China’s dominance in apparel and textile exports is certainly dwindling, if data is anything to go by. The trend of buyers moving away from China started back in 2016-2017 when high cost of production increased the garment pricing and the buyers were left with no choice than search for alternative destinations. Then came COVID-19 that shook the entire world and the sourcing of apparels seemingly moved to countries such as Bangladesh, India, Pakistan and Indonesia. Alleged unethical practices in its Xinjiang region further made a dent on Chinese textile and apparel manufacturing industry’s reputation. All these reasons are enough to speculate that the peak form of apparel manufacturing (for export markets) in China isn’t likely to pick up again.
So, what do official statistics say about the declining exports of China? The apparel exports of China to its largest export destination USA have shrunk by around 9.65 per cent in last six years as China’s share in the US apparel imports reduced to 24.03 per cent in 2021 from 35.86 per cent in 2015.
In value terms, China’s exports of apparels in the USA valued US $ 30.54 billion in 2015, which narrowed down to US $ 19.61 billion in 2021 and that means a loss of US $ 10.93 billion in revenues for China in the US market alone over a period of four years!
Importantly, unit prices of the Chinese apparel shipment have drastically come down to US $ 1.76 per SME in 2021 from US $ 2.35 per SME in 2017 – that’s 25.10 per cent downfall in unit prices. On the contrary, in the same period (2017-2021), USA’s unit prices just shrunk by 7 per cent from US $ 2.98 per SME in 2021 to US $ 2.77 per SME in 2021.
If European Union (EU) market is considered, collectively, it is the world’s largest importer of apparel and accounts for nearly 21 per cent of the world’s apparel imports value, according to World Trade Organization (WTO). In terms of number of clothing used, EU imported roughly 25 billion units of clothing in 2021, up from 19 billion in 2015.
China’s decline is also visible in the EU apparel market, though marginally by around 1.50 per cent mainly because of labour and commodity price rise. China is the single largest apparel exporter to the EU accounting for 30 per cent of the EU imports (Extra EU-27) value in 2021, while its value-wise share declined from € 21.90 billion in 2015 to € 21.67 billion in 2021.
China has also taken a beating in its apparel shipment to Canada and its share in the Canadian apparel import values declined by 7.50 per cent from 2017 to 2021 period.
China is certainly declining and its Asian counterparts are quick to grab the opportunities…
China might not be able to reach to the peak heights in its manufacturing industry again as labour is becoming expensive there and geo-political equation with Western world is not stable, hence investors and sourcing companies are finding alternate base. On the other hand, the apparel imports of USA, EU, Canada and other major apparel markets in the world are rapidly nearing to pre-pandemic level. Factories across India, Bangladesh and even Pakistan are reporting to have booked their entire capacities till December this year as they go for further expansions to develop more capacities next year.
- How is India faring?
Amidst China’s decline, India has been able to grab the orders shifting from China. India’s apparel export fraternity, buoyed by strong orders and revival of global retail industry, upped its export revenues by 24 per cent in 2021 over 2020.
As per the data analysed by Team Apparel Resources, India clocked US $ 15.21 billion during calendar year 2021 as compared to US $ 12.27 billion in 2020. The top apparel export destination for India during 2021 was USA where exporters shipped US $ 4.78 billion worth of garments, noting 44.93 per cent Y-o-Y growth. India’s apparel export to USA in 2021 has remained its best apparel export performance during last one decade, signaling a strong rebound in its top export destination after a devastating pandemic. In fact, India’s share in the US apparel import values was just 4.29 per cent during 2015, which has now gone up to reach 5.13 per cent in 2021.
The exports to USA in 2021 even surpassed the figures clocked during pre-pandemic year 2019 when USA imported garments from India worth US $ 4.34 billion. A strong reason India is receiving business is because the country has been a traditional cotton production hub and is seen as an alternate to China since always, however its true potential in textile sector is yet to be recognised. In the recent times, exports of cotton, cotton yarns, fibres, and fabrics have escalated significantly and it’s highly likely that the buyer base will keep skewing away from China at least for some time in near future.
Therefore, the shift of business from China is not just on papers as rumoured by some industry stakeholders… it is actually happening.
