turnaround and lower travel costs while, inmany cases, eliminating or reducing language barriers. Earlier this year, Skyou acquired OTC & Apparel and its sports apparel brand, Shark Sportswear, LLC. With the capability to produce in both Guangzhou, China and Tijuana, Mexico, Mulligan can better serve low-minimum-quantity clients quickly from Tijuana while still benefiting from China’s scale and supplier ecosystem. When the pandemic struck in 2020 and Mulligan couldn’t travel to his factory in China, he knew it was the time to set up production in Mexico. Instead of embarking on a roughly 14-hour flight from California to China (plus completing a mandatory three-week quarantine upon landing), Mulligan is just a 5-mile drive to his factory in Mexico. Mexico’s labor rates are also similar to rates in South China. “It’s fascinating to me that we can get China labor rates right across the border,” Mulligan says. His big challenge now lies with sourcing. Most of his company’s raw materials come from China, and he has been trying to find suppliers in Mexico or other countries like Vietnam. “The manufacturing capabilities and ecosystem are still quite limited in Mexico,” Mulligan says. “But companies that are buying products from China should find two other suppliers from two other countries so they’re not so dependent on sourcing those products exclusively from China. China isn’t going to be the one-stop shop it has been in the last three decades.” Mulligan says this isn’t just a result of the ongoing trade war and the pandemic, but also China’s changing demographics. By 2040, the United Nations estimates that the country will have lost 10% of its workers as its population ages. In 2021, people ages 60 and older made up nearly one-fifth of the Chinese population. China’s once-a-decade census released in 2020 revealed the slowest population growth rate since the 1950s. The tides are turning for many businesses in terms of howmuch they depend on China. Some of the world’s largest companies are shifting manufacturing fromChina to other countries, many of them closer to home. Among those leaving include Nike, Apple and Samsung. While these companies aren’t fully retreating fromChina yet, they may represent the start of a mass exodus. One-third of supply-chain leaders plan to move at least some of their manufacturing out of China by the end of 2022, according to research firmGartner. vchal / Shutterstock.com China | FEATURE | MAY 2022 | 65
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