General

According to the Huacheng Import and Export Data Observation Report, during the 5th China International Import Expo, the Li&Fung Research Center under the Feng Group officially released the latest edition of the Transnational Procurement Report (hereinafter referred to as the Report). The report points out that under the turbulent "new normal", Asia has competitive advantages in terms of labor force and operating costs, and has a complete regional supply chain, which can provide the flexibility and flexibility required for procurement. Therefore, Asia will remain a major production base for fashion products. As the world's largest exporter of textiles and clothing, China will continue to be an important textile supplier to Asian clothing exporting countries.

Qian Huimin, vice president of Li Feng Research Center of Feng's Group, said that in order to diversify risks, multinational procurement enterprises are continuing to diversify their procurement bases. Outside China, multinational procurement bases also have the trend of coexistence of diversification and centralization. The procurement mode of "China plus one" or "China plus many" will still dominate in the short term, which will bring huge opportunities to the whole Asia, according to the observation report of Huacheng Import and Export Data.

Turbulence has become the new normal, and the international trading system is showing a new dawn

The report reviews and prospects the development of global procurement and forecasts the situation of cross-border procurement in the next 12 to 18 months by virtue of the long-term insight of Feng Group into upstream and downstream industries of the supply chain and the professional tracking research of Li&Fung Research Center. The report covers 16 important producing countries, including China, a mature producing country, five strong rising stars in Southeast Asia (Cambodia, Indonesia, the Philippines, Thailand and Vietnam), India, Bangladesh and Pakistan in South and West Asia, and six emerging coastal producing countries in Türkiye and Latin America (Honduras, Nicaragua, El Salvador, Guatemala, Haiti and Mexico).

"This year is a year of extraordinary turbulence in the world situation. The negative impact of the COVID-19 has eased slightly, but the conflict between Russia and Ukraine has come unexpectedly. Traditional logistics channels have been disrupted, the prices of production and living materials have soared, and clothing, shoes and hats manufacturers have been under heavy pressure. In the coming years, uncertainty will become the new normal, and the risk of global economic recession will continue, bringing serious challenges to the global supply chain. Therefore, purchasing enterprises must survive in the turbulence Existence, seek stability in change. Increase the flexibility and adaptability of enterprises. " Zhang Jiamin, general manager of Li Feng Research Center of Feng's Group, said.

According to the Huacheng Import and Export Data Observation Report, at present, Sino US trade frictions cast a shadow on global production. However, in the context of the prevalence of trade protectionism and rising supply costs, the multilateral trading system has made continuous progress. In particular, on January 1 this year, the Regional Comprehensive Economic Partnership (RCEP), the world's largest regional free trade agreement, came into force. When all member countries completed the ratification process, the region covered by the agreement will become the world's largest free trade area in terms of gross domestic product, population and trade volume, and the intra regional trade volume will increase significantly, further enhancing the production strength of countries in the region. Bilateral free trade agreements between countries in the region are also in full swing. Outside the region, the United Kingdom launched the "Trade Plan for Developing Countries" in August this year to provide more trade preferences for developing countries, while the EU also restarted negotiations on free trade agreements with India. These efforts have raised new hopes for the reconstruction of the global free trade system.

In the past year, several bilateral/multilateral free trade agreements entered into force, promoting the construction of a comprehensive multilateral trading system. Important progress in trade agreements this year also includes: the China Cambodia Free Trade Agreement came into force on January 1; The India UAE Comprehensive Economic Partnership Agreement came into force on May 1; The Indo Pacific Economic Framework, led by the United States, was launched on May 23. Domestic policies of various countries have strengthened infrastructure construction, introduced tax relief and other preferential measures to enhance their position in the global supply chain. For example, China issued the National Highway Network Plan, which proposed that the total scale of national highways would reach 461000 kilometers by 2035, an increase of 79000 kilometers over the current one; Bangladesh will extend the 15% preferential corporate tax rate currently enjoyed by its textile industry for three fiscal years to strengthen the global competitiveness of "Made in Bangladesh"; The Philippines is preparing to establish a new "regional yarn production and innovation center" in the north of Luzon Island to promote textile R&D activities in the region.

China remains an important clothing procurement base

"In the first eight months of 2022, China still accounts for 25% of the U.S. textile and clothing imports, while China's investment in other procurement bases and exports of raw materials and machinery and equipment continue to increase, becoming an indispensable part of the clothing procurement supply chain," Qian Huimin said.