- Bangladesh has witnessed highest-ever apparel export turnover in 2021 – all thanks to shifting orders from China
A lot of Bangladesh’s RMG exporters are reporting that their clients, who were previously sourcing from China, have started placing orders in Bangladesh. Despite several global headwinds and COVID-19 pandemic in 2021, the country managed to clock US $ 35.81 billion (up 31 per cent Y-o-Y) export turnover last year that was the highest export revenue it clocked in a calendar year.
Of total exports, Bangladesh shipped US $ 7.27 billion worth of apparels in the US market and this was the first time when Bangladesh crossed US $ 7 billion export figures in its single largest apparel export destination.
The EU market (plus UK) generated US $ 21.74 billion export revenues for Bangladesh that was up by 27.74 per cent on yearly basis.
Team Apparel Resources talked to some factories in Dhaka and confirmed if the business is shifting from China to Bangladesh.
Supporting the statement, Humayun Kabir Salim, MD, KFL Group, that is setting up a state-of-the-art jacket factory in Dhaka, mentioned, “Since there is a demand for jackets in global market, Khantex decided to diversify in this business. The demand is being pushed in Bangladesh by brands like Inditex, Gap, Next, C&A and Primark who used to source jackets and outerwear from China and Vietnam. But those orders are now shifting to Bangladesh because COVID-19 forced factory closures in China, while Vietnam is becoming saturated now.”
A denim bigwig Armana Group has also reported to have witnessed a shift from China and Vietnam as the buyers have now understood the importance of ‘China plus One’ strategy for their sourcing needs. Another reason for Bangladesh to be successful in grabbing shifting orders is its ability to establish the most compliant factories across the South Asian region and all the investment done in the last 5 years to build world-class green factories is now paying off!
“Our entire 3 million pieces per month capacity across factories is booked for the entire year and this is because our existing clients have shifted huge number of orders from China to Bangladesh as China is still grappling with COVID-19 and political issues,” commented Sandeep Golam, Director of Operation, Armana Group.
Even statistics justify the claims of the exporters… Bangladesh remained top denim apparel exporter to USA for second consecutive year in 2021.
In 2019, the pre-pandemic normal year – Bangladesh stood third in the US denim apparel import tally, lagging behind Mexico and China. And, in disrupting times, Bangladesh surpassed both the countries to top the tally. The country had concluded 2020 with US $ 561.29 million worth of denim apparel exports to USA as compared to US $ 469.12 million of Mexico and US $ 331.93 million of China.
The growth continued even in 2021 when Bangladesh yet again showed its dominance in the denim category as it topped the list with US $ 798.42 million worth of denim apparel shipment to its largest export destination, noting 42.25 per cent Y-o-Y growth.
What’s noteworthy here is that Bangladesh’s share increased to 21.70 per cent in 2021 from 15.65 per cent in 2019 in the US import values, despite that USA couldn’t surpass its 2019 import values in denim apparel category.
What’s next for India and Bangladesh to keep the ball rolling?
There’s lot to be done to continue this growth momentum and both India and Bangladesh are leaving no stone unturned to achieve higher apparel export revenues in years to come.
The focus of both the countries has shifted towards fetching more export revenues in MMF-based garments. MMF garment manufacturing globally is a US $ 200 billion opportunity and fetching just 10 per cent of it can take the country to US $ 20 billion that needs creation of a supply chain that starts with design, product development, fabric development and garmenting.
The opportunity is really big and the same can be sensed by analysing the import data of India’s largest apparel exporting destination USA that imported US $ 39 billion worth of MMF apparels in 2021 which is almost the same as its cotton apparel import values (US $ 39.30 billion). Further digging into data, Team Apparel Resources’ found that the share of India in MMF apparel imports of the USA is 2.10 per cent (US $ 815.62 million), while cotton apparels shared higher market cap of 8.22 per cent (US $ 3.23 billion). And the same applies to the other key markets such as Europe, UAE, Japan, Canada, and Australia where India’s MMF apparel exports share hovers just around 20-22 per cent, while cotton apparels constitute nearly 75 per cent of its total export values.
Similarly, Bangladesh’s share in the USA’s MMF garment imports stood at 4.62 per cent (US $ 1.78 billion), which is higher than what it was in 2020 (3.96 per cent) and in 2019 (3.20 per cent). Even in the EU market, Bangladesh’s share of MMF garments hovered around under 4 per cent in 2021. It is certainly picking up and the efforts need to escalate.