‘Because there is no profit, no one is willing to work’: Inside China’s fast-fashion dilemma

Guangzhou: From his sewing machine station at the back of his small garment factory, Wu Bin takes a drag from the cigarette clenched between his lips as his hands feed the seam of a woman’s black blouse through the chomping metal.

It’s an oppressively sweaty day in Guangzhou’s Panyu district, in southern China, and Wu and his dozen workers are forgoing their lunch break, or even a smoke break, as they churn out piles of dresses and tops. The fans affixed to their machines work overtime to keep them cool.

Speed and quantity are the currency here, powering the world’s epicentre of ultrafast fashion in a neighbourhood dubbed “Shein Village”, where workers huddle over sewing machines for 12 to 14 hours each day, and are often paid less than $1 for a piece of clothing finished.

When this masthead visited the district on a Sunday in early May, a week before the US and China brokered a 90-day trade truce, Wu was bracing for an uncertain future. His factory is one of the many thousands in the area that makes clothes for Shein – the online retail giant to which Americans flock to buy ultra-cheap fashion. The US is Shein’s biggest market.

“As long as the tariff is not removed, I don’t think I can continue to work on Shein orders,” Wu, 37, said, continuing to sew as he discussed the impact of the trade war on his business.

“The sale of products has fallen a lot after the tariff drove their prices up. Many of those unsold clothes are now stockpiled at US warehouses. Consequently, there are less new manufacturing orders now.”

Wu had been producing 20,000 pieces of clothing a month for Shein before US President Donald Trump kicked off a trade war with Beijing, which saw the world’s two largest economies hit each other’s imports with sky-high tariffs before agreeing to lower them in the armistice.

In April, Wu’s Shein orders plunged to under 5000 pieces, and by early May his factory wasn’t working on any orders for the platform, forcing him to seek out orders from domestic clients or other export markets.

It is not yet clear what impact the 90-day trade ceasefire will have on Guangzhou’s fast-fashion hub, given a complicated tariff structure remains in place. But locals in the district are already counting the costs of the trade feud to date, saying they’ve had to adapt their business models as US orders depleted, while some have rerouted production to third countries such as Vietnam, and the especially hard hit had closed down their factories altogether.

Under the temporary deal struck in Geneva last weekend, the US agreed to slash its import taxes on Chinese products from 145 per cent to 30 per cent, and China agreed to reduce its duties on American goods to 10 per cent, down from 125 per cent. The changes took effect from Wednesday.

The US also reconfigured its changes to a tax-free loophole called the de-minimis rule, which had previously allowed direct-to-consumer postal shipments from China valued under $US800 ($1250) to enter the US duty-free, until that was axed on May 2.

The loophole was heavily relied upon by Shein and its e-commerce rival Temu to send millions of cheap items directly to US buyers from Chinese factories each year. Under the latest revision, the new levies on these shipments will be reduced to 54 per cent from 120 per cent, or incur a flat fee of $US100 per postal package.

Trade analysts say that Shein and other e-commerce retailers would now have to weigh up whether to send parcels by airfreight to consumers, incurring a 54 per cent duty, or import goods in bulk to the US by boat with a 30 per cent tariff, but face longer shipping times.

“Sellers are probably taking a wait-and-see approach but, in general, I think it’s fair to say the boom times of small package delivery from China to the US, the Golden Age is already gone,” Jianlong Hu, chief executive of Chinese e-commerce firm Brands Factory, told Reuters.

“If people are buying clothes on Shein and are told the product will arrive one month later, who will buy that?”

Shein did not respond to a request for comment. Last month, Shein and Temu released near identical statements advising their US customers that they would be making “price adjustments” from April 25 “due to recent changes in global trade rules and tariffs”.

For exporters and importers on either side of the Pacific Ocean, there’s no certainty as to what the trading environment will look like in three months’ time – the agreed negotiation deadline for US and Chinese officials to work towards a broader trade deal.

“The de-escalation is obviously good news for the global economy, but we’re still left with the uncertainty of tariff policy in 90-day increments, which, frankly, is terrible for businesses trying to make decisions about investment and hiring people,” said Dr John Kunkel, senior economics adviser at the United States Studies Centre in Sydney.

A scramble to adapt in Shein Village

In the chaos wrought over the past month, small factories such as Wu’s have had to scramble to find new suppliers as Shein orders have dwindled. Sitting at sewing station near Wu, a young mother whirrs through a black and white dress, her baby asleep in a stroller beside her on the factory floor. The clothes she and the other workers are making are destined for domestic buyers on Pinduoduo, the bargain-basement Chinese e-commerce site.

But some of the bigger “tier one” suppliers – those companies that contract directly with Shein and make patterns and source the fabric that is then supplied to factories like Wu’s to produce – have faced financial ruin.

A few streets over, on the third floor of a massive warehouse, dozens of garment workers are cutting, sewing, ironing and packing orders for Guangdong-based fast-fashion clothing company IEF, which has thousands of shops nationwide.

For 10 days, 20 workers have been focused solely on making a blue women’s dress, and will finish 20,000 pieces by the time the order is complete. Price tags affixed to finished dresses show they will each retail for 159 yuan ($34).

The factory manager, who declined to give his name in order to speak freely about the industry, said his company began pivoting to domestic orders several years ago, and did not take orders from Shein because the profit margin was too low.

“Many factories that used to work for Shein have shut down. Tariff is one reason. Another reason is Shein, after outsourcing its order to first-tier suppliers, offers extremely low margins to those actual manufacturers. So they had to give up,” he said.

Some companies had moved their production to South-East Asia to limit their exposure to the gyrations of the US-China relationship, he said.

“Some manufacturers, including one of my friends, have set up companies in Hong Kong and shipped their products to Vietnam, placing a made-in-Vietnam tag before exporting to the US.”

It’s not just the factory owners who have taken a hit in the trade war. Garment workers say they have seen their wages slide. Many of them are migrant workers from poorer rural areas.

At a corner off the main strip in Shein Village is an area shaded by banyan trees that functions as a meeting point for workers who play cards and kill time while scouting for a decently paid gig. More than a dozen metal A-frame placards line the footpath with advertisements for workers, promising air-conditioned factories, housing in dormitories and well-paid salaries.

Recruiters wander through the area with dresses, blouses and pants draped over their shoulders – a sample of the clothing that the workers would be required to make in their factories.

“A lot of the information posted here is not true, there’s lots of fake information,” said Ding Wenfan, 54, who is loitering with a group of out-of-work garment makers.

He has worked in the garment district for decades and said many factories were losing money, with the trade war further dampening wages that were already depressed due to China’s flat domestic demand and sluggish economy. Today, he can make 5000 yuan ($1078) a month down from 8000 yuan before the pandemic.

“The margin is getting lower and the clothing designs are getting more complicated. Because there is no profit, no one is willing to work. Lots of factories have shut down in the past two months,” Ding said.

Another woman, Ke Wangbao, in her 50s, left her last job on April 30 after she was given just one day off that month, instead of the promised two days. Her hands are calloused and her skin is peeling from old wounds on her palms, which she said were caused from being scalded by steam while ironing clothes.

“It’s extremely tiring work,” she said, but jobs were harder to come by now.

“The orders factories are getting are not stable. We work only from time to time,” she said.

For now, instability is the new normal for many at the coalface of the supply chains rattled by Washington and Beijing’s economic jostling.

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