{"id":41669,"date":"2021-05-14T07:39:41","date_gmt":"2021-05-14T07:39:41","guid":{"rendered":"https:\/\/furnitureroots.com\/?page_id=41669"},"modified":"2021-06-03T11:46:57","modified_gmt":"2021-06-03T11:46:57","slug":"manufacturing-moving-from-china","status":"publish","type":"page","link":"https:\/\/furnitureroots.com\/uae\/manufacturing-moving-from-china\/","title":{"rendered":"Furniture Manufacturing Moving From China"},"content":{"rendered":"

IS FURNITURE MANUFACTURING MOVING FROM CHINA TO INDIA?<\/h1>
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India has been a laggard in the furniture export markets, even after & the globalization and liberalization initiatives during the 1990s, policies, ease of doing business, and the security is given to importers from other countries have been a few, among the several factors that have resulted in India’s share of furniture exports being on the lower side when compared to our obvious counterpart, China.<\/span><\/p>\n

For all intents & purposes, China & India could have been compared neck-to-neck sometime during the turn of the 20th century. Both were home to about a billion people, both were more or less culturally segregated from the western world and both of them had recently opened up their borders for international trade and adopted liberal policies under the hope that this would allow access to better products & services for both countries and would also result in a net increase in foreign exchange reserves due to the lower cost of manufacturing and providing services in their respective home countries.<\/p>\n

In 2004, China dethroned Italy to become the leading exporter of furniture in the world and while India’s export industry did grow, the imports far exceeded its exports and the benefits that were expected to trickle down to the manufacturing industry and consequently every bit of the economy, simply did not happen.<\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div><\/div><\/div><\/div>

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INDIA'S FURNITURE INDUSTRY V\/S CHINA's FURNITURE INDUSTRY<\/h2>
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Fast forward to today & let’s look at some numbers to get a solid idea of the furniture manufacturing industry in the world.<\/span><\/p>\n

IN 2019, the global furniture market size is pegged at ~USD 600 Billion (this includes metal, stone, engineered woods like MDF, plywood, and natural wood furniture). APAC’s contribution to this figure is > 48%, ~<\/strong>40% of which comes from China (USD 240 Billion), which’s ~20% more than the US. Of this 240 Billion, about USD 60 Billion worth of furniture is exported and to countries abroad.<\/span><\/p>\n

The same report puts India’s share in total furniture production at a measly 4% of total world production, with exports barely even summing up to a billion dollars.\u00a0<\/span><\/p>\n\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div><\/div>

MASS EXODUS FROM CHINA<\/h2>
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It’s not unfamiliar news that manufacturing in China is not only slowing down, but companies are actively taking decisive action to move away from China. While the lingering sentiment due to the negligence of the CCP around the pandemic is usually considered the first cause, there are other factors that must be known too.<\/span><\/p>\n

Wage rates and labor costs are an indicator of overall economic growth and progress. Thanks to a decade of relentless growth & investment into productive sectors of the economy like manufacturing, China has also seen a growth in labor prices, these additional costs have trickled down into the final product making it more expensive than what it used to be, thus reducing the attractiveness of importing from China in the first place.<\/span><\/p>\n

In fact, since 2016, the share of China’s production in global manufacturing has steadily been decreasing, simply due to economic reasons. A growing sentiment among importing countries, concerning the quality of products, copyright infringement issues, and a continuous trade war with countries like Australia & the US were also responsible for the falling demand.<\/span><\/p>\n

The cost was the primary reason for companies moving their supply chains to countries with equally low tariffs but the pandemic & a trade war also brought their own set of perceived risks. Companies soon realized the risks of having their supply chain completely vested in one country and soon began spreading their eggs across multiple baskets.<\/span><\/p>\n

While there are skeptics who argue that manufacturing really isn’t leaving China anytime soon by pointing to various surveys like the AmCham [Link<\/a>], the fact is that supply chains are at least partly leaving China and distributing itself across different countries.<\/p>\n\n\t\t<\/div>\n\t<\/div>\n

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IF NOT CHINA, THEN WHERE?<\/h2>
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While the premise of the Trade war has been to bring manufacturing back to home countries. for the majority of the industries, this is hardly practical. Importing countries, especially western countries simply cannot bring home manufacturing at a comparable price, but that is hardly the only problem.<\/span><\/p>\n

What made China unique was not just the low price but the convenience. In very few places on earth can one find access to skilled labor at such a large scale. This is true especially in the case of the electronics and electrical component industry.<\/span><\/p>\n

