Major Japanese apparel manufacturers are shifting more of their overseas production from China due to China’s rising labour costs and zero-Covid policy chip away at its dominance, media reported.
Moreover, amid a depreciating yen and rising costs of raw materials, apparel companies are using every available method to lower costs.
The Regional Comprehensive Economic Partnership (RCEP), the Asia-Pacific trade deal that came into effect in January, has given companies a new lifeline.
Major apparel companies, such as Adastria, Aoyama Trading and suppliers of Uniqlo, are moving some of their production bases to RCEP member countries in Southeast Asia – like Vietnam, Cambodia – taking advantage of reductions in or exemptions from textile import tariffs.
Adastria has increased production in Cambodia and Vietnam this year.
Moreover, the company also plans to expand production areas to include Indonesia, Bangladesh, and other countries, and increase production in Southeast Asia to 50% by the fiscal year ending February 2026.
Of the company’s clothing imported into Japan, the number of items produced in China fell to 59% in 2021, down from 81% a decade earlier.
Meanwhile, Aoyama Trading, a major menswear company, is expanding its product procurement from Indonesia and Vietnam.
Matsuoka Corporation, a contract manufacturer for Uniqlo subsidiary Fast Retailing, produced 50% of its clothing, by sales, in China in the fiscal year ending in March 2022, but plans to decrease that to 29% by fiscal 2025.
Over the same period, it will increase production in Bangladesh to 34% from 28% and in Vietnam to 28% from 16%.
The company is also increasing production capacity in the two countries, having committed $64 million to invest in new factories over the two-year period ending in March 2023.
According to the Japan External Trade Organization, the average monthly salary of a factory worker in Guangzhou, China, recently reached about $670, greatly exceeding the approximately $270 monthly salary in Vietnam’s Ho Chi Minh City and the $120 figure in Dhaka, Bangladesh.
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