China is a major exporter of cheap consumer goods to the West. But, analysts now believe that this will be reduced considerably in the coming years due to
increasing domestic consumption and worker pay, rising inflation and unsettling retailers in Western markets.

On Monday, in an annual gathering of retail industry executives, William Fung, chairman of logistics group Li & Fung, Hong Kong, which supplies firms like Walmart Stores Inc with clothing and toys, told the World Retail Congress, “China will disrupt the world.”

Fung also said that China is a country that operates in economic cycles of 30 years, and that it had been the world’s factory producing consumer goods at low prices. Further he added that after 30 years, China has now reached a point where this is no longer sustainable.

He said, “China is talking about slowing down GDP growth to 7.5%. However, their retail business is projecting almost double that, and we think at Li & Fung that from the next 30 years, China will become the largest consumption country in the world.”

With regard to overall household consumption, China has long way to go, he believes. Fung said, “When China starts consuming and with India right behind it, I predict a round of price increases and margin squeezes.”

With costs on the rise, Fung suggests that the global apparel industry should be prepared for a bumpy ride.

He said, “It’s not going to be easy anymore. Raw materials have been stable and going down but that won’t be the case at the next stage when China starts consuming.”

He predicts that over the next 30 years, China and India could add more than one billion middle class consumers to the world, both as an opportunity and a threat.

Talking about labour safety he said, “There are going to be problems...the world is no longer willing to accept that. I predict that will be a huge impact on the world.”

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