European clothing companies prefer to source wool from Italy than from China. This is a sign of the changing times. China is caught between rising domestic costs and persistent technical and distribution advantages elsewhere. Italian fabric producers are closer to the market, so not only is transport cheaper also timelines between orders and sales are shorter and in the fast-paced world of high fashion, this matters.

When cost differences are significant, quality may be less important but if overall costs are comparable, quality should be decisive in sourcing decisions. If Chinese producers still have a reputation for relatively low-quality textiles, then as the labor cost picture worsens, they will likely have nothing left to offer.

At a macro level, China has for years aspired to move up the value chain, to capture more of higher skilled components of the global supply chain. In keeping with this, China was content for the low-value textile industry to relocate to Southeast Asia in search of cheaper labor. But now, as China’s own costs rise still further, they find themselves competing against long established, higher quality production centers like Italy, and losing out. Even in textiles, China is no longer the prime destination for new investment.