deputy chairman, Slawomir Loboda, LPP with Reserved generated higher revenues abroad than domestically in the second quarter of 2018.
LPP not only wants to open further stores in Western Europe, but is also aiming for other markets. In November 2018, first sales salons of the LPP brands Reserved, House, Mohito and Sinsay followed in Almaty in Kazakhstan. These brands can be purchased in Germany via online trade. The German market is LPP's fifth largest foreign market in terms of turnover.

¹⁾ without Simple; ²⁾ in Poland
Source: Company data according to daily newspaper Rzeczpospolita

CCC does not rely on the online segment only
The country's largest shoe company, the CCC Group, which is also expanding strongly abroad - including Germany - already achieved a fifth (19.8 percent) of its turnover with its online trade in the first half of 2018. The online sales were very successful: In the first three quarters of 2018 the revenues on a zloty basis rose by 59 percent compared to January to September 2017 to EUR 150.3 million.
An important platform for CCC online trading is eObuwie.pl, in which CCC holds a 75 percent stake. There are plans to place eObuwie.pl at the Warsaw Stock Exchange. eObuwie.pl intends to use the result to expand and strengthen its logistics. At its location in Zielona Gora (Grünberg), eObuwie.pl is building a modern, automated warehouse.

Online shoe trade relies on 3D models of feet
According to eObuwie.pl chairman Marcin Grzymkowski, who holds 25 percent of the shares the platform wants to use the esize.me scanner in order to motivate more Poles to buy shoes online. This scans feet and creates accurate 3D models of them. Based on these, virtual shoes will be selected that guarantee the best possible fit. It is planned to place such scanners at around at 40 locations in shopping centers. So far, according to estimates by eObuwie.pl, only 10 percent of Poles buy shoes online, as the daily Rzeczpospolita reports. In spring 2019 eObuwie.pl plans to establish an e-shop for high-quality clothing.
CCC already ordered shoes from Gino Rossi to distribute them through eObuwie.pl. Now the group wants to offer these articles also in stationary shops at home and abroad. Therefore CCC intends to acquire approximately 120,000 pairs of shoes from Gino Rossi in 2019 and approximately 180,000 pairs in 2020. After all, orders are expected to increase to around 500,000 pairs per year. Gino Rossi has factories in Slupsk and Elblag.

CCC will also acquire the license to use and sublicense the Gino Rossi brand name. The group may design its own shoe models under this brand name. Special collections are to be sold in around 200 selected CCC stationary stores among other countries in Poland and the Czech Republic. Through the agreement with CCC, Gino Rossi plans to earn an additional EUR 3.5 to 4.2 million in 2019 and EUR 8.4 to 9.3 million in 2020.

• Exports rise in the country's most important industrial sector.

Phnom Penh (GTAI) - Cambodia's clothing exports are growing steadily. However, two factors cloud the prospects for the future.

Cambodia's garment industry is the backbone of the Kingdom's export-oriented economy. Industry exports account for around 40 percent of the gross domestic product (GDP). More than 800,000 Cambodians are employed in over 800 companies. That is more than 85 percent of all factory workers in the country.

Apparel and footwear exports reached USD 8.0 billion in 2017, according to Cambodian customs. This represented an increase of 9.6 percent compared with 2016. Proud growth rates between 7 and almost 15 percent were already achieved in previous years. GTAI estimates on the basis of partner countries' imports an even higher export volume of around USD 12 billion.

More than 70 percent of the country's total exports of goods regularly come from the sector. Shoes accounted for exports of USD 873 million (+14.4 percent) in 2017. Foreign business with shoes has been improving for some years now and has been able to increase its share of exports to over 10 percent. With an unchanged share of 46 percent compared to the previous year, the EU continued to play a major role among the customers in 2017, followed by the USA with 24 percent.

The value-added volume of the sector is low and the road to an integrated textile industry in Cambodia is still long. Machines, raw materials and design come from abroad in the form of a CMT model ("Cut Make Trim"). Fabrics, yarns and haberdashery have to be imported in order to keep the local clothing industry "on the runway". In 2016, according to the United Nations Comtrade Database, USD 4.1 billion worth of textiles came into the country for processing - about 60 percent of which came from China. Textile imports have risen proportionally to clothing exports in recent years.

