California Apparel News

After months of arm twisting from the U.S., the Chinese government announced July 21 it will no longer peg its currency to the U.S. dollar. Instead, China will let its currency float based on a basket of foreign currencies.

The announcement was good news for U.S. exporters because it will make U.S.-made goods less expensive for buyers in China. But it added one more wrinkle to importing apparel and textile from China, which now will be more expensive.

“I have a feeling this is going to cost us. I don’t think I am going to be able to raise my prices,” said Moshe Tsabag, owner of Hot Kiss Inc., a Los Angeles juniors company that imports about 10 percent of its merchandise from China.

After the announcement was made, the Chinese yuan increased in value 2.1 percent. Before, one dollar was worth 8.277 yuan. Now it buys 8.11 yuan.

For some time, the U.S. government has maintained that China’s currency has been undervalued by as much as 40 percent, making its goods extremely cheap in the United States and in other countries.

U.S. officials said the currency revaluation was a good start. But they would like to see the yuan revalued even more.

The change in the government-set exchange rate was not greeted warmly by many large California apparel and textile companies that have become increasingly dependent on Chinese factories to make their goods. Many have already been hurt by safeguard measures, or temporary quotas, imposed on clothing categories such as cotton knit tops, cotton pants, synthetic knit tops and synthetic pants.

Ron Perilman, president of City Girl Inc., a Los Angeles womenswear company that imports 95 percent of its merchandise, sat down with his staff to figure out where to shift production now that currency fluctuations and temporary quotas are making it harder to produce in China.

“This is not a good thing,” Perilman said. “Someone has to eat it, and it always seems the manufacturers end up eating it.”

Richard Hirsh, co-chief executive officer of John Paul Richard Inc., a $100 million apparel company in Calabasas, Calif., concurred.

“I think it just adds another component of unknowingness to doing business with China,” Hirsh said, noting that his company already had shifted about 5 percent to 10 percent of its production out of China and to other countries. “This is the beginning of a new challenge.” —Deborah Belgum