China Losing Apparel Production to Lower-Wage Countries

Dear Colleagues,

I thought you would be interested in this article (also copied below) concerning geographic trends in apparel exports to the US. The article references US Customs data, which show, over the last year, a significant shift in apparel production away from China and to the following regions/countries:

-For women’s and infant’s wear: Southeast Asia, especially Vietnam and Cambodia
-For men’s wear: Bangladesh and other South Asian countries; Honduras and other Central American countries

From the article: “The results of this analysis underline the change of trend direction in US imports of footwear and apparel from China, from upward to flat to downward, as manufacturing firms flee the country on rising wages,” said Mario Moreno, economist for The Journal of Commerce/PIERS which carried out the research.”

It is important to bear in mind that China remains by far the largest exporter of apparel to the US, but these trends are a sobering indication of the apparel industry’s negative response to wage increases, even in a country that is a highly competitive and efficient producer.

Best,

Scott

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US: Shipping data shows apparel import shift from China
10 May 2011 | By: just-style.com
China’s share of US imports is declining in labour-intensive goods such as footwear and apparel, and sourcing is shifting to other countries in Southeast Asia and Central America, according to a new analysis of container import data.
The research shows mainland China’s share of footwear imports dropped from 75% in the first quarter of 2010 to 73% in the first quarter of 2011.
China’s share of US men’s wear imports dropped from 25% to 22% in the first quarter of 2011 compared to the first quarter of 2010. And in women’s and infants’ wear, China’s market share fell from 34% to 31%.
China remains by far the largest supplier of containerised goods to the United States, and this position isn’t seeing significant erosion. During the first quarter, imports from China accounted for 45% of overall US imports, a drop of one percentage point from the first quarter of 2010.
The second-largest source country for container cargo in the first quarter was South Korea, at a 4% share, followed by Japan with a 3.7% share.
In 2010, US footwear imports from China rebounded by 11% over 2009, but the overall US foreign demand for footwear grew 16%. Vietnam and Indonesia were markets that saw higher rates of growth compared to China, indicating sourcing shifts to these markets.
In the case of men’s wear, sourcing division is favouring the India subcontinent, led by Bangladesh, and Central America, led by Honduras.
Men’s wear imports from the India subcontinent and Central America were up by 22% and 57%, respectively, in the three months from January through March 2011. While imports from China in the first quarter fell by 1%, a significant variance in performance.
Regarding women’s and infants’ wear, inbound shipments from China are clearly trending down as they increase from other sourcing markets. Imports globally dropped 5% in the first quarter of 2011, but declined 12% from China during this same period.
Imports in this category from Southeast Asian nations, led by Vietnam and Cambodia, showed strong quarterly growth at a rate of 7%.
The data also illustrates a shift in production within China, from South China to the north and interior regions where goods exit the country via the Yangtze River and nearby ports such as Shanghai and Ningbo.
The shift reflects ongoing changes in China’s labor market, as wages increase and the working population sees more employment options, changing the Chinese economy from its export engine toward a pro-consumption model.
The strengthening of China’s currency is also reducing already-tight profit margins for manufacturers of low-value goods such as footwear and apparel.
“The results of this analysis underline the change of trend direction in US imports of footwear and apparel from China, from upward to flat to downward, as manufacturing firms flee the country on rising wages,” said Mario Moreno, economist for The Journal of Commerce/PIERS which carried out the research.

Scott Nova
Worker Rights Consortium
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Washington DC 20005
ph 202 387 4884
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www.workersrights.org