China, Bangladesh, Vietnam and India are four of the largest garment exporters in the world. While all four countries have a well-developed garment industry, each has a unique business climate that may be more or less suitable for your manufacturing needs. Low-cost labor is certainly a key factor in choosing a supplier for manufacturing garments. But don’t discount other concerns that can affect your quality and deliverability, like labor productivity and infrastructure development.
Of 348 garment importers surveyed on InTouch’s website since October 2016, 61 % said they source garments from at least one of these countries. China remains the most popular choice at 21%, Bangladesh and India tie for second place at 14%, while Vietnam comes right behind at 12%.
Trends in garment industry growth
For many years, China has retained its position as the largest clothing exporter in the world, but this could change in years to come.
China’s gradual move away from labor-intensive garment manufacturing is typical of industrialized countries as wages and standards of living rise and population growth slows. China’s government not only acknowledges its inevitable shift in manufacturing but is actively promoting it.
Undoubtedly, China is still a major player in the sector, but garment exports will likely account for a smaller portion of China’s total GDP in the years ahead. This will present opportunities for importers of products that require more sophisticated manufacturing. But as we’ll see, China’s increasing wages will force more garment importers to move production to less developed countries that offer lower costs.
Indeed, importers’ preferences e for lower wages is eroding China’s competitiveness putting China’s East Coast provinces — the traditional heartland of Chinese garment production — out of the market for many high-volume, basic clothes.
In Shanghai has the highest monthly minimum wage at 2,300 RMB (338 USD), with similar rates in other tier-1 cities like Beijing and Shenzhen. Minimum wages in county-level cities in smaller provinces can be as low as 1,000 RMB (150 USD). But even these low rates can’t compete with the other countries’ when solely comparing labor costs.
To diminish losing business to other countries, the Chinese government is providing incentives for manufacturers to move production to cheaper provinces in Central and Western China, with schemes like investing $8 billion in its far-western Xinjiang Province, a major cotton-growing region, to attract textile and apparel companies. To some garment manufacturers, it is certainly a promising offer as tax benefits, rent and power subsidies make it a “near-guaranteed profit.”
Many importers consider India a major potential competitor to China for manufacturing due to its massive workforce, second in size only to China’s (related: Manufacturing in India vs. China). This large workforce makes India a particularly attractive option for manufacturing garments. However, India’s significantly lower labor costs has not always sufficed for manufacturers to consider relocating.
One reason for this is the productivity of workers. Per-capita GDP, adjusted for purchasing power parity (PPP), is one measurement of a country’s productivity. Typically, a higher per-capita GDP reflects a greater degree of productivity, as it measures the value each individual provides to the economy. While wages in India are significantly lower in India than in China, the above measurement shows India’s productivity is also estimated to be less than half of China’s.
Is skilled labor necessary for manufacturing garments?
Manufacturing garments is typically a low-skilled job, so garment importers might not be particularly concerned about whether a workforce is skilled. However, skilled labor in managerial positions increases the efficiency and productivity of a factory, which can shorten lead times. The World Economic Forum (WEF) Human Capital Index measures the “knowledge and skills embodied in individuals that enable them to create economic value” through education metrics. By this measurement, Vietnam’s human capital eclipses China’s, while India lags behind, even Bangladesh.
Bangladesh, in particular, faces a shortage of skilled labor in the ready made garments (RMG) industry. Of Bangladesh’s total exports, 79% are concentrated in five basic products: trousers, t-shirts, sweaters, shirts and jackets. Without enough skilled labor, Bangladesh struggles to diversify production and manufacture more high-end garment and textile products.
In contrast, some of China’s advanced garment factories have found a market in diversification by producing lower volumes of higher quality and more technical garments. Technical garments, also known as “techwear”, include items constructed with special fabric and techniques that allow for breathability, movement, water-resistance and comfort. Manufacturers can sell these garments at a higher margin, offsetting higher labor costs.
Trade-related infrastructure for garment producers
While garment production has started moving away from its traditional bases in China, it’s not happening overnight as its large, skilled labor force is keeping the country in the competition. In addition, China also leads in other influential areas related to infrastructure.
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