Weekly Business Insights from Top Ten Business Magazines | Week 287 | Shaping Section

Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 287 | March 10-16, 2023

Shaping Section : Ideas and forces shaping economies and industries

US Apparel Companies Can’t See a Future Without China

By Jeannette Neumann et al., | Bloomberg Businessweek | March 10, 2023 

Listen to the Extractive Summary of the Article

For American companies like Actively Black, buying from China has become more challenging in recent years because of increased tariffs, snarled supply chains, factory shutdowns under Beijing’s Covid Zero policy and rising geopolitical tensions that have forced America Inc. to contemplate the fallout from a possible invasion of Taiwan.

Those concerns have led to a surge in pledges by executives to reduce their reliance on Chinese suppliers. But quitting China isn’t easy, and most progress has been concentrated in industries such as semiconductors that US lawmakers consider vital to national security. Producers of lower-tech, lower-margin products such as clothing, shoes, housewares and luggage are finding that few factories outside China have the machinery or the skilled workforce to, for instance, sew what’s known as a six-needle, flat-seam stitch—needed for Actively Black gear like sports bras and shorts because it doesn’t chafe skin.

Since the 1990s, China has spent hundreds of billions of dollars transforming itself into the world’s premier location for manufacturing. Its factories have the machinery and expertise needed to produce quality products at a volume and pace that’s difficult to match. Along the 80-mile stretch from Shenzhen to Guangzhou, companies can weave, dye, sew, trim, label, and package anything from T-shirts to tuxedos. And China’s investment in highways, railroads, air hubs, and seaports has created a smooth path from factory gates to consumers worldwide.  Despite growing tensions, US-China trade continues to thrive. In 2022 the US imported $537 billion in goods from China, slightly below the record $539 billion in 2018.

China’s advantages are so great that some US companies that have tried to move away have returned at least a portion of their production there. While US lawmakers have a record of eventually reinstating lapsed tariff reductions, the uncertainty makes it more difficult for businesses to commit to leaving China.  And alternatives come with their own political and economic complexities.

And when companies move manufacturing out of China, they often end up working with Chinese-owned suppliers or sourcing components and materials from the country. The dominance of some Chinese suppliers can make it difficult to find alternatives.  Part of the difficulty is that many Chinese companies have set up shops abroad to diversify their own production and benefit from lower labor costs. 

3 key takeaways from the article

1. For American companies buying from China has become more challenging in recent years because of increased tariffs, snarled supply chains, factory shutdowns under Beijing’s Covid Zero policy, and rising geopolitical tensions that have forced America Inc. to contemplate the fallout from a possible invasion of Taiwan.
2. Those concerns have led to a surge in pledges by executives to reduce their reliance on Chinese suppliers. But quitting China isn’t easy. 
3. Since the 1990s, China has spent hundreds of billions of dollars transforming itself into the world’s premier location for manufacturing. Its factories have the machinery and expertise needed to produce quality products at a volume and pace that’s difficult to match. And China’s investment in highways, railroads, air hubs, and seaports has created a smooth path from factory gates to consumers worldwide.

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Topics:  Global Economy, Manufacturing, China, Supply Chain