This article is from WeChat public account:Transaction Gate (ID: tradingmen), author: Spring feel, from FIG title: Oriental IC
From the coatmakers of Fashion Avenue in New York to the manager of Jiangsu Children’s Wear Factory, everyone has discovered such a rule: labor costs account for a high proportion of total costs, and production links with relatively low technical requirements can be moved to Southeast Asia. But apart from this, it is very difficult to move to Southeast Asia.
As scholars have said, in the absence of substantial changes in technical conditions, the transfer of manufacturing to China will be final in the foreseeable future. The status of China’s world factory may be final. .
In other words, the shift of Chinese manufacturing to Southeast Asia is actually a “spill” of the Chinese supply chain, rather than a shift in the sense that we usually understand.
1 Where are you leaving China?
One Thursday in May, Chinese girl danced to receive emails from her boss at the office of
Speech dance has lived in New York for almost ten years. Like many Chinese immigrants, she started from scratch, worked diligently, and lived a meager little day in New York. She realized her own “American Dream.” Sudden tariffs disrupted her life. In the past ten years, speech and dance have never felt that the “international political situation” is so close to oneself.
The company that speaks dance is the largest coat manufacturer in the United States, with agents including big-name women like Michael Kors. Speech dance is a company in procurement and is responsible for dealing with Chinese suppliers. The production process of the coat is relatively complicated, and the brand is willing to outsource it to a professional company. A piece of clothing, if the brand does it itself, costs a few dollars, but ultimately it is reflected in the retail price, which is the difference of tens of dollars.
The Sichuan announced new tariffs and the company immediately entered a state of emergency. The Jewish boss who is on vacation sent a frightened email. The words and dances immediately called the Chinese factory to pick up the goods, to know which stage of the existing production, and told them that “the sooner the better, the better.” She and the supplier discussed the response, and some suppliers began to consider moving the factory to Southeast Asia.
Under the overall situation of the shock, the individual is forced to make a 180-degree change. Words and dances began to try to place orders at factories in Bangladesh and Cambodia. She told me: “A year ago, our attitude was impossible to leave China. If we all transfer out of China, this can’t be done. But now we are starting to discuss, where can we go?”
2 irreplaceable Chinese supply chain
The dance was born in an artist family, and her father was a well-known sculptor. The character of speech and dance is sensitive and gentle with resilience. In the year of college graduation, China joined the WTO Agreement. Since then, China’s global textile exports have increased nearly 10 times, becoming the world’s largest textile exporter.
After graduation, he joined a textile trading company in Jiangsu. The company’s main business is to export fabrics to Europe and the United States. In the past few years, she ran her business half the time and spent half of her time on business tax. After working for a few years, she decided to go to the United States to study and give herself a vacation.
In 2010, graduated from a dance and graduate school, and found a job in a large clothing company in New York, responsible for international procurement. She often placed orders for washed leather factories in India and Pakistan (washed leather is more polluted by the environment, only India and Pakistan are willing to do it). She soon discovered that the India-Pakistan company did not respect the contract very much, and she was staring at the delivery and quality.
The apparel industry is seasonal and delivers in the next few weeks, and the brand may miss the peak season. Therefore, if the supplier misses the delivery date, the US buyer may cancel the order or discount, “30% to 50% are possible.” In contrast, Chinese suppliers are much more professional.
At present, about 60% of suppliers are from China and 40% are from South Korea. About 80% of these Korean suppliers are sourcing from China.
“China’s supply chain is very strong.” Since April this year, the language and dance began to transfer more than 5,000 orders out of China. She has tried to place orders in countries such as Cambodia and Bangladesh, but factories in these countries are still purchasing fabrics from China.
She explained the case with a jacket. There may be more than a dozen accessories in a jacket. “hats, zippers, buttons, hidden buckles, under buckles, drawstrings, stoppers, cotton, liners.” And these accessories can be bought in one stop in China.
Sometimes because of the buyer’s reasons, the dance must find a cheap replacement in a short time, “For example, this button is ten cents, I need five cents now, but the quality can not be too far, the Chinese market is It’s easier to find alternatives.”
There are some unfavorable factors for the Chinese factory to open to Southeast Asia. The first is the cost of freight. The second is that the local workers are far less proficient than Chinese workers.
Speech Dance observed that after the global financial crisis in 2008, the purchasing power of American consumers stagnated, and the popularity of Amazon and Uniqlo has repeatedly hit traditional department stores. She rarely receives a “big single” under Wal-Mart. Her clients are department stores like Macy’s, and most of them are 2,000 to 3,000 small orders.