The garment industry is dominated by foreign companies, mostly from the Asian neighborhood China, Hong Kong (SVR), Singapore, Malaysia or South Korea. Many manufacturers produce to order for multinational brands such as Adidas, Puma, Gap, H&M, Marks & Spencer or Uniqlo. In principle, the complete contract manufacturing is intended for export.

Rising wages fuel fear of competition
After years of growth the sector is looking to the future with concern. The country is increasingly in danger of losing market share to its competitors - for example in Myanmar, Vietnam or Bangladesh - primarily due to rising wage costs. In January 2018, the monthly minimum wage for workers was raised to USD 170, up from USD 153. Compared to 2013, when a minimum of USD 80 was required by law, there has now been more than a doubling.

The annual agenda included regular increases of around 10 percent. According to the Cambodia Garment and Footwear Sector Bulletin of the International Labor Organization (ILO), workers who worked the full month, including overtime payments and incentives, were paid an average wage of just under USD 243 in 2017. Last year, it was USD 225.

In the past, low wages were mainly responsible for the attractiveness and competitiveness of Cambodian industry. This advantage is crumbling year after year as a result of the increase of minimum wages. An end to this politically motivated development is not in sight. The government can imagine, referring to expert recommendations, that minimum wages will be raised to USD 250 per month by 2023.

If the trend continues, companies are likely to migrate and not too many new investors will pitch their tents in Cambodia, critics warn. In 2017, sector companies invested nearly USD 270 million in 55 projects. This represented 5 per cent of the Kingdom's total investments. In the previous year, this share had been 9 percent.

Industry representatives complain that the costs grow faster than the productivity. Automation of production processes is becoming more and more urgent in order to keep up with productivity. However, both the lack of skilled workers and an infrastructure in need of improvement are serious bottleneck factors. There are also critics who are generally pessimistic about a possible automation in the sector. Cambodia could only score points through low labor cost advantages. Automated mass production is reserved for countries that have a reliable and cost-effective power supply and are closer to the sales markets.

Will the trade routes to the EU remain free?
Even more worrying would be the EU's cancellation of the preferential trading system EBA ("Everything But Arms"). Finally, the exemption of Cambodian clothing from customs duties is at stake on the main market. A discontinuation is likely to trigger a wave of migration of the clothing industry. Quite a few companies have taken the EBA initiative alone as an opportunity to establish themselves in the Kingdom.

In addition, the view wanders across the border to Vietnam. Manufacturers there could soon benefit from a free trade agreement with the EU. Vietnam is also participating at the Asia-Pacific Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP), while Cambodia remains outside. If the trade arrangements remain unchanged, Cambodia may get off with a black eye. However, the other factors should not be ignored. Transport and general export costs are also considered comparatively high compared with Vietnam or China.

Cambodian exporters are currently benefiting from the trade dispute between the USA and China. The National Bank of Cambodia (NBC) semi-annual report supports this assumption. According to the study, apparel and footwear exports rose by 11 percent in the first six months of 2018 compared to the same period of last year to reach a volume of USD 4 billion. Since July 2016, clothing, shoes and travel goods (suitcases, bags, etc.) can be delivered duty-free to the USA. According to the Garment Manufacturers Association of Cambodia (GMAC), shipments of travel goods to the USA in the first half of 2018 reached an amount of around USD 160 million - three times the previous annual exports.

Cambodia's imports of textile machinery amounted to USD 127.3 million (SITC 724) in 2017 according to the UN Comtrade database. This was 11.4 percent more than in the previous year. About 60 percent of the capital goods came from China; the remaining deliveries are relatively evenly distributed among other Asian countries. German deliveries only appear very sparsely in the statistics. Used machines from abroad are more likely to be in demand, but are not recorded statistically.

