Last week, South China Morning Post featured an interview with Nick Chan Ying-kit, Managing Director of a clothing manufacturer based (mostly) in South China’s province of Guangdong. The company his father started 30 years ago in Hong Kong has now over 1500 employees. In the interview, Mr. Chan Ying-kit touches upon two trends that are or will be more and more ordinary features of manufacturing in China in the foreseeable future.

The first one is widely known and talked about concern over the rising cost of labor in China (in addition to increase in the general overhead costs). The fact that one of the major tasks for Chinese leadership is to steer the country through transition from export oriented towards domestic consumption driven economy is precisely caused by many production companies’ decision to relocate Southeast of China. Despite having established facilities and many local advantages (such as the sophisticated logistic network) at hand in China, there are enough arguments on the table for some to make the move outside. The cheap, young labor and location favorable for transport by sea are in favor of mass production manufacturers making their move.

There is, however, a way around it. Nick Chan Ying-kit explained that the key decision for his company success was in dedicating portion of their production capacity to making more expensive, higher-added value (but also more production time-consuming) products that cannot be copied that easily. For his company, this means that besides making bulk-orders of plain shirts for global fashion chains worth USD 10 their portfolio now includes even cashmere scarfs worth USD 400.

Such a drastic shift is not easy in any field and territory, but certainly one must adapt to the new realities, which are not at all bleak in the case of China. Affluent Chinese (an ever-expanding social group) are increasingly willing to spend money for more authentic luxury experience, which would open the playing field to those who can offer high-end products made in China for China.

Sources:

“Quality not quantity: ‘Made in China’ label will emulate ‘Made in Italy’ 10 years from now, vows Hong Kong garment maker” SCMP, http://www.scmp.com/news/china/economy/article/1912779/quality-not-quantity-made-china-label-will-emulate-made-italy-10

«Manufacturers step up search for low cost alternative to China» SCMP, http://www.scmp.com/business/companies/article/1863709/manufacturers-step-search-low-cost-alternative-china

«Manufacturers shift focus from quantity to quality» Nikkei Asian Review, http://s.nikkei.com/1KVgHGJ

«China Is Set to Lose Manufacturing Crown» Bloomberg Business, www.bloomberg.com/news/articles/2015-04-29/china-is-set-to-lose-manufacturing-crown

«The Worst May Be Over for Luxury Goods in China» Fortune, http://for.tn/1Nd3XYa?xid=for_em_sh

Annex Asia Publishing: publishing@annexasia.com

Image: China2West

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