We’ve learned a lot this week about Asia & the wealth of production options that exist in the region.  We’ve also learned that this is an area of such extreme poverty living along side extreme wealth.  If you’ve every travelled to Hong Kong, & driven only 30 minutes North, you’ll understand both extremes with your own eyes.  This brings up the question:  Is China Developed or Developing or Un-Developed?

Read the three short articles below, or find your own articles to add to the mix & answer the question at hand:  Is China developed, developing or un-developed?

Import/Export

Asia-

In terms of land mass & overall population, Asia is the largest continent on the planet.  To further complicate matters, all forms of government exist in Asia simultaneously. Youll also see this region referred to as the Pacific Rim from time to time.

Though the civilization in is ancient, the industrial revolution & the resulting economic impact as well as the unavoidable societal shifts that come along with advancement took much longer to take hold in Asia than in other parts of the world.  Regardless of how long the onslaught of industrialization in Asia took, the fact is that once the advancements began, the changes were swift & widespread.

I have a theory about this why this continent embraced the industrial revolution so slowly.  Population & landmass certainly had a little bit to do with the slow progress. However, I contend that the slow progress had a great deal to do with a culture that is ruled by & celebratory of the elder aged citizens.  Most movements on in society begin within the youthful demographics who are yet to be set in their ways or lack the practice of tradition that comes with age & time. In Asia, there is a reverence for the aged.  They are celebrated as pinnacles of society & respected in ways that other societies simply dont do.  As a result, the culture is guided & shaped by the ways of the older generations. Regardless of whether this or some other more scholarly explanation is the actual reason, the fact is that Asia has caught on, caught up & arguably surpassed he West in technological advancements.

Asia has its share of cooperation treaties just like those weve spoken about in the other regions of the planet.  The Asia-Pacific Economics Cooperation (APEC) was one of the first in the region.  Established in 1989, APEC serves as a forum for facilitating economic growth, cooperation, trade & investment in the Asia-Pacific region.  Similar in structure & impact to the OAS in that there are not binding resolutions reached, APEC is merely a strongly suggested framework that is aims at fostering one ultimate goal:  Free Trade within the region.

There can not be any conversation about the region without one country coming into the conversation within moments:  China

China is the 4thlargest trading nation on the planet, behind the U.S., Japan & Germany (in that order).  The buying power of China, may be 4th in rank, however, it is destined to rise in rank as the country becomes more developed.  There is a great deal of debate about the development status of China.  Depending upon who you trust, what you read & what you believe, as well as which definition of developed you chose to accept, there is a serious argument to be had simultaneously for & against either side of the issue.  Read the following quick article to see what we are saying first hand:

https://chinapower.csis.org/is-china-a-developed-country/ (Links to an external site.)

Of all the regions studied thus far in class, Asia is the poorest, especially when looked at from a financial resources per capita basis.  Considering that the region is also one of the most productive manufacturing regions on the planet, it is obviously the population that is keeping it further down the rankings charts than it perhaps deserves.  Our assignment this week will deal with this area.

The influx of the textile industry into Asia was the gateway to the economic development the region is mastering today.  It all began immediately following WWII in Japan, when it became a rapidly developing manufacturing based country.  Both Germany & Japan developed extremely rapidly following WWII.

The article that follows goes into a concise 3 point explanation of the reasons for this rapid ascension from complete & utter physical, economic & psychological devastation to top 3 world economies in literally 3 years.

Why Germany & Japan developed so rapidly following WWII:

https://www.theglobalist.com/germany-and-japan-a-comeback-story/ (Links to an external site.)

I would also like to propose the following factor in the rapid development process.  Neither Germany nor Japan were permitted to have a full-fledged military, as part of the post WWII settlement treaties.  By full-fledged, I mean that they are restricted to activity within their own borders or in efforts on behalf of any military pact to which the countries are a party.  For instance, Germany is permitted to have its Army act on behalf of NATO activities.  However, the German Army cannot act in an aggressive manner towards building a nation beyond its own borders.  If attacked, the Army is allowed to defend, but to grow Germany beyond its borders, the Army would be in violation of global treaty.  The same is true in Japan as well.

As a result of the ever-increasing development status of Japan, by the 1970s, prices for Japanese made products soon rose to levels that made them too expensive to widely used for mass market production.  The textile market, which was the foundation for the foundation for the economic comeback Japan enjoyed had to move elsewhere.

