In a factory in China’s manufacturing heartland, workers hand-sprinkle tiny specks of paint and glitter onto printed images of flowers – a small tweak designed to boost dwindling profits in the face of sagging global demand.
“If you’re looking for high-end, I’d like to say the better the quality of the painting, the more classic it is, but in the current global economy, the more you sell it, the lower the price will be,” said Wang Xiaosa, general manager of Fujian Jieow Industry in Minhou county, southeast China’s Fujian Province.
While President Xi Jinping wants China’s economy to focus on “new high-quality productive forces” such as green technology and electric vehicles, low-cost factories have long been the bedrock of the country’s explosive growth and one of its biggest sources of jobs.
But these factories are increasingly struggling with sluggish orders from Western buyers, trade restrictions in overseas markets and growing competition from rival bases, especially Southeast Asian countries such as Vietnam, Indonesia, Bangladesh and India.
China, the world’s top clothing exporter and a major maker of toys and furniture, “remains a giant when it comes to labor-intensive products,” said Fred Neumann, HSBC’s chief Asia economist. But all of these industries are just hanging on by a thread amid growing competition from lower-cost rivals.
A worker operates a sewing machine at an Anta Sports factory in Jinjiang, Fujian province. © Qilai Shen/Bloomberg
According to a Bank of America Global Research report, apparel, footwear and furniture accounted for 9 percent of China’s exports in the first eight months of last year, down from 20 percent in 2001. Automobiles and machinery’s share of total exports rose to 33 percent from 16 percent in the same period.
China’s share of global footwear and apparel sales has fallen in recent years, with its share of total supply to brands like Nike and Adidas falling from 20-27% in 2017 to 16-20% by 2022, according to a Bank of America report. While China remains the world’s largest supplier, its share of global footwear exports has fallen by more than 10 percentage points over the past decade, according to figures from the 2023 World Footwear Yearbook.
The report added that much of that capacity has shifted to Southeast Asian countries, particularly Indonesia and Vietnam. Vietnam, now the world’s second-largest exporter, has been the biggest beneficiary, with its share rising from 2 percent to about 10 percent.
The shift partly reflects companies’ pursuit of lower labor costs, but more recently a desire to reduce supply chain risks amid rising geopolitical tensions.HSBC’s Neumann said a further withdrawal of traditional labor-intensive industries from China could lead to job losses that policymakers in Beijing are eager to avoid.
“Most of China’s manufacturing is still low- to mid-level, so they need labor-intensive product factories in China,” he said. “The thinking for policymakers is it’s not just about EVs or advanced tech advantages or having a home-grown semiconductor industry. It’s also about maintaining production capacity for all types of products, and even all products.” [the] lower end.”
China’s share of global shoe and apparel sales has fallen in recent years. © Qilai Shen/Bloomberg
Shoe and textile factories, ranging from factories more than 12 stories tall to metal barn-like buildings with iron roofs, line the streets of Jinjiang, an industrial city in Fujian province. The city is home to major shoe manufacturers such as Anta, as well as the world’s largest “one-stop” center for sports footwear textiles.
Lai Mingquan, owner of Shenglong Microfiber, a wholesaler in the complex, said China’s push into high-tech electric vehicles has created demand for synthetic leather used in car interiors, but overall sluggish demand at home and abroad makes it difficult for factories to fully adopt the latest technology.
“We have to reach a certain order volume when it comes to factory automation,” he said, “and the orders in China are not that big at the moment.”
Yang Xiang’an, sales manager at suede microfiber manufacturer BoBang, said competition to produce newer, cheaper synthetic fibers is ever-intensifying, but new orders have declined since the pandemic ended, especially from exporters shipping to overseas buyers. “Every year in this industry it’s worse than the previous year,” he said.
While analysts say China still dominates in supplying advanced fabrics used in footwear production, Zhang Xinglou, sales director at Jiayi Plastics, a manufacturer of shoe parts, said the country’s extensive shoe manufacturing base, once concentrated in and around Jinjiang, is now decentralized to other provinces and overseas.
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Weakening domestic and international demand for shoes has hit businesses like his that sell cheap, no-name products to factories particularly hard, he said, adding that the situation has been exacerbated by tariffs imposed on Chinese-made footwear products in markets such as the United States.
“High tech is only part of the picture,” he says. “One factory produces a ton of stuff in a day, and there are so many factories, factories everywhere. How do you support so many people?”
Back at Jie Ao Industrial, a sign at the entrance to the warehouse reads, “Innovation is the root, quality is life.”
But with demand slumping and remaining customers focused on negotiating lower prices, the company has been forced to cut its workforce of about 300 painters in half, Wang said.
“For us as traditional businesses, there are actually a lot of obstacles,” she said.
