Where does the Chinese footwear industry stand?

The "Made in China" label once symbolized global manufacturing dominance, but as costs rose and the country's manufacturing sector evolved, labor-intensive industries like footwear, textiles, and garments began to shift. These industries have largely moved to Southeast Asian countries such as Vietnam, Thailand, Cambodia, and Laos. However, this transition is far from smooth. Challenges include the maturity of local infrastructure—both soft and hard—and the stability of political and economic policies. The question of where "Made in China" should go next remains a complex issue for industry leaders. As global economic integration continues, the manufacturing landscape constantly shifts. The footwear industry, highly sensitive to cost, has seen multiple relocations since the 1960s, moving from North America to China and South America, then to Europe, Japan, South Korea, and eventually to the Pearl River Delta in mainland China. In recent decades, some Taiwanese companies have also relocated parts of their production to Southeast Asia. By the early 2000s, rising manufacturing costs in the Pearl River Delta prompted many foreign shoe companies to move operations to Vietnam, India, and Bangladesh. Some companies also shifted production within China, creating patterns like "Southern shoes moving north and eastern shoes moving west." For instance, Baoshen Industrial, which produces shoes for Nike and Adidas, expanded its operations into central and western Chinese provinces while also increasing its presence in Vietnam and Indonesia. In 2012 alone, 51 production lines were shut down in mainland China, signaling a significant reduction in the region’s manufacturing capacity. Similarly, Wanbang Footwear, a Taiwanese company that produced Adidas shoes, moved its operations to India. Meanwhile, Brazilian firm Panomon transferred part of its Dongguan-based business to Sichuan and Qingdao, establishing a new production line in Chongqing. Zhou Shizheng, executive director of the China Institute of International Trade, described the fate of low-cost OEM products like footwear as one of “helpless cancellation.” He believes that traditional processing trade has reached the end of its historical role, with primary manufacturing destined to decline. In the U.S., for example, shoe production dropped from 53 pairs per person in 1976 to just 1.5 by 2006, effectively ending domestic manufacturing. China’s low-end footwear industry faces a similar fate. While it was once the world’s largest producer, the industry is now diversifying into Southeast Asia. Data shows that wages for Chinese shoe workers increased nearly three and a half times between 2003 and 2013, while the RMB appreciated over 30% against the dollar. With rising costs, profit margins have shrunk significantly. According to the Asian Footwear Association, Southeast Asian countries have taken about 30% of China’s orders since the 2008 financial crisis. If this trend continues, many coastal factories could be forced to close within the next 10 years, affecting around 19 million workers. However, relocation is not without challenges. Industrial clusters take time to develop, and political instability, strikes, and limited local workforce skills in some Southeast Asian countries complicate the process. Huajian Group, one of China’s largest women’s shoe manufacturers, opened a factory in Vietnam to avoid trade tensions. However, issues like underdeveloped local production capabilities and worker strikes led to the plant’s closure. Similarly, IMC’s Indian facility faced difficulties due to inadequate infrastructure and a lack of skilled labor. Frequent labor strikes in countries like Cambodia have disrupted production, forcing factories to raise wages to calm unrest. Wu Zhenchang, chairman of Guangzhou Genesis Footwear, noted that while Southeast Asia offers lower labor costs, the risks are high and unpredictable. He has considered moving operations there but remains cautious due to political instability and labor disputes. Li Peng, secretary-general of the Asian Footwear Association, argues that China still has advantages in terms of investment environment and workforce quality. While some Chinese factories face downtime, these issues are often internal rather than external. In contrast, foreign companies in Southeast Asia may suffer more from strikes or political events. Despite these challenges, many companies continue to shift production to Southeast Asia due to favorable tax policies, lower costs, and improving supply chains. For example, Nike initially imported 98% of its raw materials from abroad, but now only 56% need to be imported. This shift has helped Vietnamese footwear production grow rapidly, with exports reaching $8.4 billion in 2013. While recent incidents in Vietnam have caused temporary disruptions, the long-term trend of industrial relocation seems irreversible. Many companies remain cautious but continue to explore options in both Southeast Asia and China’s central and western regions, where labor costs are competitive and conditions are more stable. Emerging markets also pose risks for Chinese enterprises expanding globally, especially in the home appliance sector. While many companies have started with emerging markets, rising risks challenge their strategies. Overall, the global manufacturing landscape continues to evolve, driven by cost, policy, and market dynamics.

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