The textile market soon had to find a new home in the rest of Asia, predominantly Hong Kong, Taiwan & South Korea. This move simultaneously conflicted with the MFA in the U.S. & U.K., which was a major reason for this Agreements ultimate demise.  Remember the MFA?

During the 1980s, when textile production in Asia peaked, Hong Kong, Taiwan & South Korea were known as the Big Three & supplied almost 30% of the worlds textiles.  This is an astoundingly large figure these three relatively small countries had nearly 1/3 of the production stronghold on a product that was an essential component of the very thread (pun not intended) of societies globally.

As costs increased in the Big Three, China emerged & made it the Big Four, but soon, Pakistan, India, Indonesia, Philippines & Thailand also gained prominence.  This was the beginning of the full region gaining economic might, not only the Big Four.  Soon, Sri Lanka, Bangladesh & Macau entered the fray.

Fabric & garments were sourced in the lowest cost country possible. Wherever a lower price could be won, the market entered.  As soon as a lesser priced option emerged, the market again followed, abandoning the previously favored country. This constant shift of labor to the lowest priced country was referred to by economists as the Race to the Bottom.

The current trend in many large companies is to limit the number of countries used to source, as the costs of maintaining a broad production base is too high.  Once legendary garment company, Liz Claiborne a few years before it closed in 2006, sourced in some 60 countries.  Towards the end of the company, Liz Claiborne reduced its manufacturing base to 30 countries & was making moves towards reducing it to 20.

A little more about Liz Claiborne:

https://www.businessinsider.com.au/liz-claiborne-disaster-timeline-fortune-500-to-failure-2012-7#in-1976-liz-claiborne-was-founded-by-four-people-it-was-quickly-very-successful-1 (Links to an external site.)

This move to reduce the scope of the production base & focus narrower & deeper with this facet of corporate operations is not uncommon. Companies like Zara have built their operations as such from the beginning to great levels of success.  Its a direct reflection of the sheer cost of logistics due in no small part to the cost of crude oil.

Following the founding of the World Trade Organization, quota restrictions were no longer a factor in sourcing production.  Sourcing strategies took on a marked change in what was used to determine the best fit between company & producer.  The new areas of comparison are:

Tariff schedules- What are the duties & tariffs on the product categories you are producing?
Social responsibility- Are goods from that country allowed to be imported into your country (for instance, in the U.S., goods from Myanmar are banned & goods from Cambodia enjoy social approval due to the desire to support the economic recovery there)?
Security of shipping- Will you get your goods out of the country or is there a danger of piracy like in Somalia?
A countrys overall business climate- Is doing business in the country safe, convenient & predictable?
Infrastructure conditions & logistics- Do the physical conditions in the country allow for ease of operations?
Proximity & access to major import markets- Difficulty getting goods to a port of export or raw materials from a port of import can offset cost savings if the factory is too remote?
Availability of low-cost, skilled workers- Are there workers in the country to do what you need to have done?
Effective management- Remember Mexico??? If local management cannot do the job, you will have to bear the expense of staffing a factorys front office.
Appropriateness of product quality- Can the factory do what you need to do at the level you need to deliver?
Access to reliable supply of competitively priced materials- Can you buy raw materials locally, or do you have to pay the costs of importing them to the factory?
Reliability of delivery according to specifications- Can the factory deliver on time, as promised?
Levels of supplier service- Does the factory deliver what you need at the level you need it?
Free Trade agreements that are now being negotiated worldwide-  Can you be an early entrant into a market so that when a new trade agreement is ratified you will have competitive, early mover advantage?
Once quota was eliminated, the list of questions above had to be constantly answered by your sourcing team.  The role of sourcing teams became vital to a companys future competitive edge. Today, as Asia is growing in price & the to pressures of Globalization heavily pressuring the product mix of modern companies, the sourcing functions are growing in importance daily.  Now you can understand why sourcing teams & logistics teams are so vital to a companys success & make the money they do.  If you want to make a lot of money fresh out of school & have a career where you have to be up on every world issue, every weather system & abreast of every international conflict both current & future, logistics is for you!

