Crypto News: Supply Lines: Where clothes are made

Global apparel and footwear makers like Adidas to Nike have been shifting some of their supply chains out of China for the past decade.

The moves, initially driven by lower operating costs, have lately been pushed by mounting geopolitical tensions between China and the west.

But China remains the world's top clothing exporter — about one-third of all garments globally come from its factories — and the limits of the viable alternatives may have been reached, as Bloomberg reports today.

US and European brands say they want to further cut ties with China to reduce potential political risks. But finding established production locations elsewhere brings challenges: a lack of skilled workers, insufficient raw materials, or underdeveloped infrastructure and logistics networks.

The latest headwind is a weakening of consumer demand, which makes the investment in expansion or the pursuit of a China-plus-one sourcing strategy even less attractive.

So some Chinese garment manufacturers that have built factories in Vietnam and other Southeast Asian nations have retreated back to China, our story explains. Some paused expansion to reduce potential losses.

While there's ongoing discussion on reducing reliance on Chinese raw materials to avoid escalating sanctions, that's going to be tough to do. The Vietnamese clothing industry, for instance, still relies mostly on Chinese-made buttons, thread, labels and packaging, with only about 30% to 40% of such materials made domestically.

And even if the drive to shift production and raw material sourcing away from China, it remains to be seen if customers are willing to pay a higher cost.

"Therein lies the dilemma," said Michael Laskau, a Vietnam-based businessman who links local apparel manufacturers and overseas buyers. "Customers want the fabric produced in Vietnam but they don't want to pay the price. They want everything to be as cheap as it can be."

Related Reading on Bloomberg.com:

—By Bloomberg News

Contracting again | China's factory activity fell back into contraction in October, while an expansion of the services sector unexpectedly eased, signaling that the economy remains fragile and is in need of support. The official manufacturing purchasing managers' index slipped to 49.5 this month from 50.2 in September, according to a statement from the National Bureau of Statistics on Tuesday. That compares with an estimate of 50.2 in a Bloomberg survey of economists. The non-manufacturing gauge, which measures activity in the construction and services sectors, declined to 50.6 from 51.7, lower than the forecast of 52. The 50 level separates growth from contraction.

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The sixth annual Bloomberg New Economy Forum returns to Singapore Nov. 8-10 as the world's most influential leaders gather to address the critical issues facing the global economy. This year's theme is "Embracing Instability." Request an invitation here.

Join Bloomberg's "Supply Chain Resiliency: Risk & Mitigation" event in Detroit on Nov. 16 for an afternoon with our research analysts & subject experts to discuss trends, risks, and innovative ways to monitor and manage critical supply-chain elements -- especially their impact on the auto industry. To register for the free, in-person-only event, click here.

Container liners pushed through strong rate hikes last week; Shanghai-Europe rates jumped 32% week-over-week as negotiations for the long-term contracting season begin. The latest hikes narrowed the Shanghai Containerized Freight Index's year-to-date decline to 5%, though industry dynamics remain unfavorable, Bloomberg Intelligence says.
South Korea sees exports recovering from a year-long slump this month, in an encouraging sign for its economic growth prospects and for global commerce.
Run SPLC after an equity ticker on Bloomberg to show critical data about a company's suppliers, customers and peers.
Use the AHOY function to track global commodities trade flows.
For freight dashboards, see {BI RAIL}, {BI TRCK} and {BI SHIP} and {BI 3PLS}
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