The factory of Conshing Group is just one of the more than 3,000 big jeans factories in Zengcheng, Guangdong province. Local manufacturers are feeling the pinch of rising labor and material costs.

Denim capital struggles to fit into next stage of growth as rising labor costs bite into profit

Zhou Hexi looks at a pile of jeans on the floor and shakes his head. "Profit margins are getting thinner and thinner. Now I make only 1 yuan (0.1 euro) from every pair of jeans I ship out," the 46-year-old says. Zhou runs one of the more than 2,000 street-side workshops that sort, alter and label jeans in Xintang township of Zengcheng, a suburb of Guangdong's provincial capital Guangzhou, for buyers at home and abroad.

Zengcheng city is known as China's "denim capital". Last year jeans production fueled a 29.7 billion yuan textile industry, figures from local authorities show. More than 3,000 major jeans producers operate in Zengcheng, with more than 90 percent of them located in Xintang. Together, they can churn out about 200 million garments a year or more than half of the jeans for domestic consumers and about one-third of China's denim exports.

The jeans cut out by the massive sector trickle down to small outfits like those run by Zhou, who employs about 60 workers in a space less than 1,000 square meters that he started renting three years ago.

Zhou, from neighboring Hunan province, says he handles up to 300,000 pairs of jeans a year, mostly for export to Australia, Europe and the United States. He pays his workers up to 3,000 yuan each month.

"The increasing wages are one of the reasons that make it very hard for me to stay afloat," he says. "The standard of living might be improving in the area, but that also means its people are less willing to work for comparatively low pay. It's getting very difficult for me to find workers, and to pay them on top of trying to make a decent profit."