Nike, Adidas Starting to Move Away From China, and That Says A Lot

Nike and Adidas are shifting more of their Asian manufacturing business from China to Vietnam, continuing a recent trend of companies choosing to leave China due to higher costs.

According to GQ, Adidas reported that 44 percent of its shoes were made in Vietnam in 2017, up 13 percent from the previous year. During that same time period, Nike decreased its Chinese production from 32 percent of its overall shoe manufacturing to just 19 percent.

China, having been a cornerstone of manufacturing for years, has adopted somewhat of a new identity in the footwear manufacturing world—one that has a wealth of experience and therefore the know-how to create more high-end products than competitors. Balenciaga, which along with Prada and Burberry has been using Chinese labor recently, noted that China has "the savoir faire and capacities to produce a lighter shoe."

In their eyes, China is no longer just the cheap way to mass produce something. But, of course, that reputation boost comes with a price, which is what drives some to neighboring countries while others buy in.

GQ reports:

The global sneaker landscape looks different these days—and it might not change anytime soon. As Adidas [CEO Kasper] Rørsted said at the investor's meeting: "I'm not going to trull out that this trend is going to continue."

CNN reported in 2016 that Chinese labor is only 4 percent cheaper than in the U.S. when you account for productivity. Chinese wages have increased at a faster rate than productivity increases, and the Yuan has gotten stronger.

"The bottom line: Manufacturing in China is no longer a surefire way to save on cost of labor," the article said.

Two years later, and CNN's hypothesis turned out to be true, for the most part. Nike and Adidas are powerful players in the footwear and apparel market, and their lead is one that others tend to follow. Coupled with the big-ticket, high-end companies like Armani and Burberry using Chinese manufacturing as a point of pride and indication of quality, using China as a reliable way to make stuff at a low rate and maximize profit could soon be a thing of the past.

With countries like Ethiopia, Cambodia and Vietnam looking to boost their own textile economies by providing incentives for companies to move operations there, the global apparel manufacturing market could be more global than it was even a decade ago.