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Why china's sewing machines could go silent

Why china's sewing machines could go silent Source:
Date: 06-04-2012
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It’s an inevitable march: With exports falling, and the costs of production including materials, labour and the need for cleaner technology rising, companies in China’s own garment industry will be the next generation to move their production offshore.

“They definitely are worried about what they’re going to do with costs rising. They are not expanding fast, but they are wondering what their next step will be as the market expands,” said Wang Jun, secretary general of the China National Garment Association, in Beijing this week. “I think in future it will appear that Chinese factories will move their production base offshore.”

The Chinese garment industry has had a difficult start to the year: This month’s HSBC flash PMI dipped to a four-year low this month, driven down in part by slowing export growth of just 7 per cent year-on-year for January and February – half as fast as in December. China’s own powerhouse GDP growth is also expected to slow this year, to around 8 per cent, down from an average 10 per cent a year for most of the last decade.

Meanwhile, costs of production are rising. China’s southern manufacturing belt is facing labour shortages. Wages are beginning to rise, after employees fed up with low pay and often terrible working conditions began staging successful walkouts. And China’s central government is placing an increasing focus on clean technologies, in an effort to address the impact of severe pollution caused by poorly regulated manufacturing. It’s good news for the workers’ own buying power, and much-needed for the battered environment, but it means the days of China as the bargain-basement manufacturer to the world are numbered.

That leaves garment industry executives, gathering in Beijing this week for the annual China Fashion Forum, worried and in search of new ways to revitalize their industry and develop new, homegrown brands that will appeal to China’s masses and help manufacturers make up for the losses in foreign markets.

Mass-market brands like Japan’s Uniqlo and Spain’s Zara have developed a loyal and growing following among China’s young and upwardly mobile set. But there is no Chinese equivalent; the closest is a jeans-and-T-shirt chain, Metersbonwe, which has the largest market share of any Chinese retail brand but is targeted at the university crowd rather than the young urban professional.

But there is potential. In 1990, the average Chinese urban resident had around 1,279 yuan in disposable income (just over $200 U.S. at today’s exchange rate), of which they spent almost 180 yuan ($28.60) on clothing. By 2010 those numbers had risen to 13,471 yuan and 1,444 yuan, respectively – a tenfold increase.

E-commerce is a key platform; so are redoubled efforts at marketing and branding in a county where foreign labels still hold more cachet than local ones.

Ultimately, though, the pressure is on Chinese designers to come up with a new Brand China that will appeal to the hopes and dreams of the Chinese middle class.

“The mainstream belongs to people who want to build their own brands, rather than copying others,” Mr. Wang said.

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