China’s Changing Economic Landscape: Beyond The Garment Industry
Five years ago, workers from regions as distant as Gansu and Qinghai flocked eastward to Guangdong’s Pearl River Delta, lured by the promise of lucrative wages in the booming garment factories. It was a time when a skilled sewer could earn more than a university graduate. Fast forward to today, and the scenario has drastically shifted. Factories are shutting down, and the tide of guest workers is reversing course, heading back west. The culprit, we are told, is China’s export garment industry, facing a crisis that may be irreversible.
Recent data from the United States reveals a significant decline in China’s market share, plummeting from 39.2% in 2010 to 21.1% as of October 2023 – a staggering 46% decrease. However, the interpretation of these figures is not as straightforward as it may seem.
Garments: A Shrinking Slice of the Export Pie
Contrary to popular belief, garments constitute a relatively small and diminishing share of China’s overall exports, as illustrated in the chart below.
Unit vs. Value: A Nuanced Perspective
While the decline in market share by value stands at 46%, a closer look at unit-based market share reveals a more moderate 11.7% decrease. The decline in factory activity is less tied to exports than to the domestic market, which, after experiencing substantial growth in recent years, is now showing signs of a reversal.
Root Causes: Property Speculation and Economic Shifts
China is grappling with profound, long-term challenges stemming from rampant property speculation. Initially confined to property developers, this issue has spread to provincial governments and the informal banking sector, potentially accumulating losses in the trillions. Traditionally viewed as the safest investment, property ownership has lost its allure among the Chinese populace due to recent events. Consequently, consumer confidence has plummeted, leading to reduced consumption across all sectors.
The economy finds itself in the grip of deflation, with falling prices and corporate profits. The decision not to purchase another pair of jeans is just one minor repercussion of this confidence crisis.
A Glimmer of Hope for Exports
Ironically, there remains a possibility of revival for China’s export market. With a reputation for producing high-quality goods, China could see a resurgence in demand as importers seek to elevate their product standards. However, this rebound hinges on the restoration of consumer confidence and an improvement in the domestic market. The timeline for such a recovery is uncertain, possibly spanning several years.
