We all know that China is the single largest supplier of textile and apparel to the U.S. market. But on Oct 20, 2016, Arkansas Gov. Asa Hutchinson announced Tianyuan Garments Company, a Chinese sport apparel manufacturer based in Suzhou, China will invest $20 million to build a new garment factory in the Little Rock area of Arkansas.
Tianyuan, founded in 1998, is a garment maker specializing in the production of casual and sport apparel, including garment for Adidas, Reebok and Armani. With five facilities in China, Tianyuan was named one of the top 100 garment companies in China in 2015. Tianyuan’s annual production rate is nearly 10 million articles and clothing. The company currently supplies 90% of the garments marketed by Adidas, which is the second-largest global sports and apparel maker behind Nike. Tianyuan was also one of several suppliers for the 2014 World Cup and for the Italian Olympic Team in 2016.
According to the Memorandum of understanding (MOU) signed by Hutchinson and Tianyuan executives, the Chinese apparel giant will hire 400 full-time workers primarily from Arkansas within four years of starting operations in central Arkansas. It is said that these workers will be paid around $14/hour.
As part of the deal, Arkansas offers an incentive package that will include five-year, 3.9% annual tax rebate worth nearly $1.6 million annually. Other incentives include a $1 million infrastructure assistance grant for building improvements and equipment purchases, as well as a $500,000 stipend for worker training.
Arkansas will also help provide assistance in helping Tianyuan get 20 work visas for company executives who will live in Arkansas or travel between the U.S. and China on business related to the Little Rock manufacturing plant. Furthermore, the Chinese garment maker will receive abatement of up to 65% of property taxes from the city of Little Rock and Pulaski County.
Tianyuan is not the only Chinese textile and apparel company that invests in the US in recent years. Back in 2013, Keer Group, a Chinese textile company founded in 1995 and based in Zhejiang, China opened a new facility in Lancaster County, South Carolina as the base of operations for Keer Group’s expansion into the North American market. With $218 million total investment in 5 years, Keer America plans to open one plant with manufacturing capacity of 30,000 metric tons of yarn per year and another plant with 75,000 spindles to make 50 metric tons of yarns daily.
Please feel free to share your thoughts on the following discussion questions:
- Why do you think Tianyuan and Keer group decide to open factories in the US? Based on your research, do you think Tianyuan and Keer’s investments reflect a growing trend in the industry or are they just two individual cases?
- In your view, are investments made by Tianyuan and Keer group good or bad for the US economy? Why?
- What is the business outlook for Tianyuan’s garment factory in the US and Keer America? What are their opportunities and challenges?
- Any other thoughts or questions for the case?
[Discussion for this post is closed]
FASH455 Global Apparel & Textile Trade and Sourcing 
I will be focusing my comments on question number 2, I believe that the investments made by Tianyuan and Keer group are good for the US economy. I believe this sill, in the long run, reduce debt in our nation because we will have the ability to source i8n America. I also believe that the opening of these factories will employ many Americans and help with the unemployment rate. Lastly, I the property tax the the factory owner would have to pay would definitely boost our economy and possibly reduce our debt.
Good comment! It is truly a very interesting move and I am very curious about the motivation behind Tiantuan’s investment decision. It is not too surprising that Chinese apparel manufacturers are looking for investment opportunities abroad given China’s fast rising labor cost,but us is not a common choice. Like you said, maybe the growing interest of “made in usa” products among consumers could be a factor…
In your view, are investments made by Tianyuan and Keer group good or bad for the US economy? Why?
I do believe this is a good investment for the U.S. economy, as the article mentions “Tianyuan executives, the Chinese apparel giant will hire 400 full-time workers primarily from Arkansas within four years of starting operations in central Arkansas.” which will allow for more job opportunities in the U.S.
Although, I doubt this will be the beginning of apparel manufacturing being resurfaced in the U.S., yet it does not hurt the economy. Other Chinese companies may see this as good opportunity and follow Tianyuan lead. However, I think it will take time to see if that is the case, but I highly doubt the U.S. will again be a dominate apparel manufacturer because we do not have the cheap labor and are much more capital intensive.
agree with your observation! Latest employment data reflects the same trend: https://shenglufashion.wordpress.com/2016/06/03/u-s-continues-to-lose-apparel-manfuacturing-jobs-in-2016/
In response to question 2, investment by the Tianyuan and Keer group will be beneficial for the US economy. It will allow more goods to be produced domestically and will in turn create more jobs in America. Although some of the jobs will go to non-American citizens, such factories will still be open to hiring American workers. This will also be good for the US economy since Tianyuan’s annual production rate is nearly 10 million articles and clothing. The company also supplies 90% of the garments marketed by Adidas so investing in America will allow them to produce more of Adidas goods in America, where they are sold. I think this investment will be beneficial to both America and the Tianyuan and Keer group. Can you think of any problems this investment might cause in America?
great point about ” non-American citizens”. This reminds me of an article about “Made in Italy” a few years ago: https://cpianalysis.org/2015/10/22/made-in-italy-by-chinese-in-prato-the-carrot-and-stick-policy-and-chinese-migrants-in-italy-2010-11/
I think these Chinese investments are beneficial for the US economy. After all the conflict and protests against bringing jobs to countries across the world, now, the US is getting jobs plugged in domestically that will create employment opportunities in places where it may be hard to find jobs of medium skill level. I wonder how Americans will react to the wage of $14/hr, being that there have been many discussions and deliberations of people trying to bring up the minimum wage. Though $14 is much more than the minimum wage right now, I wonder how long this salary will be maintained and if the increase of labor costs later on in time will influence what the Chinese Manufacturers will do.
