Chinese Loses Competitive Edge in Apparel, Shoes
By wchung | 01 Apr, 2026

The apparel and footwear industries, once China’s manufacturing mainstays, have shifted to southeast Asian nations like Indonesia, India, Bangladesh and Vietnam, as well as South American nations like Nicaragua.

“Sourcing goods in China purely because of ultra-low costs is a thing of the past,” KPMG China partner Nick Debnam told apparel and textile website just-style.com. “There will still be good reason to invest more in younger and cheaper countries such as Bangladesh, Vietnam, Cambodia and Pakistan.”

Export figures bear out the assessment. Bangladesh boosted textile exports 43% to over $18 billion in the 12-month period through July 2011. Indonesia’s footwear exports jumped 42% in 2010 $2.1 billion.

Some of the production is also shifting to low-cost South American countries like Nicaragua. During the first half of 2011 Nicaragua’s apparel exports to the U.S. grew by 22 percent to 202 million square meter equivalents (SME), and jumped 27 percent in terms of value to $586 million, according to information from the Office of Textiles & Apparel (OTEXA) of the U.S. Department of Commerce.

Meanwhile the value of China’s exports to the U.S. grew only eight percent during the first half of 2011 and actually fell three percent in volume, from $4.2 bil. in the first half of 2010 to $4.1 bil. in the same period of 2011.

The shift is inevitable given China’s soaring labor costs. China’s population of 18-30 year-olds — who make up the bulk of workers in the apparel and footwear industries — is set to begin falling next year as the impact of the country’s one-child policy begins to be felt. As a result workers have demanded higher wages, and are getting it in big increments.

Minimum wages are pegged to rise at a 13% annual rate through 2015 under China’s new focus on narrowing the troublesome wealth gap and seeking growth from domestic consumption instead of exports in its 12th Five-Year Plan which begins this year. In an effort to tame raging inflation, China has been letting the yuan appreciate faster against the dollar, also boosting its costs to multinationals.

These factors have pushed up the average monthly salaries of over 80% of workers to 1,500 yuan ($235) in the second quarter, a 10% jump over the first quarter. That’s about four times greater than in some nations of South Asia and Southeast Asia and about 40% greater than even nations with relatively well-developed infrastructure like Indonesia and the Philippines. This is making the production of low-end shoes, clothing, bags, textiles and other household goods prohibitively expensive, forcing a difficult migration upward into more hi-tech and premium goods like consumer electronics, green technology, pharmaceuticals, autos and more sophisticated equipment and machinery.