"The reality of manufacturing

We interviewed Joseph Eiger, our former student and an executive in a global sourcing company that manufactures consumer products, about how the world of manufacturing operates.
...
China’s manufacturing industry has access to a high level of agglomeration economies — or ecosystem. Take the example of producing a hoodie. It’s not just about the textiles needed to cut and sew into a hoodie. It is also about the trims, dyes,
zippers, cords and other necessary pieces that are required for assembling the product, Eiger explained.

China has deployed a strategy that ensures the entire manufacturing supply chain is located there, and has mastered each step of the process. China even imports and processes much of the world’s wool and cotton, including a significant amount of US-
grown cotton that comprises approximately 35 per cent of the world total.

This cotton is then processed, made into fabric, dyed and sewn into clothing and other products. They are then exported globally, including back to the US as finished goods. The entire textile ecosystem for production is located in China. And this is not
just the case for fabric, it’s also the case for all of the components.
If a retailer in the US or Canada wanted to move the production of the textiles it sells out of China, it would have to move the entire ecosystem with it. Either that, or the retailer would need to source the inputs needed from China into other countries
like Bangladesh, where final production would take place.
Costs are too high

It turns out that the costs associated with leaving China are simply too high. As long as the ecosystem for manufactured goods remains in China, then so will its significant share of the world’s manufacturing.

Will there be a tipping point when companies will relocate production out of China? It is unlikely that conditions will suddenly switch anytime soon in favor of other countries.

In the coming years, as manufacturing sectors in other Asian countries emerge and develop their own ecosystems, the economic case to move production out of China will grow as well. But this is some years away.

Walid Hejazi is a professor of international business at the Rotman School of Management, University of Toronto. Bernardo Blum is an associate professor at the Rotman School of Management, University of Toronto."

https://asiatimes.com/2023/06/why-so-much-manufacturing-still-gets-done-in-china/

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