I still wonder why these Chinese businesses decided to bring their investments and work into the US; Would it have been cheaper or more productive investing in a factory in its home country or surrounding countries?
great point about the minimum wage! I have the same questions in mind too. It seems apparel manufacturers are sensitive towards the wage level: https://shenglufashion.wordpress.com/2016/04/17/the-l-a-apparel-industry-gets-involved-in-the-debate-on-minimum-wage/
We need more empirical studies to “stress test” the impact of wage levels on apparel manufacturers’ survival in the US
2. In your view, are investments made by Tianyuan and Keer group good or bad for the US economy? Why?
I believe that investments by Tianyuan and Keer groups are good for the US economy because “the Chinese apparel giant will hire 400 full-time workers primarily from Arkansas.” If the trend of Chinese manufacturers continue to create factories in the U.S. this will help to create jobs and bring manufacturing back to the U.S. I also think this will help with turn around time for brands in the U.S. Instead of outsourcing to other countries manufacturing in the U.S. will help with brand image and with transportation time etc.
In response to question one, I believe a good reason for moving some manufacturing to the United States is technical textiles and apparel. Textiles and apparel factories in the U.S. can be highly specialized, which means the companies moving some manufacturing to the United States can produce more complex products. Active wear companies, such as Adidas and Reebok, are creating more technical textiles and apparel, moving into products that keep consumers warm or cool and some are even moving into smart textiles. I feel that this could be a trend in the U.S., because sportswear companies can stimulate the U.S. economy and produce more specialized products that are capital intensive.
The comment made by @jluetje is very interesting. The US has the resources for manufacturing very high tech textiles, which will most likely be the focus for an American factory. However, why invest in a factory rather than equipment? Are the chinese trying to market themselves so they can get the coveted label of “Made in America”? The investment is not only the factory building but for the tae of workers too. Could this money have been better spent in China to train workers and buy better equipment?
I think that the investments made by Tianyuan and the Keer group are good for the US economy. By opening up factories in the US, this will allow for more job opportunities here, thus increasing the employment rate. Arkansas is also helping to provide the work visas, something that is very important. It will also allow more goods to be produced domestically, making more products “made in USA”.
This information is very interesting! I believe that Tianyuan and Keer will be helping the US economy because they will be employing Americans. I find it fascinating how such a big company is going to go in such a small place such as Little Rock, Arkansas. However, it is very interesting how Arkansas will also help provide assistance in helping Tianyuan get 20 work visas for company executives who will live in Arkansas or travel between the U.S. and China on business related to the Little Rock manufacturing plant. This will build a stronger relationship between the U.S and China and will hopefully persuade other Chinese companies to start building alternate headquarters in the U.S to employee US citizens. However, I think it is going to take a bit of time to get the place running because these workers are inexperiences, and are no where near as skilled as the Chinese workers that would be working in the Chinese offices/factories.
I think this will be a benefit to the US economy, because the opening of a factory in the US will create jobs and increase labor and create a positive outcome on the US economy. I think a reason that they would want to open a factory in the US is due to the fact that the US is capital intensive and has the ability and capital to make textiles with machines while employing people to work. It is interesting that Arkansas is helping with supplying the visas, it seems like it is being done to help create positive relationships between not only the state and the company but between the US and China as a whole. I think it will be interesting to see how the factory is running once it is fully up and running and if more factories will begin to open if all goes well in Little Rock, Arkansas.
#2 In your view, are investments made by Tianyuan and Keer group good or bad for the US economy? Why?
In my opinion, investment made by Tianyuan and Keer group are good for the US economy. It will create many jobs for US workers and therefore increase the employment rate. I think this is a good way to get the quality and expertise that Chinese factories offer and bring that to the US. This could also set an example for some US manufactures and teach them how to be more efficient and produce higher quality products in less time.
#2 In your view, are investments made by Tianyuan and Keer group good or bad for the US economy? Why?
I believe the investment made by Tianyuan and Keer group will be good for the US economy because it is bringing production back to America. Tianyuan and Keer group “will hire 400 full-time workers primarily from Arkansas within four years of starting operations in central Arkansas. It is said that these workers will be paid around $14/hour.” Therefore, this will make more jobs for U.S. people at a wage is above minimum wage. Tianyuan and Keer group has already seen to do well in the past manufacturing nearly 10 million garments.
Do you think with Tianyuan and Keer group other Chinese companies will follow their lead and invest in manufacturing in the U.S.?
I chose to answer the second proposed question : In your view, are investments made by Tianyuan and Keer group good or bad for the US economy? Why?
I believe that having these investments made by Tianyuan and Keer have both positive and negative effects for the U.S. economy. By having these factories on U.S. grounds, that has created full time employment for job seeking Americans at $14/hour. This has also allowed for easy and quick lead time from manufacturing to retailer as this is now on-shoring. Tianyuan also has a very high production rate which is beneficial for both parties involved. The only reason I believe this may cause some harm for the U.S. economy is due too the incentive deals. There will be a 3-9% annual tax rebate, $1 million infrastructure grant and $500,000 stipend for worker training. This seems like a great deal of money being invested for just five years. Although in the long run I do believe the benefits will outweigh the cons of this deal.
There was one question I found that I couldn’t help but wonder the reasoning for. Do other nations, like Italy and those involved in the World Cup care about their goods being produced domestically as much as the U.S. does? For example, all of the USA Olympics gear is produced domestically under an American brand so I am wondering if other nations try to produce domestically for themselves in global events such as the World Cup.