Chinese rug prices expected to rise

High Point, N.C. -- As the Chinese yuan strengthens against the U.S. dollar, and with labor and raw material costs rising, there is growing upward pressure on wholesale prices of products made in China, including that country's booming rug business.

Rug importers showing here at the High Point Furniture Market say that higher prices will have to be passed along to retailers, but just when is not clear. Both hand-made and machine-made rugs are being affected.

John Feizy, president of Feizy Rugs, said even the efforts by the Chinese government and exporters are not keeping the yuan from rising. "It looks like the yuan will settle at about seven yuan to the dollar, and now it is 7.5 to eight yuan to the dollar," Feizy said. "When we are talking about very tight profit margins to begin with, that puts a lot of pressure on wholesalers to raise prices, much as we do not want that to happen."

"In addition to the appreciation in the currency, the government has cut some subsidies to the manufacturing sector," said Hari Tummala, executive vp of Kas Oriental Rugs.

"China has experienced incredible growth in many manufacturing sectors," said Alex Peykar, a principal of Nourison. "The labor force is beginning to be squeezed. Good people are jumping to new jobs.” Peykar added, "There's a lack of consistent worldwide demand for hand-knotted rugs,” pushing many workers to leave the looms for more steady employment.

There seem to be no simple answers.

"It's not a matter of switching our sources to India, for example," said Charles Peck, president of Trans Ocean. “We buy rugs from China because they have a certain look. India production also is important to us, and so is Belgium. Every country produces a certain look that is important to our product mix."

"We are waiting for a little business momentum to build to make it easier to pass along,” said Leon Capel, a principal of Capel Industries. "If you absorb prices, it gives your customers the impression that your products were overpriced to begin with."

"When you hold the line on price, you either take it out of profits or out of product," added Peck. "We don't want to compromise our quality."

(This report was supplied by Lissa Wyman, rug editor for HTT sister publication Furniture Today.)

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