GENEVA — Spiraling energy and freight costs coupled with rising wages and other expenses in China's Pearl River Delta, the world's premier textile and apparel manufacturing hub, are spurring the relocation of factories to lower-cost Asian countries and a rethinking of sourcing plans to places closer to key home markets.
In contrast to the days of global quotas when firms moved around from country to country to secure access to restricted markets, relocation today is largely driven by increasing costs.
However, Asia is still positioned to retain its pivotal role as the world's textiles and apparel production hub and much of the relocation is expected to occur within the region.
The increase in wages is seeing a trend of firms moving production away from China toward Vietnam, Cambodia, India and Bangladesh, said Neil Kearney, general secretary of the International Textile Garment and Leather Workers Federation.
Analysts at the Zurich-based International Textile Manufacturers Federation who track investments in the sector note that there is a general trend of increasing investment in countries such as Vietnam, Bangladesh and Cambodia. Improved conditions in China's rural areas, as a result of the increases in prices for farm products, have also seen a reduction in the availability of cheap labor from the countryside, they said.
In addition, Kearney noted that the sharp increases in land and utility costs, and shortages of water, in coastal areas are increasing the transfer of plants to other low-cost Asian locations. But China still remains by far the biggest investor in the industry, although the outlays have leveled off, said ITMF analyst Christian Schindler.
Despite the increases in costs, China's big domestic market, good infrastructure compared with Pakistan of India, for example, and availability of inputs in the value chain from cotton to man-made fabrics still makes it an attractive sourcing location.
However, analysts note that in view of the congestion in the coastal areas there is also a move to relocate plants inland in China's poor western region. The area is set to benefit from the development of Euro-Asian Transport linkages that will enable the shipment of textiles and apparel merchandise by rail to Western European markets, and also on to the U.S. and Canada, and in the process slashing the time of getting the goods to market by at least 10 days compared with hauling the same goods by sea routes.European and Asian transport ministers have agreed to outlay $43 billion by 2014 to the revitalization of the ancient Silk Road and to modernize other networks throughout Eurasia.
Guozhi Chang, senior adviser at China's railways ministry, said at a recent United Nations conference here that China plans to invest $12.5 billion over the next few years.
"The future of this project is very bright," he said in an interview, adding that haulage of value-added products such as textiles and apparel rather than bulk commodities are seen being carried to and from China and Europe.
Proximity to market has also seen strong investment in recent years in Egypt, given its strategic closeness to Europe. Similarly, investments have also been strong in Turkey but seem to have reached a peak, Schindler said.
Asked who was likely to fare best in the new high-cost environment, a top Swiss private banker, who asked not to be named as he has clients in many countries, said, "Obviously those companies with the ability to locate and produce in various locations will be the winners in the long run. Those having to decide on a functional basis where to shift production will be losers because of trade and overall costs."
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)