Clothing Manufacturers Fleeing China

Pal Jon Custer alerted us to a WSJ video this morning showing us that clothing manufacturers are slowly moving their operations out of China because wages are increasing there, and moving them to places like Vietnam, where wages are growing at a slower rate. He points to this chart which shows how China is leaving some of its other neighbors in the dust when it comes to per-capita GDP growth.

According to this report from Havard Business School, some retailers are already focusing their operations in other countries. Fast fashion clothing store Zara sources two-thirds of its items from Africa and Europe. Plus, Zara’s owner Amancio Ortega is the the third richest man in the world behind Carlos Slim and Bill Gates, so he must be doing something right.

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6 Comments / Post A Comment

josefinastrummer (#1,850)

Wait, I just had a 401k meeting telling me to invest in manufacturing because the factory jobs are coming back to the U.S.! This isn’t true?? I was also advised to invest in fracking…good meeting!

@josefinastrummer Wage increases in China are also part of why certain kinds of manufacturing are coming back to the US. Clothing and other low-value-added manufacturing is unlikely to return any time soon, though theoretically if every country on earth were equally rich you might see clothing being made in high-income countries again.

josefinastrummer (#1,850)

@stuffisthings Well I am glad to hear that, but I am not going to hold my breath waiting for all the factories to come back.

deepomega (#22)

Globalization works! Capitalism pushed up wages in China (and India, and…) and then moves on.

sea ermine (#122)

It’s important to note that huge (HUGE) part of why Zara is because of their business model (which yes, dictates why they put their factories where they did but doesn’t really relate to how much they pay the workers in those factories).

Their deal is fast fashion but on a much more intense scale than something like H&M or Forever 21 because the key thing about the stores is that the merchandise is supposed to turn over anywhere from weekly to even daily. They do it a little less than they used to and they don’t do it quite as often in farther away countries (like the US) but what they are supposed to do is to bring in completely new styles as often as possible. That way they keep up with all of the trends as they appear and they keep shoppers coming in every day because what they saw on Monday wont be there on Saturday. That’s also why, outside of the US, Zara doesn’t really do sales or does them very rarely, because the merchandise should have sold out and been replaced with a new style by that point.

So they keep their manufacturing close (lots in Morocco, some in Portugal, etc.) so that it gets to the (European) stores faster so that they can keep up with their plan of bringing in new trendy things all the time.

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