Any scholar engaged in the study of international business, international economics or even social research is likely to be interested in the growing role that China is playing in an ever-increasing number of industry and market sectors, as well as the expanding degree of influence it is exerting with respect to world finances.
In a certain sense, China has taken the rest of the world by surprise and by storm. Leaping from its status as a developing nation less than a century ago to an economic and political superpower to be reckoned with almost one decade into the 21st century, China has focused its energies and considerable resources, both geographic and human, on becoming a major player in international business. The nation is distinguished by its apparent willingness to engage in both the highest and the lowest ends of the market, determined not necessarily to be the best in terms of the quality of its goods or its performance, but rather the most attractive competitor in each of the markets in which it operates for other reasons.
For apparel manufacturers and retailers in China, in particular, the region offers powerfully attractive benefits to those countries that would like to outsource labor when it has become too expensive in their own countries. China is geographically vast and boasts a population density that signifies a labor pool without shortages; moreover, the members of that labor pool tend to be willing to work for wages that would be unreasonable in the country that is outsourcing the work. China has become a nation where almost any labor competency appears to be able to be rendered quickly and cheaply (Ting, 2004), and the apparel industry has certainly taken notice.
In fact, China has done such a successful job of distinguishing itself from its competitors in the apparel manufacturing industry that it has secured a dominant place in this particular market. The United States has become one of China’s best customers for inexpensive apparel goods. An article on the clothing export business in China published during 2005 in The Economist (“The great stitch-up,” 2005) revealed just how dependent American retailers became upon Chinese-manufactured clothing in the first half of the present decade. In the first quarter of 2005 alone, the quantity of cotton pants imported by the United States from China increased by 1,573% (“The great stitch-up,” 2005).
While this figure represented the largest increase in cotton clothing imports during that period, the quantity of cotton shirts was almost as impressive, having increased by 1,277% (“The great stitch-up,” 2005). Finally, exports of cotton undergarments made in China also represented substantial profit for Chinese manufacturers, as the quantity imported by the United States increased by 318% (“The great stitch-up,” 2005). In all, The Economist reported, “[t]otal Chinese textile and clothing exports to America were over 60% higher in the first quarter of this year than in the same period in 2004” (“The great stitch-up,” 2005, p. 61). Industry analysts confirmed these impressive numbers. Laws (2005a), for instance, reported that China doubled its apparel exports to the United States between January 2004 and January 2005, and some specific types of clothing increased in export rates by as much as 1000%.
Such impressive numbers, however, may have reached their peak in the 2004-2005 fiscal year and may now be headed towards a plateau. Between 2003 and 2005, the astronomical rates of Chinese clothing imports in the European Union and especially in the United States drew the attention of business and economic analysts around the world (Cass et al., 2003; Grant, 2005). Such high numbers, although resulting in short-term advantages for both the country producing and exporting the goods and for the country importing and retailing the goods, were considered to be untenable, and even dangerous, over a longer term. The threats identified by ever-increasing import-export rates would impact the importer directly by undermining the importing country’s own interest in and capacity to participate in the production of apparel domestically. It was thus conceivable that the entire apparel industry in the United States could collapse (Grant, 2005).
A virtual monopoly on the clothing industry by China, or any other single country for that matter, would also affect other stakeholders, however, especially China’s own neighbors in Southeast Asia. Cambodia, Indonesia, Thailand, and Vietnam also manufacture apparel for export to the European Union and the United States (“A Stitch,” 2005; James, Ray, & Minor, 2003). Although these countries are fledglings in the apparel industry compared to China, the superior competitiveness of China as the least expensive site of manufacture would, it was believed, squeeze these smaller players out of the market altogether, with serious and devastating consequences for these countries’ economies (“A Stitch,” 2005; James et al., 2003). China’s cornering of the apparel market could also have deleterious effects for historically favored trade partners of the United States. This is particularly the case for those countries that are geographically proximal to the United States, especially Canada and Mexico, both of which have long occupied positions on the top ten list of textile and clothing exporters to the United States (Nathan Associates, 2005). While it is beyond the scope of the proposed study to analyze how these other trade partnerships are affected, it is important to note that any trade relationship that suggests exclusivity will inevitably affect other markets around the world.
For these reasons, both the European Union—itself a significant importer of clothing manufactured in China (Nathan Associates, 2005)– and the United States began to reconsider import-export agreements with China, and by 2005, serious renegotiations of trade agreements were well underway. The concerns about the economic implications of China’s dominance of the apparel export industry were so pervasive and pronounced that international economic bodies became involved in the brokering of these agreements. The World Trade Organization, an international economic body of which China became a member in 2001, played a critical role in the development and implementation of regulations that are intended to ensure that a country’s imports of Chinese apparel do not cause significant market disruption and instability, whether domestically or abroad (Cass et al., 2003). The significance of these agreements, and, in particular, of the World Trade Organization’s involvement in their development and implementation, is that they acknowledge China’s rapid ascension to economic power. The changes introduced by China’s aggressive participation—and, indeed, redefinition—of import-export dynamics– have occurred so quickly and have been so dramatic that they have challenged scholars’ and industry analysts’ ability to keep apace in terms of understanding implications and making feasible forecasts for future effects (Perkins, 2007).
