(Yicai Global) April 27 -- The sewing machines in Cao county in northeastern Shandong province, the seat of China’s traditional costume industry, are humming as the long, flowing, wide-sleeved gowns worn in ancient China gain popularity among the country’s youth. Yet these small-scale home industries face challenges getting the funds they need to expand.

Also known as Hanfu, the profit margin of a popular style can be over 20 percent, Yicai Global learned on a visit to Cao county, which is home to about 2,000 apparel factories and accounts for one third of the country’s output. The price of a Hanfu garment is usually between CNY100 (USD15) and CNY500 apiece.

The market is expected to be worth CNY10 billion (USD1.5 billion) this year, a 56 percent jump from last year and the number of fans could reach 6.9 million this year, up 32 percent from 2020.

“Hanfu can become a cash cow if you have a deep understanding of the market and consumer tastes,” Li Fugui, who runs a local Hanfu e-shop, told Yicai Global.

Chinese consumers only like certain Hanfu styles, though, Li said. Last year, only 100,000 Hanfu fashions, which comprise thousands of years of evolution of Chinese clothing, were popular.

"Before, we mostly made clothes that appeared in film series such as Harry Potter and the Japanese comic Demon Slayer: Kimetsu no Yaiba for overseas vendors,” Li said. They sold well, but we could only earn a couple yuan, under USD2, in profit for each item, he added.

Raising Loans

Despite burgeoning demand, it is hard for Cao county’s Hanfu makers to raise capital to expand their business.

"Banks will generally lend small amounts of between CNY300,000 (USD46,270.3) and CNY500,000 (USD77,122) to qualified Hanfu makers, as it is hard to use their land and factories as collateral,” the manager of the local branch of a state-owned bank told Yicai Global.

Smaller retailers are usually unable to get a loan, and for the bigger ones the amount is not enough, he added.

Li borrowed CNY300,000 from a local bank last year, at an annual rate of 5 percent, but the business needs more money to expand, Li said.

Cao county's Hanfu industry also lacks in originality. In 2019, several firms were taken to court for copying the outfits made by a well-known Hanfu brand.

Editors: Liao Shumin, Kim Taylor