China Tightens Up on Cashmere Exports

From the Financial Times

Chinese authorities are taking action to restore order to the international trade in cashmere, one of the world’s most luxurious fibers.

The cashmere trade has been in crisis for more than a year because of the attempts by China, which produces almost all of the world’s cashmere, to liberalize its internal trading system as part of its economic reform program.

The knitwear groups of Scotland and Italy have found it increasingly difficult to secure supplies of cashmere, which is made from the fleece of goats living on the mountains of Inner Mongolia, and consumers have had to pay more than ever for the end products.

The Chinese authorities have recently attempted to regain control of the market by restricting exports to a small number of licensed exporters.


Under the reform program, Chinese authorities relaxed their central controls to encourage free enterprise, leaving European knitwear mills, accustomed to stable prices and secure supplies, faced with unpredictable pricing and sudden shortages.

At the same time, quality control of China’s cashmere exports declined, and European mills found sheep’s wool and mud in shipments.

These problems were compounded by China’s attempts to increase its involvement in the more profitable business of cashmere processing. Traditionally, the Chinese have exported raw cashmere to be processed into yarn in Europe.

Cashmere is very delicate and the process of de-hairing and spinning elaborate. The new Chinese processing plants were inexperienced and consignments arriving in Europe were often too damaged to be used in luxury knitwear.


The Scottish and Italian mills were forced to pay premium prices to secure emergency supplies of cashmere of the correct quality. Dawson International, the Scottish knitwear group and the world’s biggest user of cashmere, estimates that it spent the equivalent of $3.4 million in tackling supply problems last year.

Cashmere prices in the shops rose by a fifth last autumn and have risen by about the same amount this spring. Rises have been marked in the United States where the decline of the dollar against the pound and the lire has exacerbated the effect of the problems in China. Dawson’s most expensive cashmere piece--part of a collection by Oscar de la Renta, the New York fashion designer--now costs $1,500.

Confronted by chaos in the Chinese market, the European mills have attempted to establish alternative sources of cashmere supplies. They have invested in goat farms all over the world, from Australia to Scotland.

China is still the chief source of cashmere supplies. The more modern growers are involved in artificial insemination and cross breeding. But nearly half China’s cashmere still comes from goats herded by peasants in the remote mountains of Inner Mongolia.

If China’s attempts to regain control of the cashmere trading system succeed, the European knitwear mills can at least expect more stable pricing and secure supplies. But the Chinese are still committed to increasing their involvement in processing, and the world cashmere trade will never be quite the same again.