The real significance of China’s growing market share

China's share of America's apparel imports in September 2011 was within a few hundredths of one percent of its highest ever. In fact it slipped back a bit in October – as it does most Octobers (It peaks in September every year, falls back every month till March, then builds up again till September). Month to month fluctuations don't signify anything much.

What matters a lot more though to Chinese businesses and their workers, though, is the amount they're shipping to the US. Which (measured in kilogrammes of clothes) in May of this year was 5% more than in Mat last year – and in October was 14.6% less than in October last year. And what matters more to their Western customers is how much buyers are having to pay (in October, 14.9% more per kilo than in 2010 for garments from China, but 18.6% more for garments from the rest of the world)

Quite extraordinarily, it's quite in keeping with the evidence of the past few months to say that if you want to find cheap clothes, China's the place to go to. America bought its clothes from China 8% cheaper than from the rest of the world last year: now China's 11% cheaper.

Now of course all these numbers fluctuate from month to month, and the precise number differs between buying countries. But the general trend is clear: Western apparel buyers are buying less, they're paying more – but they're finding better prices in China than most other places, and China's relatively cheaper (though obviously a great deal pricier in absolute terms) than it was a year ago. What's bizarre is watching how people react to this statement – which of course is common knowledge among buyers, but not among their colleagues or their bankers.

To buyers, the "China's getting uncompetitive" thing is generally a bit of a red herring. Their company's first problem is that sales are pretty weak – though that varies a lot around the Western world, and there are a number of chains doing reasonably well for sales. Their bigger problem is that it's practically impossible to get anything like the volume they want at consumer prices that fully reflect the 15% and up cost hikes they're being hit with on the clothes they buy. In one sense, as far as they're concerned, China IS uncompetitive (it's not offering the prices they'd like), but that isn't something they can do much about. Their current concern is how much cost prices will fall back once the current cotton price works its way through, and what live options (such as despecifying, or moving to Bangladesh) they can follow right now.

Because most of them have discovered that some options that looked worth pursuing 6-12 months ago don't stack up any more:

• South Asia isn't looking as sharp as it once looked. The Bangladeshis aren't putting on any extra capacity. Indian factories aren't expanding. Pakistani and Indian businesses are more worried about local problems than about chasing new business. And there's something very weird indeed about the claims the Sri Lankans keep on making about customers flocking to their garment makers' doors.
  
• Central America looks as if it isn't living up to its promise. The Honduran factory owners claims hundreds of thousands of jobs have been lost because of an excessive wage increase. But they claimed Nike and adidas were quitting Honduras one day, then said they weren't the next. So maybe their claims are just a wee bit designed as evidence for people too lazy to check of why they'd be better off not putting wages up? The Mexicans are claiming 200 garment plants will close this year "because of a flood of contraband from China". Or maybe just cheaper clothes? But no-one can deny there are closures in Guatemala. Whatever's really going on: all the claims we heard in mid-2011 about US buyers flocking to Central America may have been accurate. But there's no evidence any orders came out of all those flights south of the Border
  
• The Europeans haven't got much to chortle about either. The Euro's falling – and the apparel trade on their doorstep isn't exactly evolving in a way that improves the quality of garment making for European buyers. The chaos that seems to be hitting Egyptian garment making doesn't seem to have infected Tunisia or Morocco (much more important suppliers) yet. But the efforts of the government in Jordan to reduce its garment industry's dependence on temporary foreign workers is a further indication of growing nationalism the Arab world which isn't encouraging investment in an industry that, by definition, thinks multinationally
  
• Which leaves South East Asia. But even here, the floods have made the Thai industry into a mess it will take months to sort out. The Thai problem has affected Laos, which needs Thai ports and accessible Thai roads to bring raw materials in and get finished goods out. So that really leaves just Indonesia, Vietnam and Cambodia.
  

For most buyers, finding cheaper sources isn't as urgent now as it felt a year ago: most now understand there just isn't a cheaper, reliable alternative to China and many have switched their attention to other problems. Among those problems is the realisation that putting all your sourcing eggs into one basket isn't prudent in the long term – even if that basket is as big, and stuffed with so many factories, as China.

But finding other baskets to add is looking increasingly tricky