China facing heat in apparel exports, Bangladesh, and India enjoy those shifts in orders!

It might be difficult to China’s RMG sector to reach the peak heights in its manufacturing industry again as labor is becoming expensive there and the geo-political equation with the Western world is not stable, hence investors and sourcing companies are finding an alternate base. On the other hand, the apparel imports of USA, EU, Canada, and other major apparel markets in the world are rapidly nearing to pre-pandemic level. Factories across India and Bangladesh are reporting to have booked their entire capacities till the end of this year as they go for further expansions to develop more capacities future.

China’s dominance in apparel and textile exports is certainly dwindling, if data is anything to go by. The trend of buyers moving away from China started back in 2016-2017 when the high cost of production increased the garment pricing and the major customer were left with no choice but a search for alternative destinations. Then came COVID-19 which surprised the entire world and the sourcing of apparel seemingly moved to countries such as Bangladesh, India, Pakistan, and Indonesia. Alleged unethical practices in its Xinjiang region further made a dent in the Chinese textile and apparel manufacturing industry’s reputation. All these reasons are enough to speculate that the peak form of apparel manufacturing (for export markets) in China isn’t likely to pick up again.

So, what do official statistics say about the declining exports of China? The apparel exports of China to?its largest export destination USA?have shrunk by around 9.65% in the last six years as China’s share in the US apparel imports reduced to 24.03% in 2021 from 35.86% in 2015.

In value terms, China’s exports of apparel in the USA were valued US $ 30.54 billion in 2015, which narrowed down to US $ 19.61 billion in 2021 and that means a loss of US $ 10.93 billion in revenues for China in the US market alone over a period of 4-years!

Importantly, unit prices of the Chinese apparel shipment have drastically come down to the US $ 1.76 per SME in 2021 from the US $ 2.35 per SME in 2017 – that’s 25.10% downfall in unit prices. On the contrary, in the same period (2017-2021), USA’s unit prices just shrunk by 7% from the US $ 2.98 per SME in 2021 to US $ 2.77 per SME in 2021.

If?European Union (EU)?market is considered, collectively, it is the world’s largest importer of apparel and accounts for nearly 21% of the world’s apparel imports value, according to World Trade Organization (WTO). In terms of the number of clothing used, EU imported roughly 25 billion units of clothing in 2021, up from 19 billion in 2015.

China’s decline is also visible in the EU apparel market, though marginally by around 1.50% mainly because of labor and commodity prices increasing. China is the single largest apparel exporter to the EU accounting for more than 30% of the EU imports (Extra EU-27) value in 2021, while its value-wise share declined from € 21.90 billion in 2015 to € 21.67 billion in 2021.

China has also taken a beating in its apparel shipment to?Canada?and its share in the Canadian apparel import values declined by 7.50% from 2017 to 2021.

China is certainly declining and its Asian counterparts are quick to grab the opportunities…

Amidst China’s decline, India has been able to grab the orders shifting from China. India’s apparel export fraternity, buoyed by strong orders and the revival of the global retail industry, upped its export revenues by 24% in 2021 over 2020.

As per the market information, India clocked US $ 15.21 billion during the calendar year 2021 as compared to US $ 12.27 billion in 2020. The top apparel export destination for India during 2021 was USA where exporters shipped US $ 4.78 billion worth of garments, noting 44.93% Y-to-Y growth.?India’s apparel export to the USA in 2021 has remained its best apparel export performance during the last decade, signaling a strong rebound in its top export destination after a devastating pandemic. In fact, India’s share in the US apparel import values was just 4.29% during 2015, which has now gone up to reach 5.13% in 2021.

The exports to USA in 2021 even surpassed the figures clocked during the pre-pandemic year 2019 when USA imported garments from India worth US $ 4.34 billion. A strong reason India is receiving business is that the country has been a traditional cotton production hub and is seen as an alternative to China always, however its true potential in the textile sector is yet to be recognized. In recent times, exports of cotton, cotton yarns, fibers, and fabrics have escalated significantly and it’s highly likely that the buyer base will keep skewing away from China at least for some time in the near future.