Now, lets look at the region country by country (or at least region by region)

Oceania-

This area consists of Australia & New Zealand.  The region was first settled by British prisoners & outcast in the late 1700s following the  loss of the American Colonies in 1776.  Japan was the 1stcountry to make serious financial investments in the region, thus there are not only a lot of Japanese in the region, they have a very friendly diplomatic & business relationship with the Japanese in general.

The countries in this region are extremely tapped in to the Western pop culture in general.  The issue with the area from a fashion standpoint is the opposite seasonality of the region with the balance of the fashion producing world.  It makes it very difficult to do business with the region as an American or European fashion company.  Do you ship them first or later?  If you ship them first, your business model must adapt.  If you ship them later, they already see the fashions as dated.  If you produce a separate collection for them, their volume is so low that it isnt economically feasible.  The usual solution ship them later & theyll deal

As far as fashion goes, the only significant contribution by Oceania, aside from UGG Australia, it the wool produced by Australian Sheep.  Australian wool was actually banned from being imported into the U.S. until just recently (2017).  Im not certain what changed to allow the ban to be lifted, but if you read PETA statements, their stance is that it ought to be banned 100% at all times for all uses.

New Zealand has found a niche market in buying end of the season closeouts from the West & consolidating them in warehouses to be sold as current, thus recouping the difference as profit.  Also, due to the remote locations of the countries in the region, they are very internet savvy. Fashion, of course, is not as commonly sought on-line due to the sizing concerns.

East Asia-

This are is the most diverse when all the countries are looked on an overview basis.  The region is a major supplier of textiles & garments with textiles being mostly produced in Japan, South Korea & Taiwan, garments coming from Hong Kong & Taiwan & China being a major supplier of both textiles & garments (along with nearly every other imaginable product produced on earth!).

Even though these countries still produce tremendous amounts of textiles, the price has moved their focus out of the mass market & into the highly technical realm.  Specialty textiles can command higher prices as they are specialized, technologically advanced & in demand for niche markets.  Therefore, countries with production capabilities, but with slightly lower labor markets than the West will succeed, as will countries with production capabilities with equal labor prices, but offer some competitive edge.  Japan & South Korea are in the later category & Taiwan is in the former.

Japan-

As we mentioned earlier, Japan moved rapidly from developing to developed status. Japans fashion importance is multi-faceted.  While they have a significant fashion company presence, their influence as a stand-alone fashion center has been one of an on again off again nature.  Tokyo used to have its own spot on the international fashion calendar, but today, Im not even certain it is even still an organized week.  However, the importance of Japanese designers on the worlds stage is sizeable & well recognized.  Designers like Kenzo, Rei Kawakubo for Comme des Garcons, Issey Miyake, Matsuda & others.

The main influence Japan has on the world of fashion is not on the creation, but rather the consumption of it.  The Japanese population consumes an astounding quantity of luxury fashion goods & the trend is only growing.  See the following article in the Business of Fashion:

https://www.businessoffashion.com/articles/global-currents/japans-luxury-market-enters-a-new-era (Links to an external site.)

As you can see from the article, the market for luxury goods in Japan is on the rise & will be so for the foreseeable future.  There are whole businesses in Japan around fashion tourism with luxury shopping being the main activity throughout the trip.  The Ala Moana Mall in Honolulu, HI has set itself up as an Asian friendly environment, as it is the closest U.S. shopping center to this lucrative market. Look at the language settings in the upper left hand corner of the malls website:

https://www.alamoanacenter.com/en.html (Links to an external site.)

Of the 5 languages for the site, only one is English & the other 4 are Asian.

There is still a massive supply complex for fashion textiles in Japan, however. The fabrics tend to be quite pricey, but at the same time, the quality is unparalleled & unlike any other in the world.  If you want to see stunning textiles, in the most exotic possible designs, just visit a Japanese fabric company.  Stunning

South Korea-

Korea shares many of the same fashion characteristics as Japan does when it comes to fashion fanaticism.  However, the Korean fashion design scene is on the upswing, versus the scene being one of memory only in Japan.  There are some truly influential designers working in Korea.  Some of them show here in New York during NYFW-  Siki Im & General Idea immediately come to mind.

