The End Of Cheap Chinese Goods

2011/3/30 15:01:00 80

Li&Fung, a Hongkong based consumer goods purchasing and logistics company, warned that "one

Purchasing price rise

The new era has arrived, and manufacturing enterprises have passed on the raw materials and the cost of Chinese labor force to customers.

This family

Supply chain

Corporate profits rose 27% to HK $4 billion 280 million ($550 million) in 2010, the company announced on Thursday.

Li Feng supplies WAL-MART, Walmart and Gap, and British de Benhaim (Debenhams).

Bruce Rockowitz, President of Li Feng's trading company, said: "in this industry, the biggest topic in everyone's mind is that the price increase is indeed a foregone conclusion."

At the moment, retailers are not sure which can be passed on to consumers, and which are not.

William Fung, managing director of Li Feng Group, said that the increase in China's labor force has led to a 20% rise in wages this year, which indicates the end of deflation led by China in the world economy.

The company said that traditionally, rising prices were beneficial to its trading businesses.

"Over the past 20 years, as prices continue to fall, we have to increase shipments (in order to maintain revenue growth)," Le Yumin said.

The company's core operating profit margin rose from 3.82% in 2009 to 4.56% in 2010.

Labor cost in China

The rise has prompted Li Feng to shift production of clothing and other labor-intensive goods to countries with lower wage levels, such as Bangladesh, Vietnam and Indonesia.

Li Feng said that China's share of Li Fung's garment purchasing business is only 25%.

Le Yumin said Bangladesh and Vietnam are rapidly increasing their share of clothing business.

Nevertheless, due to a series of acquisitions last year, the proportion of China's total purchases in Li Feng increased from 54% in 2009 to 57% in 2010.