Apparel Sourcing Intelligence - Worldwide

Flying geese don’t mean the Chinese are leaving home

One of the biggest myths of modern sourcing is that Chinese  garment manufacturers are leaving China. My op-ed in the April 21 Sourcing Journal Online exposes the myth.

In 2002, Hong Kong-owned firms employed 11 million workers in China’s Guangdong province. By 2014, half those firms had closed, leaving just 5 million employees in the province. The chairman of the Taiwanese-invested Enterprises Association of Guangzhou said in February that 30 percent of his members had left over the past couple of years.

But the province’s working population grew over those 12 years. Indeed the number employed in the province by companies based in mainland China grew from 41 million to 61 million.

During the 1990s, businesses from all over East Asia – HK, Taiwan, Korea and Japan – set up manufacturing subsidiaries in China, especially near Hong Kong, to tap China’s cheap labour. With wages rising, many of them want to move on somewhere else.

In the process of offshoring those East Asians have changed, from businesses centred on their original country, to rootless cosmopolitans, known as Flying Geese in China.

Strategic centre back home (possibly), customers in Europe or North America, manufacturing wherever’s best value, financing in London, marketing in New York – and, in the case of Hong Kongers, probably with an MBA from somewhere round Boston, Mass, a convenient UK passport and an ultimate holding company in a low-tax British dependency in or near the Caribbean.  They’ll go on changing.

The mainland Chinese businesses, though, haven’t moved. A few have set up factories abroad – but we can find none at all that have moved out of China altogether: those foreign expansions are almost all extra capacity.

I doubt most will ever move. They’re headquartered in what’s more or less the world’s biggest apparel market – and they’ve little experience of operating anywhere else. There’s next to no advantage in making garments outside China for shipping back home.

Clearly some might pack up manufacturing in China. But we’re years away, I believe, before those Flying Geese become a substantial phenomenon in China