Following the Korean War in the 1950s, South Korea followed a system of economic development known as syncretic capitalism.  The government put out an offer to any companies who would be willing to come to Korea to produce their goods that if they come, the government would build the factories free of charge & provide all sorts of other incentives as long as they agreed to employ Korean workers & when they wanted to leave the country, the factory remained behind.  Many companies took advantage of this offer, several electronics companies & car companies amongst them.  In the 70s & 80s, when the prices were more lucrative elsewhere, the companies left for cheaper pastures, leaving behind a trained workforce & a vacuum of opportunity in the domestic market.  Thus companies like Daewoo, Hyundai, LG, Samsung & Kia were born.

Today, Korea leads the world in the production of high-tech cellulosic textiles.  If you own an umbrella or a raincoat, or a high quality suit with a lining you are wearing/using Korean textiles.

Taiwan-

Taiwan is a major supplier of man-made fibers, fabrics & yarns to the world.  It was ranked 7th in the world in 2017, which is down quite a bit from its number 2 rank only 15 years earlier, so its strong, but fading.  See the chart below for a full comparison of the top 10 in the world in U.S. dollars of textile output.

top textile producing countries

Source:

https://www.statista.com/statistics/236397/value-of-the-leading-global-textile-exporters-by-country/ (Links to an external site.)

The unusual situation when speaking about Taiwan is that it is not an official country.  It is a (former??) territory of China & still considered as such by China.  The rest of the world doesnt see it that way, however, & counts Taiwan as a separate, sovereign nation.  They have their own elections, their own military, their own taxes, etc., but ask any Chinese person if Taiwan is part of China or separate, they will say part of China.  As any Taiwanese citizen & they will say just the opposite.  As a result, the U.S. will not normalize relations with Taiwan for fear of stepping on Chinas diplomatic toes.  The WTO tracks figures for China & Taiwan completely separately.  Its all very confusing

Hong Kong-

Its proximity to China made Hong Kong a production gold mine as goods could be produced in a very advanced country with modern technology & then have certain parts of the cycle outsourced to China with very little travel expense & time lost. This was done both legally & illegally. Illegal transshipment ran rampant for years with Hong Kong as its base of operations.  The fact that Hong Kong enjoyed duty free status with the bulk of the planet until it was once again returned to Chinese rule from the British in 1999, made this practice commonplace.

Today, Hong Kong has priced itself nearly completely out of the market for mass production of garments.  It is now the center of Asian banking & serves as a base of operations for many companies that have production business in mainland China, especially in the Southern Chinese regions.  The predominance of English speaking citizens also contribute greatly to Hong Kongs success in doing business with the West.

The biggest & most influential garment company in Hong Kong is Li & Fung.  While they dont have a brand of their own, they instead manufacture for nearly every major fashion brand on the planet.  They source on behalf of their client companies, functioning as sourcing departments for hire.  They are like contract sourcers.  Meaning, you have a product to be made, come to Li & Fung & theyll figure out how to get it for you at your desired price, then deliver finished goods to you at the precise moment you need it, for a package price.  Your costs?  Only the costs of the final products.  You dont have to hire the sourcing teams, the technical design teams, speculate on fabric, along with all the production personnel that such work requires basically, you design an item & then order it, waiting for the finished units to arrive. Convenient, eh?  Apparently, a lot of companies agree, as Li & Fung did $16.2 billion in sales in 2016 via their massive sourcing network in some 40 countries.  They have a showroom in NY City that spans three full floors of the inconic Empire State Building & literally, every single designer or label you can think of has products in that showroom from Marc Jacobs to Calvin Klein, or from Target to GAP.

Macau-

Set up much the same way as Hong Kong for production but was settled by the Portuguese rather than the British as was the case in India & Hong Kong.

Now the Big Kahuna

China-

China is one of the few countries left in the region that produce both textiles & garments.  In fact, its not just garments & textiles that are produced in China, but rather every single category of goods one can imagine.  From micro-computer chips to massive ocean-going ships, China supplies the world with stuff.  In fact, China is believed by some to be on the verge of producing more goods than the world can consume in a timely manner.  If youve ever been to Chinas manufacturing regions, its not hard to imagine this being true!

China is thought of as a recent player in the trade game.  Reality is, the 1st trade between the U.S. & China was in 1785 when a ship carrying Chinese made goods arrived in New  York with tea, porcelain dolls & 3,200 pounds of Nankeen (a cotton fabric used for mens trousers).  From the 1700s until the 1970s trade between the two countries was arguably non-existent.  It wasnt until U.S. President Richard Nixon & Chinese President Deng Xiaoping began speaking that this changed.

