Bring In, Go Up, Go West, Go Out: Upgrading, Regionalisation and Delocalisation in China’s Apparel Production Networks

Abstract

The rise of China’s export-oriented apparel industry since the 1990s has been driven largely by global sourcing practices intent on capturing the cost advantages of a development model predicated, in part, on unskilled or semi-skilled migratory labour flows, linking western and central labour pools to coastal production sites. Until recently, the dominance of this model has fuelled growth in low-wage employment in the coastal regions and has provided few opportunities for economic and social upgrading. Since the early 2000s, coastal factories have increasingly had to confront difficulties generated by the increasing social and economic costs of this regionally concentrated low wage growth model. Specifically, this paper focuses on the role of the apparel industry in this process. It documents the major changes in organisation and geographies of economic activity in the industry, and demonstrates how the central and local state, domestic and international capital and Chinese and other Asian workers are shaping the changing organisation and geography of China’s apparel industry. The paper focuses particularly on firm strategies and state policies that have arisen in response to pressure to increase wages from workers, rising materials and energy costs and competition from other low-cost producers in Asia.

Key Words:

• China
• apparel
• upgrading
• relocation
• delocalisation
• Global Production Chains Global Value Chains

Acknowledgements

We would like to thank Jennifer Bair, Robert Begg, Adrian Smith and Tu Lan for their careful review and recommendations on an earlier draft of this paper and three anonymous reviewers for their helpful suggestions. Colleagues in China assisted in fieldwork and interviews in 2011 and 2012. We would like to thank: Hua Shan (the office director from the China Textile Planning Institute of Construction), Jian Zheng (project manager from the China National Textile and Apparel Council), Dr. Jici Wang from Peking University, Dr Jiang Ningchuan from Chengdu Textile College, Allan Wong of Li & Fung, Stephen Frost and Jacky Wu of CSR Asia, Gu Qiang of the NDRC, Zhang Xubiao of ILO China, Benjamin Wong of Euro RSCG and the China Labour Monitor. This research was supported in part by the National Science Foundation Grant Award No. BCS 0551085, the Carolina Asia Center Grier Woods China Fellowship, and by the Capturing the Gains Research Network on Economic and Social Upgrading in Global Production Networks (University of Manchester and UK DFID). We also acknowledge the support of Dr Canfei He (Peking University) and the Natural Science Foundation of China (NSFC) (41071075). The authors are responsible for all errors and interpretations.

Notes

1. ¹ The maps in the paper are based on firm-level data derived from the annual China Industry Economy Statistical Yearbook.

2. ² Longitudinal analysis of industrial employment in textiles and apparel has to take into account the administrative change between 1988 and 2007 when Chongqing was upgraded to a centrally administered municipality in 1997, adding an additional administrative region to the 30 spatial units that existed before 1997.

3. ³ Go West here refers to one general tendency to expand or relocate from the Pearl River Delta (PRD), Yangtze River Delta (YRD) and Shandong Province to other lower cost regions, including intra-provincial shifting of production (e.g. to the outskirts of Guandong and west across the Pearl River). This policy also covers the subcontracting and outsourcing of production to the informal sector and SMEs in less-developed areas inside China as firms attempt to lower their costs. Also within what we refer to as Go West the specific locational patterns of individual firms may, of course, be more complex. Besides these general trends, there are also reasons for factories in PRD to move to YRD or Jiangxi (Go North), while some factories prefer to relocate within or near to their existing locations.

4. ⁴ China’s CSR standard, CSC9000T, so far only applies to the textile and apparel industry (hence the ‘T’).

5. ⁵ The government has also actively encouraged and, in some cases, compelled textile and apparel enterprises to reduce their operating costs and their environmental impacts by moving from polluted coastal provinces to inland areas closer to their cotton and wool input suppliers and to extensive and low-cost regional labour markets. Central government inducements have been particularly strong in urging textile manufacturers to move to Inner Mongolia, Xinjiang, Ningxia and Qinghai, silk production to Sichuan, Guangxi and Yunnan, and fibre-dependent industries to Henan and Hubei. Large successful export-oriented apparel firms were also targeted in this endeavour. In 2008, the China Chamber of Commerce for Importers and Exporters of Textiles organised a trip to visit the Western provinces for operators of more than 120 export-oriented textile and garment enterprises, including the firms Silique from Guangdong, Shenda from Shanghai and Weiqiao from Shandong (China Wool Textile Association, April 2008), “Great Industrial Relocation.” Accessed August, 10 2011. http://www.cwta.org.cn/news080423e.htm.

6. ⁶ The rise of China’s domestic market for manufactured goods is a crucial driver of many of these changes, allowing firms to manage export market risk by leveraging domestic markets, by establishing domestic brands for that market, and for selling into a local market that saves on the logistical and tariff costs of increasingly competitive and low-cost export markets (see Henderson and Nadvi 2011; Kaplinsky and Farooki 2010).

7. ⁷ See Pickles and Woods (1989) for examples of an earlier round of the Go Out policy pursued by Taiwan enterprises in the 1970s and 1980s.

8. ⁸ “According to the CNTAC, there were 48 major apparel clusters in China. Each of these clusters specialises in the production on one or more textile or apparel products … [as of 2005] All of these [major] clusters are located along the coastal provinces, namely Zhejiang, Guangdong, Jiangsu, Fujian, Shangdong and Hebei” (Li & Fung 2006). As of 2009, the number of firms with revenue 5 million yuan or greater is 18,265 (apparel).