China is feeling the impact of rising labor costs as U.S. footwear firms shift sourcing to other countries.
According to a report issue Monday by UBM Global Trade’s Journal of Commerce, China’s share of footwear imports to the U.S. dropped to 73 percent in the first quarter of 2011, from 75 percent in the first quarter of 2010.
And while U.S. foreign demand for footwear in 2010 grew 16 percent year-over-year, Vietnam and Indonesia saw higher rates of growth compared with China, indicating sourcing shifts to those markets, the study found.
China’s share of U.S. imports is also waning in the labor-intensive apparel categories. In menswear, it dropped to 22 percent in the first quarter of 2011, from 25 percent in the first quarter of 2010; while women’s and infants’ wear decreased to 31 percent from 34 percent.
“The results of this analysis underline the change of trend direction in U.S. imports of footwear and apparel from China, from upward to flat to downward, as manufacturing firms flee the country on rising wages,” said Mario Moreno, economist for The Journal of Commerce.
To make matters worse, the strengthening of China’s currency is also reducing already tight profit margins for manufacturers of low-value goods such as footwear and apparel.
“As a result, many firms are moving their manufacturing facilities of footwear and apparel out of China to southeast Asia, the India subcontinent and Central America,” Moreno said.
In the case of menswear, the Indian subcontinent, led by Bangladesh; and Central America, led by Honduras, are the most popular sourcing bases. According to the study, menswear imports from India increased by 22 percent in the first quarter of 2011, and those from Central America surged 57 percent, while imports from China fell by 1 percent.
Still, China remains by far the largest supplier of containerized goods to the U.S. First-quarter imports from China accounted for 45 percent of overall U.S. imports, a drop of 1 percentage point from the first quarter of 2010, according to JOC data.
The second-largest sourcing country for container cargo was South Korea, which boasted a 4 percent share, followed by Japan with a 3.7 percent share.