Therefore, the shift of business from China is not just on paper as rumored by some industry stakeholders… it is actually happening.

• Bangladesh has witnessed the highest-ever apparel export turnover in 2021 – all thanks to shifting orders from China.

A lot of Bangladesh’s RMG exporters are reporting that their clients, who were previously sourcing from China, have started placing orders in Bangladesh. Despite several global headwinds and a COVID-19 pandemic in 2021, the country managed to clock?US $ 35.81 billion?(up 31% Y-of-Y) export turnover last year which was the highest export revenue it clocked in a calendar year.

Of total exports, Bangladesh shipped US $ 7.27 billion worth of apparel in the US market and this was the first time when Bangladesh crossed US $ 7 billion export figures in its single largest apparel export destination.

The EU market (plus UK) generated US $ 21.74 billion in export revenues for Bangladesh which was up by 27.74% on yearly basis.

Some of the factories in Dhaka confirmed that the business is shifting from China to Bangladesh.

Even I have some connection in China who is looking to place production capacity in Bangladesh and its huge quantity for reputed BRAND’s. ??

The demand is being pushed in Bangladesh by brands like?Mango, Inditex, Gap, Next, C&A, and Primark?who?used to source jackets and outerwear from China and Vietnam. But?those orders are now shifting to Bangladesh?because COVID-19 forced factory closures in China, while Vietnam is becoming saturated now.”

Another reason for Bangladesh to be successful in grabbing shifting orders is its ability to establish the most compliant factories across the South Asian region and all the investment done in the last 5 years to build world-class green factories is now paying off!

“Our entire 3 million pieces per month capacity across factories is booked for the entire year and this is because our existing clients have shifted a huge number of orders from China to Bangladesh as China is still grappling with COVID-19 and political issues,”

Still, Bangladesh remained the top denim apparel exporter to the USA for the second consecutive year in 2021.

In 2019, the pre-pandemic normal year – Bangladesh stood third in the US Denim apparel import tally, lagging behind Mexico and China. And, in disrupting times, Bangladesh surpassed both the countries to top the tally. The country had concluded 2020 with US $ 561.29 million worth of denim apparel exports to USA as compared to US $ 469.12 million of Mexico and US $ 331.93 million of China.

The growth continued even in 2021 when Bangladesh yet again showed its dominance in the denim category as it topped the list with US $ 798.42 million worth of denim apparel shipment to its largest export destination, noting 42.25% Y-to-Y growth.

What’s noteworthy here is that Bangladesh’s share increased to 21.70% in 2021 from 15.65% in 2019 in the US import values, despite that USA couldn’t surpass its 2019 import values in the denim apparel category.

What’s next for Bangladesh is to keep the ball rolling?

There’s a lot to be done to continue this growth momentum Bangladesh is leaving no stone unturned to achieve higher apparel export revenues in years to come.

The focus of the countries has to be shifted towards fetching more export revenues in MMF-based garments. MMF garment manufacturing globally is a US $ 200 billion opportunity and fetching just 10% of it can take the country to US $ 20 billion that needs the creation of a supply chain that starts with digitalization, creative design input, Technologies, product development, fabric development, and productivity.

The opportunity is really big and the same can be sensed by analyzing the import data of India’s largest apparel exporting destination USA which imported US $ 39 billion worth of MMF apparel in 2021 which is almost the same as its cotton apparel import values (US $ 39.30 billion). Further digging into data info found that the share of India in MMF apparel imports of the USA is?2.10%?(US $ 815.62 million), while cotton apparel shared a higher market cap of?8.22%?(US $ 3.23 billion). And the same applies to the other key markets such as Europe, UAE, Japan, Canada, and Australia where India’s MMF apparel exports share hovers just around 20-22%, while cotton apparels constitute nearly 75% of its total export values.

Similarly, Bangladesh’s share in the USA’s MMF garment imports stood at?4.62%?(US $ 1.78 billion), which is higher than what it was in 2020?(3.96%)?and in 2019?(3.20%). Even in the EU market, Bangladesh’s share of MMF garments hovered around under?4%?in 2021. It is certainly picking up and the efforts need to escalate.