China’s cheap goods era over
The era of cheap products from China is coming to an end, one of the biggest suppliers of Chinese goods to western retailers warned on Thursday.
Li & Fung, which supplies companies like Walmart and Gap of the US and Debenhams of the UK, said “a new era in sourcing with higher prices” had begun as manufacturers pass on the rising costs of raw materials and Chinese labour to customers.
The Hong Kong-based consumer goods sourcing and logistics company on Thursday reported record annual profits. But Bruce Rockowitz, president of Li & Fung Trading, said: “The biggest topic on the minds of everyone in this business is that higher prices are really here to stay. At this point, retailers are not sure what they can pass on to consumers and what they cannot.”
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Higher labour costs in China have prompted Li & Fung to move clothing production to lower-wage countries like Bangladesh, Vietnam and Indonesia. The company said that China now accounted for only 25 per cent of Li & Fung’s supplies of clothing as Bangladesh and Vietnam got more of its business.
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