This one-stop solution can hardly be replicated by these western countries and it is China’s central planning & commitment to vocational training that has helped it achieve this.<\/span><\/p>\n

The vacuum created by the companies flocking China can be filled by only a handful of logical successors of which; India, Vietnam, Indonesia, Thailand, Malaysia, Sri Lanka & Bangladesh are the front runners.\u00a0\u00a0<\/span><\/p>\n

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THE MITI-V<\/strong><\/span><\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n\n\t

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This trend of departure from China is popular impactful enough for academicians and keenly observers of global economic trends to coin a new phrase for the possible alternatives to China, The “Mighty 5” or the “MITI-V” refers to a coalition of countries that are actively instating policies to woo businesses away from China and into their home countries.<\/span><\/p>\n

The Miti-V refers to Malaysia, Indonesia, Thailand, India & Vietnam. All of these are favorable for different types of product manufacturing capabilities.<\/p>\n

While India seems like the most logical alternative, at least for the furniture industry, there are several innate & deep-rooted problems within the country that make alternatives a much more lucrative opportunity.<\/span><\/p>\n

Vietnam has steadily been allowing market forces to operate within the country & has undertaken numerous policy initiatives towards this effect. A favorable & frictionless relationship with most countries, coastal access to several major ports & availability of skilled labor has helped furniture manufacturers in Vietnam court a number of large western countries.<\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n\n\t

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VIETNAM – IN NUMBERS<\/strong><\/span><\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n\n\t

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Vietnam is known for its wooden furniture exports, Despite a raging pandemic, export of wooden products and wooden furniture, in general, has grown in double digits.<\/span><\/p>\n

From January to the end of\u00a0 November 2020, Vietnam’s total furniture exports of only wood & wooden furniture reached a total of\u00a0 11 Billion USD, a staggering 15.6% growth when compared to the same period last year.<\/p>\n

At the same time, the export of wood & wooden furniture products also saw an increase of 13.8% CAGR during the last decade,\u00a0 indicating an accentuated trend of shifting production away from China.<\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n\n\t

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INDONESIA – IN NUMBERS<\/strong><\/span><\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n\n\t

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At the same time, countries like Indonesia are also enjoying time under the sun. The country is known for its signature Indonesian teak & teakwood furniture among other things. Even during peak COVID periods, of Jan-May, exports of wooden furniture from the country to the United States rose by a staggering 50%.<\/span><\/p>\n

This is around the same time (2019) when exports to the US from China fell by as much as 19%.<\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n\n\t

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INDIA – IN NUMBERS<\/strong><\/span><\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n\n\t

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India has historically had a solid furniture industry known for its artisanal skills and capabilities. The entire furniture industry in Jodhpur is one built on this heritage. However, the country has simply failed to adopt modern technologies and more than anything else, archaic laws erect obstacles that prevent companies from upgrading their manufacturing know-how.<\/span><\/p>\n

Around this same time when Vietnam & Indonesia saw their export numbers soar, India’s furniture industry grew at pretty much the same rates, despite the several initiatives by the government. At the same time, imports of finished furniture also grew leaps and bounds. The government is also considering the imposition of laws that will curb the imports of furniture into the country.<\/p>\n<\/div>\n\n\t\t<\/div>\n\t<\/div>\n

THE CHINA + 1 STRATEGY<\/h2>
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Regardless of which side of the debate you’re on, there certainly is conclusive evidence that manufacturing is leaving China.\u00a0 Whether this is a phenomenon that took off before the pandemic itself OR the scale of the exodus are pretty much the only contentions areas. The fact is most companies, especially the larger ones, understand the risks of over-reliance on China & the unpleasant consequences that it brings about.<\/span><\/p>\n

“China + 1<\/strong><\/em>” is another term coined by economists to indicate that the trend of companies hedging their risks by discovering alternatives to China, despite them being less profitable.<\/p>\n

Any form of manufacturing, albeit experimental, should be welcomed in India & the initiatives taken by the Government should be proactive in this regard, while being mindful of the competition.<\/p>\n

To outcompete all the other countries, or at least to carve out our own little niche, we’ve compiled this easy to digest infographic listed below.
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HOW TO FIX INDIA'S MANUFACTURING WOES?<\/h2>
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Among the many factors that restrict India’s competitiveness in the global scene, a few of them include these critical issues that the government is scrambling to solve.\u00a0\u00a0<\/span><\/p>\n