The Chinese textile industry took off in the early 2000’s due to the expiration of quotas on exports. However, rising wages are chipping away at China’s dominance in the production of textiles and clothing. China’s textile exports made up 25% of world textile exports in 2005, but this number has been in decline since. Factory wages have risen 18%-20% over the last three years. Additionally, the yuan has appreciated and the government has implemented tighter environmental regulation. These factors have pushed textile production out of China and into less developed southeast asian countries, such as Cambodia, Bangladesh, Vietnam, and Indonesia. In Cambodia, workers take home about $1.25 / hour, while wages in the most expensive parts of China have crept above $9 / hour. [The Prof: This almost certainly should not be “US$ per hour” but rather per day.]
There is not much China can do to hold on to its textile business. Wages will continue to rise, while wages in the less developed southeast asian countries should remain low for the foreseeable future. As Chinese industry overall continues to modernize and become more capital intensive, the importance of the textile industry will slowly diminish. Textile production by its nature is more dependent on cheap labor than modern capital.