• AUTOMATION AND STRONGER FOCUS ON THE DOMESTIC MARKET

Beijing (GTAI) - The Chinese apparel industry is repositioning itself. Increased wage costs force more automation, more customers demanding more quality.
Nowhere else in the world so much clothing is being produced as in China. According to the sector portal http://www.ask.com, alone 22.9 billion pairs of socks were being produced in 2017. This was 4.8 percent more than in the previous year, and the production of jeans amounted to more than 0.6 billion pieces according to information from http://www.chyxx.com, an increase of 5.0 percent.
China is not only the world's largest production nation, but also by far the world's largest export nation in the sector. However, countries such as India, Vietnam, Bangladesh and Cambodia are catching up enormously due to lower wages. As a result, China - measured by its share of world clothing exports - has lost around 5.5 percentage points since 2013, down to only 32.4% in 2017.

¹⁾ SITC Pos.84; ²⁾ Partially estimated on the basis of information provided by the ITC
Source: UN Comtrade, GTAI calculation.

By contrast, Bangladesh (+3.7 points), Vietnam (+2.0 points) and Cambodia (+1.3 points) in particular recorded gains in the period from 2013 to 2017. In absolute terms, Chinese apparel exports fell by 15.6% to USD 157 billion since the record year of 2014 (USD187 billion). No improvement is in sight as exports are stagnating in 2018.

¹⁾ SITC Pos. 84; ²⁾ partly estimated on the basis of ITC data; 3) excluding Laos and Brunei
Sources: UN-Comtrade; ITC; GTAI calculation

Rising wage costs as investment driver
Due to rising personnel costs throughout the country, manufacturers were and are under considerable cost pressure. With an average hourly wage for a Chinese worker of the equivalent of around USD 5.2 (2017), China has not only left classic emerging markets such as Thailand (USD 2.3) or Mexico (USD 3.9) behind - not to mention India with USD 0.8 - but is already approaching individual European countries (e.g. Greece 2016: USD 6.0).

Companies have met and continue to meet this challenge through increased automation. Between 2015 (9.1 million) and 2017 (7.8 million) alone, the workforce of the textile and clothing industry shrank by 14.3 percent - according to the Chinese statistical office. More and better machines make it possible to say goodbye to the previous labor-intensive production - and thus lower cost pressure with more precise and faster execution. Imports of textile machinery are also benefiting from this. These rose in 2017 by a whopping 34.1 percent year-on-year to nearly USD 3.9 billion.

Germany no longer number one textile machinery supplier
Although Germany lost its position as most important supplier country for textile machinery to Japan, it was still able to increase its deliveries by 28.3 percent to USD 1.1 billion. This corresponded to a supply share of 28.3 percent. Japanese manufacturers achieved a ratio of 30.0 percent with just under USD 1.2 billion (+52.8 percent). Competition from Italy came to only 11.5 percent. The good performance is remarkable due to the fact that a number of German textile machine manufacturers have invested heavily in recent years in the region in order to be able to meet the wishes of Chinese customers more effectively.

^*) SITC-Pos. 724
Source: UN-Comtrade; GTAI calculation

Due to the high pressure to modernization Chinese textile machinery imports in the first seven months of 2018 increased by almost 15 percent compared to the previous period. German machine manufacturers in particular benefited from this development, with deliveries increasing by 30 percent in the same period. As Japanese exports of textile machinery to China stagnated at the same time, German manufacturers are likely to take the lead again in 2018.
As the garment exports come under such severe pressure, the industry is now increasingly geared towards the local market. Whereas ten years ago about half of the value of production was exported, today it is only about a third. In fact, the Chinese spent an average of around 4.8 percent of their disposable income or 1,238 Renminbi (RMB; around 183 US dollars; 1 USD = 6.7531 RMB, annual mean rate of 2017) on clothing in 2017, according to the Chinese Statistical Office. With an average disposable annual income of 25,974 RMB and a population of 1.39 billion, this translates into a market volume of approximately USD 255 billion.

China's consumers demand quality and design
This makes the Chinese clothing market one of the largest in the world - and one that is becoming increasingly diversified. Local offerings range from the cheapest mass-produced goods, qualitatively and visually appealing products in the mid-price segment up to luxury and haute couture. Much has changed in the upper price segment in particular. "In the past, the Chinese exported the best qualities, but today they keep them for themselves," says a British sourcing expert who has been working in the Kashmir business for decades, describing the development.