The new factory in Vietnam and Myanmar is about tens of thousands of people, which is about the same size as the Chinese garment factory more than a decade ago. They are eager to ask for 5,000 pieces, so orders for 3,000 tickets can’t be given to them.
At this time, the Chinese factory has an advantage. The Chinese garment factory has been shrinking in size over the past decade, and the factories of two or three hundred people are even large and medium-sized. Each growth line in the factory may be more than a dozen people or even less, and the ability to change lines is very strong. These skilled workers can pick up smaller, more complex styles.
3 Going to Southeast Asia to open a factory
The Speech Dance Office is in the traditional “garment area” of New York
Over the past 20 years, many developed countries, including the United States, have gradually shifted the textile and apparel industries to developing countries. New York’s garment area has grown from a factory location to a design, procurement, distribution and marketing center.
History is always repeating itself. The shift in textile and apparel manufacturing from developed to developing countries is now taking place in China.
Christy is the manager of Jiangsu Sumeda Textiles, based in Nanjing. Sumeda Textile is one of the largest children’s and coat manufacturers in China. Christy is in charge of the US market and has been working with language and dance for five years. She told me that in the past few years, US orders have grown by 10-20% every year.
Sumeta Textile opened its factory in Myanmar six or seven years ago, in order to save 12% of the tariffs in Europe. Now the company is planning an open dyeing plant to move the production of fabrics, raw materials and conventional goods. In addition to Myanmar, Sumeda began production in the first half of this year after two years of factory construction in Vietnam.
“Transfer is a must, but China is relatively large, and it takes a process to move safely.” Christy told me.
She and her colleagues found that Southeast Asia is not as good as people think. First of all, the raw materials of many Southeast Asian countries still depend on the Chinese market. In the case of Bangladesh, 39% of the country’s textiles and fabrics were imported from China in 2005, and in 2017 this percentage has grown to 47%. Cambodia (from 30% to 65%), Vietnam (from 23% to 50%), Pakistan (32% to 71%) and Malaysia (from 25% to 54%) These years have also become increasingly dependent on China’s imports of textile raw materials.
Second in Southeast Asia, there are Chinese excitement in many cities. In 2018, anti-China demonstrations broke out in several cities including Hanoi, the capital of Vietnam, and Ho Chi Minh City, the second largest city. The reason is that local people are worried that the “new special economic zone” established by the government will be “slaughtered” by Chinese investors. It is foreseeable that such tensions will not disappear quickly.
In addition, the union of Vietnamese factories is powerful. The workers call and complain to the employer. The government has strict requirements for foreign enterprise infrastructure. And workers are not as proficient as Chinese workers. Although the wages of local workers are only 60-70% of that of Chinese workers, this multiple factor is not a big advantage.
Despite this, Christy said that no transfer will not work, no matter whether it is China or the United States, no one dares to bet on Trump’s mouth.
“So we are very embarrassed this year. Originally, there were fewer domestic orders, and our factory was not fed enough. We must also bring the order to Vietnam, Bangladesh.” Christy told me.
The textile and apparel industry is an important economic and employment pillar in China and many other developing countries, employing hundreds of millions of workers. A total of 20 million people in China are employed in the textile and apparel industry, most of which are concentrated in the Yangtze River Delta and the Pearl River Delta.
Main distribution of textile and garment factories
According to data released by the World Trade Organization (WTO) in 2019, global textile exports totaled $315 billion in 2018, and total clothing exports were Up to $505 billion. China, the EU and India are among the top three textile exporters in the world, accounting for nearly 70% of total exports. China.
The dance now has its own small family in New York, and goes to New York Chinatown to eat from time to time. The hawkers who watched the sale of counterfeit bags on the roadside were still prosperous.
The wildfire is not burning, and the spring breeze is born again. The New York police smashed the gap between the three, but they couldn’t eliminate the hawkers who sold the bags. Time flies, speech and dance seems to have completed the transition from new immigrants to the mainstream of the United States, she went to Fashion Avenue, dealing with big brands like MK, no need to buy clothes, there are big names vying for her to wear. However, the old neighbors of the past, as well as the old ones who are doing the tricks of selling fake bags, like the dances, rely on the irreplaceable Chinese supply chain.
This article is from WeChat public account:Transaction Gate (ID: tradingmen), author: feel Spring