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China to retain dominance as US moves sourcing away from the Western hemisphere


China to retain dominance as US moves sourcing away from the WesternLatest statistics from the US-based Office of Textiles and Apparel (OTEXA) indicate economic recovery in the country is being driven by a gradual increase in demand for apparels. Figures reveal, though the value of apparels imported by the US decreased 32.0 per cent in July 2020 from a year ago, the speed of this decline slowed from 42 per cent in June 2020. Inventory build-up by brands and retailers for holiday season are the major factors driving demand and the trend would continue over the next two or three months.

Based on these estimates, US fashion companies plan to continue to look at China as an essential apparel-sourcing base. Though China’s apparel exports to the US dropped as much as 49.3 per cent from January to July 2020 year over year, China quickly regained its position as the top apparel supplier to the US, with a 26.3 per cent market share in value and a 38.8 per cent share in quantity in July 2020.

Large capacity and local production benefit China

China benefitted from the pandemic as the country enjoys two notable benefits that other apparel suppliers don’t. These are:China to retain dominance as US moves sourcing away from the Western hemisphere unparalleled production capacity and the ability to produce textile raw materials locally. Also, clothes made in China are more price-competitive. The unit price of Chinese apparel imports declined from $2.25/sq. mt. equivalent (SME) in 2019 to $1.88/SME in 2020. In July 2020, the unit price of US apparel import from China was around 25-35 per cent lower than those imported from other Asian countries.

Despite this, deteriorating US-China relations and forced labor issues reported in Xinjiang continue to veer fashion companies away from China. As a result, China’s market share in the US apparel imports slipped in both quantity and value terms in July 2020 compared with a month ago.

Sourcing moving away from the Western hemisphere

Asia remains the single largest source of apparels for the US. Besides China, it depends on Vietnam, ASEAN, Bangladesh and Cambodia for apparel imports. Moreover, US has not been giving any more apparel sourcing orders to suppliers from the Western Hemisphere for the last few months. From January to July 2020, the country imported only 8.8 per cent apparels from CAFTA-DR members and 4.1 per cent from USMCA members. The value of US’ yarns and fabrics exports to the USMCA and CAFTA-DR members also declined by 28.9 per cent in the first seven months of 2020 from a year ago. One of the major reasons for this was the heavy reliance on textile supply from the US and the price disadvantage.

In the first six months of 2020, the unit price of US apparel imports also declined from 104.7 in 2019 to 99.0 YTD in 2020. Imports from Mexico and China witnessed the most price decline during the period.