The Chinese textile and garment industry has started sprouting green shoots of recovery even as it grapples with an acute labor shortage, riding largely on the revitalization plan charted by the government for the sector.

"Order declines from Europe and the United States have eased in the last two months, after recording an over 20 percent fall in the first few months of this year," said Shen Xiaoyang, a senior official of Changzhou Dahua IMP&EXP (Group) Co.

Shen, however, said the recent pickup was still not enough to offset the sharp falls earlier this year, and the company may still post negative growth for the full year.

Figures from National Bureau of Statistics indicate that garment exports from January to August were around $101.7 billion, down 11.8 percent over the same period last year.

Garment exports had clocked a 35.8 percent fall in the first two months of this year. The current figures indicate that decline has narrowed by 24 percentage points over the first two months.

The whole sector has shown signs of recovery in terms of investment volumes and profitability after the industry revitalization plan was launched by the State Council in April, said Zhang Li, director general of Department of Consumer Goods Industry under the Ministry of Industry & Information Technology, at the International Development Forum on Textile & Apparel Trade in Kunshan yesterday.

"We've seen more and more multinational firms transferring overseas orders to domestic manufacturers due to the rising competitiveness of made-in-China products," said Long Guoqiang, director general of the Research Department of Foreign Economic Relations under the State Council Development Research Center.

According to Long, the market share of Chinese products has increased 2.6 percent and 3.5 percent in the United States and Japan respectively during the first half of 2009, regardless of the shrinking demand in the two countries.

The silver lining despite subdued foreign demand has been the domestic market, which absorbed nearly 77 percent of the textile firms' production capacity, said Chen Jian, vice-minister of commerce.

Overseas orders had dwindled largely due to the shaky global economy and also led to the bankruptcy of some small domestic textile manufacturers and exporters. But, big firms can expect orders to balloon, said Yin Guoxin, president of Shanghai Chenfeng Group Co, a major OEM supplier for Calvin Klein and Adidas. But the bigger problem facing the industry is the acute labor shortage.

Young-Soo Lim, general manager of Qingdao Nannan Co, a high-end lingerie and socks manufacturer and exporter said it has been tough to find suitable employees since this September after the company decided to hike its production capacity.

"During the same period last year there were plenty of people available for us to hire," said Lim.

Chenfeng's Yin also concurs with the view. "With increased investment in the central and western regions, there has been a outflux of labor from the coastal areas. Going forward, this will be a major issue for textile firms," he said.