Li & Fung Looks Outside of China for Supply

In a move which is most likely an indicator of an early trend for Chinese companies, Hong Kong Trading company Li & Fung is looking to "move sourcing activity to other regions outside China ...[including] areas such as India, Bangladesh, Sri Lanka and Pakistan where it has increased purchasing by more than 40% a year in these regions." In the words of the firms' managing director, William Fung, "There has been a large shift in sourcing trends ... in this chaotic situation you have to keep all your options open ... in an inflationary environment, we're finding deflation." While some of the "chaos" of the global apparel market is certainly specific to the industry, I have no doubt that we'll see more and more Chinese and Hong Kong companies look to other developing Asian countries to shore up supply and maintain -- or even reduce -- their current pricing levels in the near term. And in the future, with rising commodity prices and labor costs in mainland China, they will have no choice but to look at other countries if they want to stay competitive in the world market. The key, of course, in making such rapid supply moves, is the ability to move at the speed of the market and maintain flexibility -- traits which, for the most part, only high-tech and retail companies have mastered to date.

Jason Busch

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