The world's second largest clothing exporter has been hit by unrest, with many factories shut down.
In early July, demonstrations at Bangladesh's prestigious Dhaka University to protest the reservation of some civil service jobs for relatives of military veterans turned violent across the country.
In August, Prime Minister Sheikh Hasina resigned and fled to India, and the military announced the formation of an interim government. The situation in the country has stabilized, but the impact on Bangladesh's manufacturing and foreign trade has been huge.
As the world's second largest apparel exporter, Bangladesh receives orders from international apparel brands including H&M, Zara, Uniqlo, VF Corp, Levi Strauss, Target and others. From mid-July to early August, all garment factories in Bangladesh were shut down and gradually resumed operations until recently, which had a great impact on these brands.
The Bangladesh Garment Manufacturers and Exporters Association said the industry lost about $270 million, disrupting supply chains and seriously affecting production and sales plans.
At present, Bangladesh is the world's second largest garment exporter after China. The Bangladesh Garment Manufacturers and Exporters Association said that in the fiscal year 2023 (July 2022-June 2023), clothing accounted for more than 80% of Bangladesh's exports, reaching about $47 billion, more than double that of a decade ago and surpassing the previous year's record high.
From the perspective of Bangladesh textile and clothing export data, export sales rebounded at a low level around September every year, reaching a peak at the end of the year, and gradually falling in the first quarter of the following year. This is a critical period for Bangladesh's garment exports to begin to gain momentum.
Some reports suggest that the country's garment and textile factories are coming back online. Although factories are reopening, Bangladesh's garment exports are likely to remain affected for some time. Hula Global, an Indian clothing maker that serves Western customers, has said it will shift production from Bangladesh to India for the rest of the year to avoid risk.
So will the current situation in Bangladesh affect China's garment export industry or textile industry orders? After all, the development of Bangladesh's garment and textile industry, to a certain extent, is to undertake production capacity from China and other places.
First of all, because of the unrest in Bangladesh, it is true that some orders will return. Buyers began to shift orders to other countries, such as India and China, to avoid the risk of delivery delays, and India's textile stocks surged as a result.
However, we should also note that buyers are more likely to choose Vietnam, Cambodia, India, Indonesia, Pakistan and other countries as alternatives, mainly because of the United States imposed tariffs on China and strict traceability requirements.
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Secondly, Bangladesh's infrastructure is weak, and many raw materials rely on imports, 95% of its cotton for the textile industry, 80% of its yarn for weaving and more than 70% of its printing and dyeing fabrics need to be imported, and China is its main import source country. Now their garment factory large-scale shutdown, resulting in China's cotton yarn, grey cloth, fabrics and down feathers and other exports to Bangladesh have been very affected, some contracts have been forced to negotiate delay or cancel.
According to the British market research company "Transport Intelligence" website recently reported that the combination of political and economic crises in Bangladesh has had a significant impact on a range of supply chains, especially causing supply chain chaos related to the garment industry. Our foreign traders who export to Bangladesh also need to pay attention to the trade risks caused by the instability and economic downturn in Bangladesh.
