Li Feng: Cost Shifting Of Raw Materials And Labor Force In China

Li, a Hongkong based consumer goods purchasing and logistics company, warned of "one". "Fung"

The supply chain company announced on Thursday that its profits rose 27% to HK $4 billion 280 million ($550 million) in 2010.

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

President of Li Feng's trading company

Rockowitz 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.

Managing director of Li Feng Group

Fung said that the intensification of 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.

The rise in labor costs 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.