In general, Chinese consumer demand is becoming increasingly sophisticated and differentiated. In addition to the tendency towards recognized brands, an increasing individualization of consumption can also be observed. The question is what fits well, pleases and is also somehow "special". "People in the North used to buy cashmere clothes because they warmed well," explains Cheng Xudong, president of the private Dongrong Group. The design was of secondary importance - and accordingly most of the pieces were "old-fashioned".

"Today, cashmere clothes also look very good," Cheng adds. "That's why it's bought not only in the north, but also in the more southern parts of the country." In general, the middle class in particular is looking for a high-quality lifestyle - and clothing is a part of it. The entrepreneur is convinced that if the textile and clothing industry succeeds in adapting to the higher quality demands of local customers through a technical upgrade and improved design, then the industry will continue to do well in the future.

Additional information
Further information on the economic situation, the sectors, business practice, law, customs, tenders and development projects in China can be found at http://www.gtai.de/china The website http://www.gtai.de/asien-pazifik provides an overview of various topics in the region.

Cooperation and local production the new trend

Nairobi (GTAI) - China dominates infrastructure projects and the construction industry in East Africa. But now the Kingdom of the Middle is also intensifying its commitment in trade and industry.

The Chinese advance in East Africa is breathtakingly fast, focused, efficient and highly successful. The approach is simple: one makes a business proposal that meets the wishes of the decision-makers, brings everything with you, including financing, and the project will be brought out with Confucian efficiency.

Because the customer is satisfied, follow-up orders are being placed. And the more orders there are, the more Chinese activities are there that no longer have anything to do with the original project: Trade, housing construction and business start-ups. And the more the debt with Chinese financiers rises, the more their interest grows in ensuring that the debt can be serviced.

China is fast - on its terms
In Kenya, the Chinese breakthrough came with the comparatively short road from Nairobi to Thika. The international donor community was willing to finance a road construction project, but only at the usual terms, such as regular feasibility studies and tenders, but at favorable interest rates. During the term of office of the former acting President at the time, all this would not have been completed.

Meanwhile, the Chinese made a different offer: shortest construction time and commercial credit with free hand and political backing. Residence permits were issued in an urgent procedure, and work had already begun before necessary expropriations had been completed. Everything was brought along, even truck drivers and food. Deliveries were made on time for the end of the President's term of office.

If customers are satisfied, there are follow-up orders. For example, a new railway - the favorite project of the current Kenyan President Uhuru Kenyatta - is also being built, financed and operated by the Chinese. The usual donors, such as the World Bank, had previously declined because the project was unlikely to pay off economically. Thanks to Chinese commitment, the first route from Mombasa to Nairobi was completed in time for the presidential election campaign and could be marketed as a political success. The fact that, in the opinion of critics, that the section was three times as expensive as necessary, was not contested by the voters.

Chinese appearance in the ripening process
Chinese companies had learned a lot from the first road project: They now know what the Kenyan business world and industry can and can't do, what they need, how they tick, how to do business in Kenya and how to deal with bureaucracy and widespread corruption, what cartels and monopolies one has to fear and how to deal with them if necessary.

Thanks to this knowledge and preferential treatment in work permits, Chinese construction and trading companies were able to gain a foothold within a very short space of time. And the more Kenyan government orders go to Chinese companies and the more Chinese traders gain a foothold in Kenya, the more Chinese goods flood the country.

But not only that: Chinese companies have been founded to manufacture locally. In addition, hordes of Kenyan workers are employed or Kenyan goods are being purchased if they are cheaper and/or better, or, logistically speaking, can they be procured more quickly. Kenyan companies and workers have also learned what is important to the Chinese partners - a learning and maturing process on both sides. Some Chinese people have married local and want to stay.

State acquisition perfected
Meanwhile, Chinese companies have virtually "perfected" their government procurement, reports the leading Kenyan daily newspaper "The Nation" with a sarcastic undertone: Chinese acquirers use an English first name that can be remembered and pronounced and, accompanied by a politically well-connected "fixer", visit together a cabinet secretary or the head of a semi-state company and make a proposal for a major infrastructure project combined with the promise to provide the financing.

A "Memorandum of Understanding" is then signed very quickly, followed by a commercial contract with the responsible ministry. Then only the Ministry of Finance has to sign the loan agreement and the deal is perfect. Parliament, budget controllers and the state auditor are excluded. The fact that high commissions and so-called kickbacks (bribes) are being paid in these transactions is in the nature of things.

