The Beginning of the End of Made in China?

After decades of intractable growth, the South China Morning Post is reporting that China’s textile and clothing industry could now be in store for some tough times, as the rest of the world both catches up – and catches on – to the globe’s largest clothing exporter.

“China’s textile and apparel makers are going through a painful industrial restructuring,” the story says, noting that “oversupply at home, high labour costs, and rising global protectionism have all eroded its competitiveness.”

And though none of those factors would drastically affect things in isolation, the confluence of the three has put a serious dent in China’s market share of the global textile and clothing industry, knocking it down from 38.6 percent in 2015 to 35.8 percent in 2016, “with a downward trend in major apparel importing regions such as the US, European Union and Japan.”

Dollar-wise, the value of Chinese exports has decreased from about $236 billion in 2014 to $206 billion in 2016, according to the World Trade Organization, and customs data shows that exports of clothing and accessories has declined by about .4 percent over the past year.

Further exacerbating those effects is higher wages domestically. “The minimum wage in the southern boomtown of Shenzhen is now about US$336 per month – more than double the rate in some Southeast Asian countries,” the story says, meaning that labor costs in China no longer offer the same value proposition they once did.

As a result, the orders, particularly from US brands, have slowed. “A survey of 34 executives from leading US fashion companies last year found that, for the first time, fewer US brands were looking to China for products, even though the country remains the top sourcing destination for the industry worldwide.”

“For many US brands, a third of their products now come from China, a third from Vietnam, and the rest is from other countries.”

You can read more about it at The South China Morning Post.

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  • stevenstevo

    Sure sounds like China is in denial–the reality is their manufacturing industry is nothing special. It is not innovative nor is it sustainable. Their manufacturing industry is a disgrace–just a bunch of sweat shops that have no competitive advantage other than extremely low costs, which they derive from cheap labor and the absence of environmental regulations.

    Fortunately technology will eventually take care of the problem. Robots will eventually take over the low skill manufacturing jobs in their sweat shops–it’s just a matter of time. Even if the Chinese government tries to stop it from happening, ultimately the end result is still the same–because someone else will start using robotics and will be able to produce at a lower cost, which will leave Chinese factories with no alternative.