"As the ongoing trade war is pushing biggest labels out of China, a quarter of the country’s production capacity is lying idle. This is also forcing Chinese brands to offer discounts of 10 per cent to local companies. Particularly under pressure are international sportswear brands that are shifting their sourcing overseas resulting in most of the production capacity in the country lying unoccupied."

As the ongoing trade war is pushing biggest labels out of China, a quarter of the country’s production capacity is lying idle. This is also forcing Chinese brands to offer discounts of 10 per cent to local companies. Particularly under pressure are international sportswear brands that are shifting their sourcing overseas resulting in most of the production capacity in the country lying unoccupied.

This idle capacity in a country comes as big blow to Chinese manufacturers who are already grappling with an economy that is expanding at its slowest pace in the last three decades. The moving out of global firms like Microsoft Corp and Giant Manufacturing Co from China is forcing American companies to seek new alternatives including making their products in-house.

Help for these companies are coming from the world’s largest supplier of consumer goods, Li & Fung, which is actively helping clients to move sourcing away from China to other regions. It helped one American retailer to reduce its reliance on China from to 20 per cent from 70 per cent within two years. The US-China trade War is also pinching U.S. companies exporting to China, the world's largest consumer market. They are being hit by retaliatory tariffs China has levied on American products.

Leveraging domestic market potential

To counter demand from foreign markets, China can leverage its $4.7 billion domestic sportswear. Hence the market shifts to products that can be both made and sold in China. Chinese sportswear brands like X Step are currently in a sound financial condition. The brand recently acquired a U.S.-based company that added tennis brand K-Swiss, Palladium boots, and Supra shoes to its portfolio.

It now plans to take advantage of manufacturer’s lowered prices by expanding production of international brands in China. Despite all this, China’s $40 billion-a-year market for sports apparel is less than half of the market in the US. However, this may change with time as the gap between domestic brands and international brands will slowly be closed. Younger Chinese consumers, especially those born after 1990, will have a greater affinity to local brands.