PIERS has uncovered a big change in the material world—a shift away from the Chinese production of men’s and women’s clothing and footwear. According to PIERS/JOC economist Mario Moreno, container shipments from China to the U.S. of apparel and footwear have dropped, indicating a shift toward offshore sourcing of these products.
China’s share of footwear imports dropped from 75% in the first quarter of 2010 to 73% in the first quarter of 2011. Menswear imports to the U.S. dropped from 25% to 22% in the first quarter of 2011 compared to the first quarter of 2010. In women’s and infants’ wear, China’s market share dropped from 34% to 31%.
Moreno believes the decline is due to many firms moving their footwear and apparel manufacturing facilities out of China to Southeast Asia, the India Subcontinent and Central America. In fact, the Financial Times announced just last week that Coach, the U.S. accessories brand, is already planning to shift up to half of its manufacturing out of China to escape rising labor costs. Over the next five years, the company is opening factories in lower-wage economies including India, Vietnam and the Philippines and cutting its China production by as much as 50% of what it is now.
The shift reflects ongoing changes in China’s labor market—wages are increasing and the working population sees more employment options. This shows the Chinese economy is changing from its export engine toward a pro-consumption model. The strengthening of China’s currency is also a factor in reducing already tight profit margins for manufacturers of low-value goods.
PIERS’ analysis shows the change in direction from upward to flat to downward as manufacturing firms flee the country on rising wages. Moreno said jobs in general are growing at a much faster rate than the working population growth, suggesting Chinese workers have more options now than a decade ago. Thus, working at a footwear or apparel factory performing repetitive tasks on a daily basis has become less appealing to unskilled workers, despite higher wages.
With PIERS, you can arm yourself with the right information to put these and other market shifts into perspective. Can your business benefit from sourcing a new supplier? Need assistance analyzing a new market? Contact us today to have a PIERS business development manager show you how our product solutions can help you grow your business, cut expenses and so much more.