Europe and the US can keep whipping themselves into a frenzy and demand the Chinese write off their debts. Or they can trust the remorseless logic of a falling workforce and let nature put China’s export prices up a great deal faster. Either way, a China cost hike is on the cards, believes Mike Flanagan.
Predictions are ten-a-penny in the garment trade. But here’s one of the very, very few that’s guaranteed to be accurate: In 2016, the number of working-age Chinese will start falling. It will carry on falling for at least the next decade.
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And a prediction that’s 99.9% likely to be accurate: The consequences of that simple demographic fact are being felt by our industry right now. They’re far more important than any amount of squabbling about currencies or VAT rebates.
Every single Chinese person who’ll be 16 or over in 2016 has already been born. And there are fewer of them than there were a decade ago.
So what about the inexhaustible supply of Chinese who’ll work for nothing has fuelled every demand for trade barriers for 50 years?
It’s been a myth since China initiated the One Child Policy in 1978 – and anyone who’s looked at the country’s population statistics has known it since 1999.
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By GlobalDataWhat few people predicted, though, was the pace and resilience of China’s economic growth, and the speed that China’s factories have mopped up the pool of underemployed peasants that have terrified the country’s rulers since the Communist party came to power in 1949.
Garment industry growth
Amazingly, employment in China’s garment industry grew even during the 2009 recession.
In November 2009, the industry employed 4,074,000 people, compared to 3,795,000 a year earlier (though jobs in the country’s spinning and weaving industry did suffer a small fall), as its sales grew even though exports stalled.
And we’re now seeing things we’d once have thought went on only in the West:
• In Guangdong, there are more and more reports of illegal immigrants from Vietnam and Pakistan being trafficked by criminal gangs to work in factories.
• In early March, Guangdong province announced its minimum wages would go up an average of 21.1% from May: a few days earlier, Fujian province said its minimum wage would go up 24% from 1 April.
• China’s textile industry, in its annual report to the Chinese People’s Political Consultative Conference, began to fret about the need for more subsidies if it was to keep its competitive edge.
Of course, we’ve sort of been here before.
In 2007 China started increasing minimum wages and observers started predicting the imminent collapse of its garment exports. That just didn’t happen: whether through nimble management or hidden subsidies, the growth in China’s share of the world garment trade merely slowed.
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