Korean clothing, shoe firms exiting China
China has become less attractive to South Korean clothing companies in recent years, which chose the neighboring country because of lower production costs in the labor-intensive industry, according to the sources.
The world's second-biggest economy saw a sharp rise in labor costs and started to impose stricter business guidelines. Its local currency also got stronger, and hit a 19-year record high against the U.S. dollar.
Korea's underwear manufacturing firm BYC Co. will close two of its three Chinese factories in Shanghai and Zhejiang Province starting next year and move to Indonesia. Company officials said the company is building a factory in Jakarta to produce 1 million units of clothing per month.
Another underwear firm SBW Co., which runs a factory in Jilin Province in China, is seeking outsourcing firms in Vietnam, Cambodia and Myanmar.
Dong-il Renown Inc. will produce 20 percent of its Arnold Palmer Junior brand clothing in a Southeast Asian country, and raise the rate further starting this winter, according to company officials.
"Many companies are pulling out of China, as the fashion industry is turning to produce functional goods that need higher technology," said an industry insider. "Some closed their Chinese factories or even returned to South Korea."
Korean shoemakers are also joining the exodus from China, dubbed the world's factory floor.
According to industry data, 170 shoe companies based in Busan, or 64.4 percent of the city's entire industry, have invested in China for the past 20 years. Nine businesses have broken into Indonesia in the most recent two years, however, while some companies have closed their Chinese factories due to rising labor costs in the country.
Some chose South Korea for their production base in order to focus more on technology research and development.
Treksta Inc., a hiking boots manufacturer, closed down two assembly lines in China earlier this year but expanded its local Busan plant.
"Many companies are willing to return to South Korea to receive benefits from our free trade pacts," said an official of the Footwear Industrial Promotion Center.