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Cambodia, Vietnam gaining from US-China trade war

by Apparel Resources News-Desk

1 week ago  |  3 mins   read

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Image Courtesy: industriall-union.org

With the trade war going on between the world’s two largest economies China and USA, many international brands are shifting production away from China and considering Cambodia as strong contender to become their next base for manufacturing of apparels and footwear products.

USA and China have been involved in a tit for tat trade war since July of this year as USA has imposed 25 per cent duties on Chinese imports worth US $ 16 billion. Affected products include car tires, furniture, wood products, handbags and suitcases.

A study conducted among the companies that procure from China, released by US Fashion Industry Association, revealed that 67 per cent of the companies are expected to reduce the amount (in terms of value and volume) they produce in China over the next two years.

Kaing Monika, Deputy Secretary General, Garment Manufacturers Association in Cambodia (GMAC) said, “The trade war will impact investors’ confidence in China and will make them consider re-locating to other countries in the region. Travel goods production should continue to exit China and be a growth opportunity for Cambodia.” He added that aside from the trade war, China’s rising labour costs and a more stringent enforcement of regulations, such as environment-related laws, will also prompt more and more factories to leave China, and Cambodia stands to benefit from this.

Companies are gauging how fast they can make changes to their sourcing practices. Footwear brands like Steve Madden have already started to shift their production facilities to Cambodia. About 15 per cent of the handbags will be procured from Cambodia this year with this percentage likely to double in 2019

Other companies such as Tapestry, the luxury company behind Coach and Kate Spade handbags, has also reduced its’ operations in China, while increasing its’ production in Southeast Asia, especially in Vietnam. In addition to this, Vera Bradley, an American luggage and handbag design company are also looking at shifting production away from China into Cambodia and Vietnam.

As per the statistics revealed by Cambodia’s Ministry of Commerce, due to this shift, exports of Cambodian garment and footwear products increased by 9.3 percent during the first half of the year reaching US $ 3.7 billion in value.