Will American Companies Spanfer Their Capacity To Southeast Asia? Will Chinese Manufacturing Be Replaced?

The trade friction between China and the United States is aggravated, and the influence of the Trump administration on tariffs on Chinese handbags and other commodities in Southeast Asian countries, such as Kampuchea and Vietnam, seems more attractive to consumer goods manufacturers than ever before.

Steve Lamar, executive vice president of American Apparel & Footwear Association, said: "the Trump administration's tariff policy on China has raised concerns among many enterprises, and they have begun to shift the origin of their products from China to elsewhere."

According to a research report released by U.S. Fashion Industry Association in July, although all the enterprises in the survey are located in China, 67% of the enterprises say they will reduce their output value or output in China in the next two years. American protectionism is listed as the first challenge for fashion industry.

Manufacturing plants moved from China to Southeast Asian countries

Under the influence of the Trump administration's tariff policy, many fashion companies have expanded their production base in Southeast Asia to replace their factories in China.

The CEO Edward Rosenfeld of Steve Madden of the shoe accessories group, USA, told the group's latest earnings call conference that the group has spanferred the handbag manufacturing plant from China to Kampuchea. It is estimated that 15% of the handbags will be produced in Kampuchea this year, and this proportion will double next year. "Frankly speaking, we have been ahead of most of our counterparts for three years. Because our handbag makers have developed new production plans in Kampuchea to increase production capacity, and many colleagues are just beginning to try to spanfer factories, "Edward Rosenfeld confidently said.

Tapestry, the parent company of Coach and Kate Spade, has adopted a similar strategy. In the past few years, Tapestry has slowly migrated its previous processing business in China to Southeast Asia and India, expanding its production in Vietnam, and now less than 5% of its handbags are produced in China. Tapestry said such a move would help reduce the impact of the Trump administration's import duties on Chinese companies.

Vera Bradley, the US fashion handbag bag and accessories brand, also mentioned in December last year that the company was considering spanferring its manufacturing business from China to Vietnam and Kampuchea.

In May of this year, Adidas, the footwear sporting goods giant (Adidas), continued to shift its footwear production from China to Vietnam. Its competitor Puma also said in April that it had made contingency plans for the new US tariff policy and shifted some of its production lines from China to other Asian countries.

In April this year, Levi Strauss & Co. (Levi's) CEO Chip Bergh, a famous American jeans garment company, also expressed its vigilance against the Sino US trade war and moved the company's purchasing place out of China.

Advantages of Kampuchea and other Southeast Asian countries

Among many Southeast Asian countries, Kampuchea is more attractive to consumer goods manufacturers. In the case of the Trump administration's tariffs on most of its trading partners this year, Kampuchea still has some preferential conditions for the duty-free entry into the US market.

Focus on Southeast Asian market Investment consulting firm Emerging Markets Consulting Cambodia Matt van Roosmalen, a regional manager, said: "Kampuchea has indeed provided fairly good investment incentives, such as tax exemption. As long as the tax-free policy exists, enterprises will be more willing to invest in their capacity in Kampuchea.

Before the intensification of trade tensions between China and the United States, Kampuchea benefited from the plan of the United States to help low-income countries to promote development, and the policy of handbags, suitcases, wallets and other products tax-free access to the US market has always been enjoyed, and this policy has been retained until now.

Besides the threat of tariffs, labor costs in Kampuchea are also lower than in China. In recent years, China's wage level is rising, but Kampuchea is still one of the lowest labor cost countries. According to Oxford Economics estimates, the labor cost in Kampuchea is only 1/4 of China's Economics.

At the same time, the economy of Vietnam and other countries are slowly moving towards prosperity under the leadership of foreign investors, such as Samsung Electronics Co. and Intel Intel. manufacturing industry He invested billions of dollars in Vietnam. Vietnam is changing from a major exporter of rice, coffee and other agricultural commodities to a manufacturing hub in Southeast Asia.

　　 American Chamber of Commerce ( American Chamber of Commerce) Adam Sitkoff, executive director of Hanoi, said: "Vietnam has a relatively low inflation rate, a stable currency exchange rate and a stable politics, all of which will help attract foreign investment." As a country with a population of 95 million and developing rapidly, the Vietnamese market has great potential for development.

"Made in Kampuchea" is hard to replace "made in China".

Although there are more advantages to expand production in Kampuchea under all kinds of comparisons, Steve Lamar still advises enterprises to act cautiously. He believes that it is not easy for an enterprise to shift its production base out of China.

For this judgment, Steve Lamar gives 2 reasons:

Cheap labor and efficient production are not absolutely equivalent. Compared with China, Kampuchea's production efficiency is relatively low, which is undoubtedly a challenge for the finer production demand. A survey of Hong Kong Development Council, which is responsible for promoting trade and investment in Hongkong, shows that the average labour productivity of Kampuchea workers is about 50% to 60% of that of Chinese workers;

Kampuchea's production infrastructure is far behind China. According to the Global Competitiveness Report released by the World Economic Forum, Vietnam's infrastructure capacity ranks 106 in 137 countries, lagging behind neighboring Vietnam and Laos.

In addition, Sophal Ear, an associate professor of foreign affairs and international affairs at Occidental College, also pointed out: "before Kampuchea's political problems are stabilized, enterprises should cautiously increase investment in productivity in Kampuchea." in Kampuchea,

(the political issue here refers to the recent US government's claim that there are "loopholes" in the July congressional elections in Kampuchea. In the election, the ruling People's Party of Kampuchea won all 125 seats in Parliament. )

Tommy Wu, a senior economist at the Oxford Institute of economics, said: "the US and Europe may re examine their trade policies towards Kampuchea and may no longer give Kampuchea. Clothing industry Tariff preferences. This will be a great blow for Kampuchea, because its clothing exports account for 64% of the total merchandise exports.