China

This dragon isn’t sleeping

AsiaInspection Q1 BarometerApril 8th 2014

a quarterly synopsis on outsourced manufacturing and the quality control services industry.

AsiaInspection Presents the 2014 Q1 Barometer

AsiaInspection,A leading provider of quality control services

for businesses importing from Asia, Africa, Southern Europe and Latin America

The media has been reporting that the Chinese economy is on the brink of slowdown.

but China continues to be the dominant sourcing region by sheer volume.

December and January set new records for total exports,surpassing $207bn in both months.1

CHINA EXPORTS REACH ALL-TIME HIGH

$ 207 bn

+9%

China Export Figures Per Three Months (USD Billion)

Nov 12Jan 13

Feb 13Apr 13

May 13Jul 13

Aug 13Oct 13

Nov 13Jan 14

0

50

100

150

200

566 509 543 562 +9%/ Y-1

619

Adjusting for the Chinese New Year holiday by comparing November through January 2013/2014,

total Chinese exports increased compared with the same period in 2012/2013.

AsiaInspection figures surpassed this with year over year growth of

+12%+12%

+12% for ordered inspections within China.

More telling and perhaps a leading indicator of the export figures to come,March was up +26.2% compared with the year before.

Why the increase?

In Q1 the Chinese Yuan had the first major currency reprieve since 2005,

depreciating 2.7%

China has continued to preserve a healthy balance of wages, a developed infrastructure and the world’s largest workforce.

CHINA PLUS ONESouth & Southeast Asian countries

have offered opportunities to reduce labor costs.

Though their respective economies are much smaller,

emerging markets were the clear winners in percentage growth.

Inspection Figures by Country 2014 Q1 vs. 2013 Q1

Source: AsiaInspection Inspection Figures

Bangladesh

Vietnam

Cambodia

Indonesia

India

China

+70%

+32%

+22%

+16%

+12%

+57%

AsiaInspection

despite unrest in the apparel industrywhich has a resulted in protests across the country

escalating in January when police fired upon protestors

Cambodia Increased 32%

people killed people wounded2

4 38

In Indonesia, where the textile industry is set to become the country’s largest export segment,

inspections were up +22%

There has been a growing awareness and demand from the consumer not only for a high quality product, but a high quality supply chain.

AsiaInspection’s 2014 Q1 data shows a year-on-year increase in Ethical and Manufacturing Audits in Asia

BRANDS & RETAILERS TAKE CONTROL OF THEIR SUPPLY CHAIN

+156%Ethical & Manufacturing Audits

An increasing practice is to interweave Ethical Audit Programs with on-site product inspections to ensure manufacturing actually occurs at an approved factory.

Rana Plaza highlighted how factories often illegally sub contract out orders after major retailers reported that their products were never authorized to be manufactured there.

There’s notable traction taking hold in supply chains worldwide:

Governments moving forward on legislation

Corporations putting their money where their mouths are ““

““

Sebastien Breteau, CEO of AsiaInspection

The American Chamber of Commerce surveyed400 member companies sourcing from China and found that 40% have plans

to spend significantly more on ethical compliance.3

EU based companies are facing stricter guidelines that require them to report on their policies regarding ethical issues,

corruption and the risks they pose to human rights throughout their supply chains.4

during a factory fire in Hangzhou 5in a factory blaze outside of Shantou in the Guangdong province 6

Workers killed Workers killed1616 1111

China has not been exempt from ethical compliance issues. In Q1:

Low cost labor intensive manufacturing is on the rise in Africa

AFRICA, AN UP-AND-COMING

SOURCING REGION

AsiaInspection ordered inspections were up +65% year over year

The American Apparel & Footwear Association reports that companies are choosing to invest in manufacturing

for markets such as South Africa, closer to the destined consumer market rather than in Asia 7

Ethiopia, a leader in terms of foreign investment is aiming for an export goal of

as part of the four year Growth and Transformation Plan 8

Over the next 20 years Africa also represents

the greatest population growth potentialproviding both labor and end customers to companies planning for the long term

US$ 1 billion in 2014

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1 / Trading Economics. China Exports. April 2nd, 2014 http://www.tradingeconomics.com/china/exports

2 / CNN. At least 3 dead after Cambodian security forces open fire on protesters. January 3, 2014 http://edition.cnn.com/2014/01/03/world/asia/cambodia-protests/

3 / The Sourcing Journal Online. New Study: Costs of Compliance in China Expected to Rise. April 2nd, 2014 https://www.sourcingjournalonline.com/new-study-costs-compliance-china-expected-rise-ik/

4 / The Guardian. EU to force large companies to report on environmental and social impacts. April 2nd, 2014 http://www.theguardian.com/sustainable-business/eu-reform-listed-companies-report-environmental-social-impact

5 / China Daily. 16 dead, 5 injured in China factory fire. January 14th, 2014 http://europe.chinadaily.com.cn/china/2014-01/14/content_17235557.htm

6 / South China Morning Post. 11 dead, six injured in Guangdong factory blaze. March 27th, 2014 http://www.scmp.com/news/china/article/1458357/11-dead-six-injured-guangdong-factory-blaze

7 / Just Style. Analysis: Is Africa the next frontier in apparel sourcing?. April 2nd, 2014 http://www.just-style.com/analysis/is-africa-the-next-frontier-in-apparel-sourcing_id120902.aspx

8 / Just Style. Ethiopia a rising star for sourcing garments. March 6th, 2014 http://www.just-style.com/analysis/ethiopia-a-rising-star-for-sourcing-garments_id120731.aspx

Footnotes

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