German companies that participate in Chinese projects may be familiar with this background and are therefore usually very cautious. In other words: German-Chinese business relations in East Africa are reluctantly hanged on the big bell, because the German reputation could suffer. The German-Chinese business relationships that have nevertheless become known are quite different but show a range of possibilities.

Professional cooperation without ideology
On the one hand, there are German companies which are based in China, either independently, as joint ventures or in the form of cooperation. Such companies are considered "Chinese" because they know the rules of the game, the correspondence can be conducted in Chinese and the bank account exists in China. Then there are other German companies with whom one has already worked successfully together in Germany or elsewhere in the world - so why not again? And there are German companies that have a lot of experience in Africa and are well networked, such as consulting firms that can take over construction supervision. It is often the Kenyan client who demands a neutral and professional watchdog.

Many German products are appreciated by the Chinese. If a German company in Kenya is successful with construction chemicals, a Chinese company will also like to come back on them. And if a German construction machine has the desired specifications, it is also being bought by Chinese people in Kenya.

Chinese companies are first and foremost concerned with business and not ideology. German products and services have a good reputation worldwide, even among Chinese people. If China did not used them for its first projects in East Africa, it was because of a lack of knowledge of what is locally available and what is not. In the meantime, this has changed dramatically. And like everywhere in business life, contacts count and they need time to be established.

Chinese are the new Indians
It can already be foreseen that the driving force behind new industrial projects in Kenya will no longer come from entrepreneurs of Indian origin, but from Chinese ones. Once planned Chinese-built industrial parks are completed, there will be a wave of Chinese investment. If these investors first look at Chinese technology, it is only because they are better acquainted with the Chinese market. Anyone who knows and appreciates German products, on the other hand, will know how to weigh up the commercial advantages and disadvantages. For example, one of the first Chinese industrial projects in Kenya, the building materials supplier China Wu Yi Precast, has primarily installed German technology.

Farthest in Ethiopia
What applies to Kenya also applies to Ethiopia, where the Chinese advance is already much further ahead. There, too, the Chinese have built a railway, much more modern and cheaper than in Kenya. And more importantly, they are building industrial parks throughout the country where international companies can find good conditions for low-wage production. The first textile, clothing and leather factories report successes. Food processing and pharmaceutical companies are coming in a second wave. Of course, there are many Chinese companies in it, but not only. And, of course, German companies have good sales opportunities if they make the appropriate marketing efforts.

In Uganda are Chinese traders who have been mixing up the local market. The great Chinese engagement will only come with the start of the oil production and when the Kenyan railway has reached the Ugandan border. In Tanzania, the Chinese currently have less to report because the incumbent president, who is committed to fighting corruption, wants it that way. Instead of Chinese, he gets his railroad built by Turks. Meanwhile, Djibouti has become so heavily indebted to China that its influence can no longer be stopped.

New tones from Beijing
While the Chinese progress all over East Africa - even without Tanzania - can no longer be stopped, it remains exciting to see to what extent new tones from Beijing will affect China's involvement in East Africa. The Chinese leadership has declared its intention to curb corruption in its own government. If it is serious about this, it will also have to introduce stricter rules in its East Africa business.

And then there is the "socialism with Chinese characteristics" propagated by Chinese President Xi Jinping, with which he wants to make the world happy. So far it has been Western Europe and North America that have aggressively propagated their democracy as a form of government and political ideology in Africa. It seems that Xi Jinping now wants to counter this with Chinese principles. Chinese reforms can also be expected in the areas of environmental protection and sustainability, which at some point will also affect Chinese Africa business.

Source: Research by Germany Trade & Invest

The entire study "China in Africa - Perspectives, Strategies and Cooperation Potentials for German Companies" is available free of charge: Print version under order number 21054 (32 pages) at Germany Trade & Invest, Kundencenter, Postfach 140116, 53056 Bonn, Germany, Telephone: 0228/24993-316, e-mail: vertrieb@gtai.de or as PDF document (german only) after short registration at http://www.gtai.de/china-in-afrika.