In 1978, under Deng Xiaopings leadership, China began a system of government called socialist-capitalist where certain free enterprise industries were allowed to access the economy & sell goods for a profit.  This was a marked change from the previous economic reality where China was being run predominantly as a Communist nation.  Thus the reason for their relative global isolation. Nixon saw China as a vital component of the new economy that was developing (a future of globalization) & Deng Xiaoping saw the opportunity for China to supply the U.S. with the goods their economy so craves.  It was a brilliant moment in history upon which each party benefitted.

As time has developed, China has become not only the supplier to the world but has developed into a formidable consuming nation as well. In 2018, China ranked 3rdin overall trade of goods & services with a total of $4.342 trillion in total value. They ranked roughly equal to the U.S. in trade of physical goods, but the U.S. majorly edged them out in services.

2018 top 20 trade countries

South East Asia-

Nations in this region formed the ASEAN- Association of South East Asian Nations in order to enhance trade within its 10 member nations.  Terrorist activities are seriously hampering this regions development on the world stage mostly because of one country, Indonesia, which has a very large, liberal Muslim population Liberal Muslims???… now you can see why there are terrorist issues in the country.  Liberal & Muslim are not two words the fundamentalist factions in the Muslim populations like to see used in unison.

Member Nations of this region include:

Singapore-

A very small, but very wealthy island nation that has successfully set itself up as the banking center of Asia.  In 2003, the U.S. negotiated a very strong agreement which dealt with e-commerce, intellectual property, transparency & customs issues in Singapore & therefore many Western companies have chosen Singapore as their base of operations.

Philippines-

A once mighty manufacturing country that has suffered from internal conflict.  Now, its a mere shadow of what it once was on the manufacturing front.

Indonesia-

The worlds 3rdlargest Democracy (after the U.S. & India) that boasts a great network of textile producers as well as finished goods factories, though they are becoming aged & will need to be improved upon to hope to keep pace in the production race.

South China Peninsula-

This region is exotic & Western friendly, but has had many disruptions due to some very brutal series of war & military conflicts.

Member Nations:

Thailand-

Thailand is the only country in region to have never been taken over by a European occupying force.  They boast a free enterprise economy & are capable of performing all aspects of garment manufacturing.

Vietnam-

Vietnam established a sizeable garment manufacturing ability during only the last 15 years & currently is often times ranked inside the top 10 largest apparel exporters in the world.

Cambodia-

Cambodia has been steadily growing its market share in garment manufacturing presence since the 1990s.

South Asia-

Sri Lanka-

Formerly known as Ceylon, Sri Lanka boasts over 300,000 jobs in the apparel industry.  The largest drawback with Sri Lanka is that there are no important textile manufactures located in the local markets.  Therefore, EVERYTHING has to be imported.  Additionally, there is an average 90 turn time on finished garments (against the normal lead in more advanced countries of only 60 days.

India-

India has a population of over 1 Billion people & growing at 2% per year.  The populations is mostly fluent in English due to the long occupation by the British, so now the Americans are going there to produce due to the ease of communication.  India has a rather developed supply network, as well as a highly developed internal fashion complex.  India has a full week of fashion shows on their calendar along with several break-out stars that have made a great run for Western legitimacy (Naeem Khan, Falguni & Shane Peacock, Anish Aurora, among a growing list of others).

No discussion of India would be complete without a discussion of their trademark beading & handwork.  NOBODY does a better job as beading.  Their factories are mostly small, artisanal operations that, compared to the West, are like home factories & the workers just stopped by to help.  Regardless, if you are able to find a way of capitalizing on the small runs, you will be wonderfully rewarded by some of the most intricately stunning handwork you will ever see.  India is not about volume, but rather valued added.

Pakistan-

Some of the best cotton goods in the world hail from Pakistan, especially for the home market; however, given the recent political climate in the country, its probably a country to be avoided at the moment & foreseeable future.

Bangladesh-

Bangladesh has very good port access & a willing to work population that literally works on pennies an hour compared to the West.  However, the country has a very bad communications infrastructure is a major hindrance to forward momentum.  The factory conditions that lead to the collapses that make the news every so many months have done a great deal of marketing harm to the manufactures whose labels lie in the rubble.  If you want something made cheaply at the moment your best bet is Bangladesh.