Lin Feng, who is in his 50s, is a businessman who owns clothing factories in and around the southern Chinese city of Guangzhou. His factory produces products primarily for American and European customers.
In 2020, as COVID-19 closed borders, he launched a new women's clothing production line in Hanoi to "test the waters" and was encouraged by the fact that workers were satisfied with less than half their monthly wages in Guangzhou.
But he soon discovered that he was shocked by how few orders were coming in from wary overseas customers. Last year, he quit Vietnam and shifted his focus back to Guangzhou.
"It makes no sense to talk about expansion or overseas shifts now. Low labor costs and tariff exemptions make no sense amid weak demand," Lin said.
Ji, a manager at a garment factory in Guangdong, had a similar experience.
He has been running a jeans production line in Cambodia for more than 20 years. Over the past decade, however, as the minimum wage has risen, he's seen profit margins get smaller and smaller.
The wages he pays workers in the southern Chinese manufacturing city of Zhongshan are now only 30% higher than in Cambodia, a gap that was much wider a decade ago. At the same time, output at his Chinese factories increased by about 20 percent, and workers became more skilled.
Kee said expanding production in Southeast Asia was not a "rational decision." "I'm afraid the slowdown in business will continue over the next year or two."
In fact, China is so indispensable in the global apparel supply chain that even the transfer of countries does not really reduce dependence much.
