This is China! BLOG

Qingdao Sewing Up the Textile Industry

China Briefing posted an article a few days ago on the dramatic drop in export activity in Guangdong Province.

I asked a Dutch friend what his impression of the transition was. I written about conversations with him before: he’s the fellow who hates Dongguan and figures off the top of his head at least 6,000 factories had closed down in and around Guangzhou alone.

In our latest conversation about his industry – textile exports – he explained to me just how dramatically the industry had shifted in South China. His company takes orders for clothing in Europe and farms assembly out to Chinese manufacturers. “In the old days,” he said, “textile companies would outsource parts of garments to smaller companies; essentially, the big companies were assembly shops. Now, with the loss of the smaller companies, the larger companies are once again becoming vertically-integrated, raising their costs of doing business.” And as the large companies are the last men standing after the industry and regional shake-out, they can be choosier, picking higher-margin orders, with profits they might not have dreamed of before.

“And let me tell you, it is a pain to have to start all over again,” he said. “We have to find new suppliers and start working with them for the first time.” I asked him if there was a problem with the quality of the goods they were producing. “No, not really,” he answered, “the quality of new manufacturers is so-so; but not like it was with those they had spent years cultivating.”

My friend said the family business has lost the priority they once had in getting orders done, to specification. “For example, with one supplier in Guangdong, we could communicate directly with the owner to get the time and attention we needed for orders. Over fifteen years, now, and we’ve made that owner very rich. Now his son – who was educated in the States - gives us a hard time on cost. So, we sometimes have to call the father to get the terms we need.

“We can’t even do that with new vendors, especially in a new region.”

I asked him what region was taking over from Guangdong in the textile industry. Without hesitation he answered, “Qingdao.” “Their costs are lower than what you’ll find in Guangdong; but we have to build those relationships all over again.”

At least, he’ll be able to enjoy a cold beer while he waits for his orders.