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Chinese Clothing Companies Moving to Southeast Asia on Rising Costs

08-22 15:05 Caijing
Chinese clothing companies are moving off the Pearl River Delta (PRD) in south China's Guangdong Province with decreasing orders and piled-up inventories

Chinese clothing companies are moving off the Pearl River Delta (PRD) in south China's Guangdong Province, one of the leading economic regions and a major manufacturing center in the country, with decreasing orders and piled-up inventories, the online site of CCTV reported.

Some of them have started to set up new businesses in countries of Southeast Asia, according to a survey carried out by the official TV program.

Orders from foreign countries have declined, and factories are struggling to control costs by reducing working hours and overtime, Tao Liuan, owner of one of the many small garment factories in Guangdong told reporters. Labor cost was up by more than 20 percent, he said.

Xiao jingyu, owner of a contract manufacturer, told CCTV that orders have been shrinking in the recent two years, with many foreign companies turning to contractors in Vietnam and Cambodia.

"Because labor costs in the Vietnam and Cambodia are one fourth, or even less than one fifth of those in China," said Xiao, "We can hardly compete with [companies in] the two countries on wages."

China now has the third highest employment costs in emerging Asia after Malaysia and Thailand, according to findings by Dezan Shira & Associates, a service firm focused on business operations in Asia.

A comparison of minimum wage levels between China and India showed that Chinese minimum wages are two or three times the level of their Indian counterparts, and even higher when welfare payments are added on top.

Dubbed the world's workshop, the Pearl River Delta is a major manufacturing base for products such as electronic products, garments and textiles, and plastic products. Famous brands including Apple have their contractors' factories in the region.

The situation has changed in recent years, however. After Nike closed its only garment factory in China in 2009, Adidas said in July that it would shut down the only factory in China which is directly under its control this year, and is likely to move it to Myanmar. Recent rumor also has it that Adidas is mulling terminating the partnership with 300 Chinese contractor manufacturers.

 

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