Qian Huimin said that in order to protect people's lives and health, China is one of the few countries that choose to strictly prevent epidemics and ensure production at the same time; Combined with the overall suppression of the United States from technology to exports, this year is a very difficult year for China. With regard to China's exports and overall economic performance, she pointed out that China has overcome the impact of the above negative external factors. This year's exports are expected to hit a new record high, fully reflecting the competitiveness and resilience of "Made in China". Looking forward to 2023, as the COVID-19 continues to be effectively controlled and the economic stabilization policy takes effect, China's domestic demand will continue to rise and drive the year-on-year growth of GDP to 5.0%.

Since the epidemic, the production and procurement costs have soared, putting pressure on the clothing and footwear supply chain. It is particularly noteworthy that the global cotton shortage has stimulated the rise of cotton prices, and the cotton price index climbed to a new 11 year high in early May 2022. Since then, cotton prices have declined steadily due to weakening global demand and rising production. To help low-income workers cope with rising living expenses, many garment producing countries have significantly raised the minimum wage.

According to the observation of Huacheng's import and export data, as of October 2022, 19 of the 23 garment producing countries monitored by the Li Feng Research Center of Feng's Group have raised the minimum wage, including Cambodia, China, Egypt, Guatemala, Haiti, Honduras, India, Indonesia, Kenya, Lesotho, Malaysia, Mauritius, Mexico, Nicaragua, Pakistan, the Philippines, Thailand Türkiye and Vietnam. Among them, Türkiye raised the minimum wage twice this year, 94.7% higher than last year's level, while Haiti raised the minimum wage set in 2019 by 37%.

In terms of currency, the Federal Reserve of the United States, in order to curb inflation, continued to tighten monetary policy, which gave birth to a strong dollar. The dollar index rose to a new 20 year high at the end of September. In the first eight months of 2022, Asian currencies depreciated significantly against the US dollar, including Türkiye lira (- 28.8%), Bangladesh taka (- 9.7%), Indian rupee (- 5.5%), Indonesian rupiah (- 3.9%), etc. Manufacturers have to face the cost pressure brought by the rising price of imported raw materials and more bargaining from buyers. The United States is currently conducting a quadrennial review of the 301 tariff on imported goods from China. Under this circumstance, many fashion enterprises are forced to continue to diversify their procurement bases.

"At the beginning of the Sino US economic and trade frictions in 2018, China accounted for about 37% of the U.S. textile and clothing imports. By 2021, this share will decline to 28%, and in the first eight months of 2022, it will further decline to 25%. The gap will be filled by other Asian countries, such as Vietnam and Bangladesh. Despite this, China still maintains its position as an important clothing procurement base, and at the same time continues to diversify its export market to enhance its ability to resist risks." Zhang Jiamin said.

Multinational procurement bases are diversified and centralized

However, at the same time, outside China, multinational procurement bases also have a trend of coexistence of diversification and centralization. Qian Huimin said: "According to the feedback of our group's procurement companies, in the process of moving their procurement sites from China to other regions in Asia, they are gradually shifting from the initial decentralized layout in many countries to the concentration in countries with stable political environment and more friendly business environment, so as to increase the stability of production and scale effect. Currently, Vietnam and Bangladesh are two popular choices. In the fiscal year 2021-2022, Bangladesh's total exports exceeded 50 billion US dollars This is the first time in the history of the country. "

With the easing of the COVID-19, the world has been reopened. Qian Huimin believes that this will not only help ease the bottleneck problem of the supply chain, but also drive retaliatory consumption in many countries. Since this year, the fashion retail market has enjoyed a prosperous sales. However, in the face of rising inflation, consumers will become cautious, and it is expected that the demand for fashion retail will also slow down, according to the observation report of Huacheng Import and Export Data.

Zhang Jiamin said that in the future, the global high inflation will lead to financial contraction, and the Russian Ukrainian conflict has heated up in recent months, the global economic growth will further slow down. It will take some time to effectively control the inflation level. Consumers will inevitably reduce unnecessary consumption, and enterprises will face the pressure of rising costs. Under the turbulent "new normal", the clothing supply chain needs to improve its speed, flexibility and robustness.