China appears to some observers to be defying the logic of comparative advantage, competing with both advanced economies in capital-intensive industries and developing countries in labour-intensive industries like textiles. MIT economist Yasheng Huang has called it an ‘absolute-advantage economy’. But the puzzle largely disappears once textiles are viewed as a value chain whose stages use very different combinations of labour, capital and technology.
Consider a shirt sewn in Vietnam that carries fabric woven in China. Spinning and weaving are capital-intensive, energy-intensive and increasingly automated. Cutting and sewing remain labour-intensive because deformable fabric is difficult for robots to handle. Combining these activities under the label ‘textiles’ conceals the adjustment already taking place.
UN Comtrade data show that China’s apparel exports fell 16.4 per cent between 2013 and 2019, yet its exports of yarn and fabric rose 14.9 per cent. Market shares tell a similar story — China’s share of world apparel exports fell from a peak of 38.8 per cent in 2014 to 29.6 per cent in 2024, while its share of world textile exports has risen steadily to a record 43.3 per cent. Between 2013 and 2018, apparel exports from Vietnam and Bangladesh rose by 68 per cent.
