November is the peak season for the export of bags and leather, known as “Chinese leather capital” of Shiling, Huadu, Guangzhou, received orders from Southeast Asia this year grew rapidly.

According to the production manager of a leather goods company in Shiling, their exports to Southeast Asia have increased from 20% to 70%. From January to present, their orders from Southeast Asia have doubled. However, it is worth noting that in recent years, due to changes in Sino-US relations and the uncertainty surrounding Sino-Indian relations, many well-known European and American enterprises that have long been focused on developing in China have begun to transfer their production bases to Southeast Asian countries. As a result, Southeast Asia’s manufacturing industry has also experienced rapid growth.

Therefore, it may be questioned why does Southeast Asia continue to import significant amounts of bags and leather products from China?

Because Southeast Asia and China’s manufacturing industries still have many gaps. Southeast Asia’s rapid development of the manufacturing industry is based on low human, capital, and land use costs, as well as preferential policies. These features are exactly what capitalist enterprises need. However, the development of Southeast Asia’s manufacturing industry is still immature, and there are many problems compared to China.

1.Quality control defects

It is important to note that product defect rates in Southeast Asia are higher than in China. It may be true that defects in these regions have traditionally been higher than in China, the defect rate for Chinese manufacturing has declined over the past five years, while the rate in Southeast Asia has increased. Local bag manufacturers are facing challenges in meeting the increased demand as more companies are relocating to the region. During the year-end peak season, factories are becoming busier, resulting in historic spikes in defect rates. Some companies have reported defect rates as high as 40% during this time of year.

2.Delivery delays

Additionally, delivery delays are common in Southeast Asian factories. In the United States, during peak holiday seasons and other busy times, factory production from Southeast Asian may lag. This can result in delivery delays and shortages, which can be detrimental to a seller’s inventory.

3.Product design protection

If a enterprise purchases a pre-designed product from a factory, there is no guarantee of product design protection. The factory owns the copyright to the design and can sell the product to any business without restriction. However, if the enterprise wants to buy ready-made products that are customized by the factory, there may be design protection issues.

4.The overall environment is immature

In China, the transportation infrastructure and logistics industry are highly developed, which has led to “zero inventory” production. This approach improves production efficiency, reduces total production costs, shortens time-to-market, and enhances overall customer satisfaction. Additionally, China’s energy and utility sectors are efficient and provide a stable, uninterrupted supply of energy for manufacturing. In contrast, several Southeast Asian countries have underdeveloped infrastructure and energy sectors, resulting in lower productivity and a lack of competitive advantage.

China’s bag and luggage industry has a complete industrial chain, including supporting equipment, talents, raw materials, and design capabilities, etc., after three to four decades of development. The industry has a solid foundation, excellent strength, and experience, and possesses strong production capacity. So there are a lot of bags manufacturer in China. Thanks to China’s solid production and design capabilities, Chinese bags have earned a strong reputation in overseas markets.

Chinese bags have a significant price advantage, which is highly valued by overseas consumers. The average price of a single bag in some areas is extremely low, and the quality level of Chinese bag is improving.

It is also important to note that cultivating independent brands is crucial. For instance, in Shiling, Guangzhou, many bag brands have their own R&D base where they use new technologies and materials to design leather bags that are more convenient, fashionable, and relevant to consumers’ needs. This makes them more appealing to the market.

Shiling bags and leather goods enterprises is leveraging the digital transformation of the pilot town to accelerate the adoption of digitalization in the fashion industry. This will support the development of an integrated, featured, and professional industrial internet platform, enabling the migration of core business functions such as R&D, design, manufacturing, operation, and management to the cloud platform. The aim is to create a new supply chain model.