The traditional advantages of textile and garment industry are gradually lost.

Release time:

Aug 03,2018

Yesterday, the news that adidas's only factory in China will pull out of the country in October struck a new nerve with Chinese manufacturing. Industry analysts say the retreat of foreign-branded factories like adidas, which stems from rising costs at home, is a normal business decision, but it is another reminder of the precarious position of China's "world factory". In the later stage, China's manufacturing industry can no longer rely on low costs to survive, and the focus on industrial upgrading is the absolute principle of future development.

In recent days, the news that adidas's only factory in China will pull out of the country in October hit a nerve in the media and industry. Although the transfer of production lines by multinational companies has been frequent in recent years, the news has raised concerns about the future of China's manufacturing sector, even as the national economy and foreign trade grew by more than 8 percent in the first half of this year. "" it's normal for production lines to move to places where costs are low." " In this regard, China's textile import and export chamber of commerce clothing department director hu min.

Like hu, most industry insiders point to rising costs too quickly as the main reason why multinational companies are moving their production lines out of the country. But they also stress that this does not mean that China should abandon its traditional labor-intensive industries. In the long run, China's competitive advantage is still evident, and the improvement of China's overall competitiveness depends on industrial upgrading.

It is normal for the adits to pull out

"Factories like adidas have high requirements for fabrics and relatively low requirements for sewing and other processes, so the cost is very important." Given China's rapid rise in labor costs in recent years, it is normal for companies like adidas to shift production lines, hu said.

In fact, adidas's move is not unique. In March 2009, Nike closed its only shoe factory in China in taicang, jiangsu province, and moved the factory to Vietnam. In 2011, the mainland listed lingerie company said it intended to move some of its high-cost production lines out of China, expand production in Thailand and invest in new factories in Cambodia. According to the latest news, starbucks also said recently that it plans to close its factory in China and transfer the production of ceramic cups back to the United States

"There is no need to overreact to the closure of the only direct factories in China by companies such as Nike and adidas, as these multinational brands mainly operate brands instead of manufacturing, and most of their products come from OEM factories rather than the few direct factories." Mei xinyu, a researcher at the mofcom research institute.

Wang zhuo, secretary general of the China garment association, also pointed out that "under the trend of rising production costs and peripheral costs in China, it is in line with the international environment and enterprise demands for international enterprises to choose some countries with lower labor costs for enterprises operating internationally, such as adidas."

Data shows that adidas sales in China now exceed 1 billion euros. Global sales rose 14 per cent in the first quarter, but gross margins fell 0.7 per cent. While overall sales are growing and higher-margin retail sales have increased, it is not enough to offset the increased input costs.

"For Nike and adidas, the cost performance of Chinese manufacturing is no longer an advantage." As a big international company, adidas has a sensitive supply chain system and will naturally be forced out of a given market once its supply advantage disappears, industry analysts say.

Cost advantages are largely unsustainable

"" the high cost of exports has largely undermined the competitiveness of Chinese products in international markets." " Hangzhou international garment city chairman jiang jichun said. Like him, many in the industry blame rising labor costs at home or the retreat of brands such as adidas.

At present, the average monthly salary of employees in Chinese textile manufacturers is between 188 euros and 300 euros, compared with around 80 euros in Bangladesh and less than 120 euros in Vietnam, according to a research report by a foreign institution. China's average labor costs are more than double those of southeast Asian countries.

It is worth noting that in addition to the minimum wage, China also has mandatory welfare expenses such as insurance, and these wage costs will rise by 40% to 50%. It has been reported that in emerging manufacturing markets such as India, there is a uniform welfare expenditure in addition to wages, but this expenditure is either ignored or accounts for up to 10 per cent of wages. "The wage cost has gone up by more than 20 percent in one year, and the two consecutive years of increase is really hard for the company to bear. For the sake of profit, sometimes the company is afraid to take orders." Ningbo, a clothing processing enterprise, said to reporters.

Under the impact of rising costs, the market share of some traditional labor-intensive export products in Europe, Japan and the United States has also declined significantly.

Customs statistics show that in the first five months of this year, China's seven categories of labor-intensive products, including textile, apparel, luggage, footwear, toys, furniture and plastic products, had a market share of 63.3% among the same products imported from Japan, down 0.4 percentage points. In the same period, the market share of similar products in Vietnam, Indonesia and Bangladesh increased by 0.7, 0.2 and 0.2 percentage points, respectively.

According to he jun, a senior researcher at anbound, industrial upgrading is an important step in China's economic transformation strategy, and can even determine the success or failure of structural adjustment. The rise in costs is a long-term trend in China, but the high cost of cities cannot be sidestepped by the development of new industries or the transformation of old ones.

Industry insiders expect a growing number of multinationals to shift production to southeast Asian countries or even to their home countries as China's manufacturing transformation and upgrading accelerates.

New competitive advantages have yet to emerge

"There were developed countries moving into high-end manufacturing, and emerging countries moving into low-end manufacturing." Industry insiders point out that with the loss of cost advantage, new competitive advantage has not been formed, and China is moving further away from the "world factory".

In this regard, mei xinyu said that the competitiveness of China's manufacturing production and export is not only due to low costs, but also difficult for other countries in the short term due to the complete industrial system, continuously improved infrastructure and higher macroeconomic stability. But he added that reducing reliance on "cost advantages" would be a long-term task for the country. "" now we must seize the limited time to achieve industrial upgrading and seek technological breakthroughs in products and production techniques." " Experts interviewed generally agreed.

Some experts, however, have reservations about whether mainland China will be able to move from a labor-intensive "world factory" to a higher-end, technology-intensive industry in the exodus from foreign manufacturing. "China's population base is so large that it's hard to go as light as Japan, South Korea and Taiwan in the past and shift the low-end foreign labor to the high-end," liu lu, an associate professor at southwestern university of finance and economics, told the media. Liu lu believes that China needs to consider both industrial upgrading and the recruitment of this part of the workforce.

Hu min also thinks that labor-intensive industries are generally closely related to the lives of ordinary people. It is obviously impossible to give up this advantage too early, but it is also worth discussing to emphasize transformation and upgrading blindly. After all, some small enterprises do not have the strength of transformation and upgrading. "At present, enterprises' go out 'mainly through the acquisition of foreign small and medium-sized brands, with the help of their advanced design concepts and technologies, so as to improve their products. But with the recession in Europe and the us, it's not as easy for companies to 'go out'. "Mr. Jiang said.

In view of the above situation, hu suggested that relevant departments should on the one hand advocate the transformation and upgrading of large enterprises with strength, abandon some industries with low added value and build their own brands. On the other hand, some low-end industries should be properly reserved, and enterprises should be guided to improve quality to cope with the increasingly fierce market competition.

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