Lower tariffs and wages, welcoming regulations and other benefits are resulting in textile-apparel manufacturers in India and China shift production to Africa and Southeast Asia. Fibre2Fashion takes a look.

Introduction

China is the largest producer, consumer and trader of textiles and clothing in the world now. But its exceptional business ecosystem with unstable regulations on trade, rising labour costs, stricter operational oversight, stringent environmental checks and ongoing trade tensions with the United States have prompted the manufacturing industry to move elsewhere. China is also consistently increasing its minimum wage to boost domestic consumption and is pushing for more automation.

In 2017, China's textile and apparel exports reached $110 billion and $158.4 billion respectively, but its share in global textile and apparel exports went down to 37.1 per cent and 34.9 per cent respectively. In the same year, China, the European Union (EU), and India were the top three textile exporters followed by The United States, accounting for 70 per cent of global textile exports. The growth rates of China and India were 5 per cent and 5.8 per cent respectively.

The United States is not a prominent region for the textile and apparel industry's global supply chain, which is concentrated in Asia and Europe. US companies cannot afford locating suppliers or building factories in the United States, as it would be very expensive and not feasible and scalable.

Like China, India is also one of the topmost countries in the world that contributes significantly to the global textile industry. India's textile exports for fiscal 2017-18 stood at $36.6 billion, accounting for 15 per cent of the country's export earnings. India is the largest producer of cotton in the world and second largest exporter after China.

But the scenario is changing. Chinese and Indian textile manufacturers are now moving their production facilities outside the country due to lower tariffs  and wages and other cost benefits in the emerging economies of Africa and South East Asia.

Moving Chinese textile factories to Bangladesh

Bangladesh was the first country where Chinese garment manufacturers had set up factories under joint ventures as the former is a competitive destination to relocate plants owing to the rising production cost in China. Chinese textile producers have also targeted Vietnam and Cambodia for investments in textile industries.

Bangladesh is attractive because there is a lack of skilled workforce and higher production costs in China and lower labour costs and mature management in Bangladesh. Its trade arrangements with the European Union (EU) and the United States are also attractive. Manufacturers are interested in investing in fabrics, garment, printing and dyeing facilities in the country, but it is yet to allow foreign investment in basic apparel manufacturing. Its textile and clothing exports have been showing consistent growth.