While the United States and China figure out whether they agreed to roll back tariffs or didn’t, the textiles and apparel sector in China seems to be faring just fine.
That’s at least according to Cao Jiaping, chairman of the China Chamber of Commerce for Import and Export of Textiles and Apparel, who, though he admits present relations aren’t “optimistic” between the two powerhouse nations, also knows there’s really no wholesale escaping manufacturing in China.
Speaking last week at the United States Fashion Industry Association’s (USFIA) Apparel Importers Trade and Transportation Conference, Cao said textile and apparel trade “is the fundamental interest of the two countries.”
Last year, he said, citing Commerce data, China’s exports of textiles and clothing to the U.S. totaled $48.96 billion, a year-on-year increase of 7.9 percent. For the first half of 2019, those exports reached $21.23 billion, with growth a slowed 1.6 percent year over year. Clothing accounts for 73 percent of those exports, and textiles make up the other 27 percent.
While China still holds a 31.5 percent market share of textiles and apparel in the U.S., Cao said the country’s share is down nearly 2 percent—though he’s not worried about the sector’s sustainability.
“According to the latest Chinese Customs statistics from January to August 2019, among the top 10 garment exporters in China, American brands such as Nike and Gap have maintained sustainable growth,” Cao said, with the help of a translator. “The importance of a mutual market still exists.”
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Though that belief holds for many U.S. brands and retailers that are either electing to stay the course or have little choice otherwise because of the nature of their manufacturing needs, others are in scale-back mode hoping to skirt the uncertainty-fueled risk. A survey at last month’s Sourcing Summit New York revealed that as many as 35 percent of attendees from major global apparel brands and retailers intend to reduce their China sourcing by upward of 50 percent.
As they look to sourcing alternatives, like Vietnam, Bangladesh and Cambodia, however, many still rely on inputs from China.
“The adjustment of [China’s] export commodity structure is accelerated and the growth of textile exports is higher than the garment sector,” Cao explained. “It is mainly due to the incompleteness of the supply chains of those low-cost countries like Bangladesh and Cambodia. The shortage of the raw materials and fabrics boosted China’s textile exports.”
It’s all part of a shift in China’s stronghold as the world’s factory, and while things may be different than they were a decade ago, and sourcing more diversified, China will only relinquish a little bit of its command in the apparel and textiles sector.
“The international market share continued to decrease and China’s textile and garment industry entered [an] adjustment period, however, I still believe that in the next few years, China will remain the world’s largest exporter of textiles and apparel,” Cao said.
By no means sleeping on sourcing’s evolution, Chinese companies have already been taking the lead in making overseas investments, setting up factories, finding strategic partners and accelerating the construction of overseas warehouses, Cao noted.
“Chinese manufacturers gradually emerge as the new role of organizers and managers,” he said. “The top exporting companies in the country already have an investment for cooperative factories overseas.”
Those investments are going toward setups in places like Vietnam, Cambodia and Bangladesh, in order to retain an opportunity to serve U.S. brands and retailers wherever they’re headed, and to avoid the tariffs that are making things tricky in China.
“In the next five years, it might be in the [Chinese] companies’ plan to transfer 20 to 30 percent of production to overseas factories,” Cao said.
Though the U.S.-China trade war has upset the better part of the past 18 months, China is still at the center of the manufacturing conversation.
“The production efficiency of China’s textile and apparel industry is beyond the reach of other Asian countries,” Cao said.
And what’s more, the availability of inputs has a major impact on supply chain efficiency and speed to market—two things companies can’t afford to forego in favor of saving 15 percent on tariffs.
“If the [quantity of] zippers and all the buttons are miscalculated before production, it can be solved in China in only two hours, while in Southeast Asia, the production line would need to be shut down for two days to wait for the right accessory to be replaced,” Cao explained. “Also, for some products with complex procedures, the delivery time in Southeast Asia is at least one month slower than in China. Therefore, brands with fast-fashion items that need to be replenished quickly are still better off staying in China.”
While it’s in Cao’s purview to promote China’s manufacturing and its capabilities, his comments likely ring true regardless. There has yet to be a country equipped to even compete fairly with China’s manufacturing prowess, though several are giving it a valiant effort.
“Compared with emerging textile and garment manufacturing countries such as Southeast Asia and Africa, China’s supply chain is still in a favorable position for fast orders, and fashion orders and high-end orders are still and will stay in China,” he said.
Tariffs or not, brands and retailers manufacturing there or considering pulling out should get comfortable with the idea.
This week has been a continuation of the back-and-forth about a deal or no deal and whether it will include more tariffs or less, so the status of progress on talks toward an agreement on trade between the U.S. and China remains unclear. But Cao is hopeful the two countries will get somewhere soon.
“We can still see and hope for the potential of Sino-U.S. trade operations in the future, and from where I can see, Chinese and American companies have not stopped trying to seek opportunities for cooperation,” he said.