Impact from manufacturing shift in China on sourcing patterns expected to take years

The manufacturing shift from southern China to Southeast and South Asia may have increased intra-Asian trade but it will still take years to cause an impact on global sourcing patterns, say trade finance bankers and fashion retailers.

"World trade has been growing faster than world [gross domestic product] due to the fragmentation of the supply chain," said Noel Quinn, the Asia-Pacific regional head of commercial banking at HSBC. "I expect a significant gap between world trade growth and world GDP growth to continue."

While the world economy grew between 3 and 4 per cent a year in the past three years, according to data from the International Monetary Fund, trade finance business at HSBC had been growing at more than 10 per cent during the period, Quinn said.

He said the gap between world trade and GDP growth might narrow in the future, but trade would still grow at a faster pace than the overall economy because production had become more multinational as manufacturing had been shifting to new production bases in search of lower costs, which in turn could lead to more trade.

Manufacturing has been shifting away from the more expensive southern China to Southeast and South Asian countries such as Vietnam and Bangladesh. The shift is being led by textiles.

Asiainspection, a quality control company, estimates that the average daily wage in China this year is US$18, compared with just US$2.50 in Vietnam, US$2.80 in Bangladesh and US$1.10 in Myanmar.