Almost a quarter of German companies operating in China were planning to relocate production from the country in 2019, according to a report by the German Chamber of Commerce in China. For example, Adidas has halved its Chinese manufacturing since 2010, with much of the production moving to Vietnam, and pledged in July last year to cut all ties with suppliers implicated in a report that uncovered forced labour being used in some factories.
Like Apple, Adidas also felt the impacts of Vietnam’s rising COVID-19 infection rate, which has stalled production since mid-July and is expected to cause losses of up to $600 million (£431m) during the latter half of 2021. Adidas also saw its sales plummet on Chinese ecommerce giant Alibaba after the company took a stand against the treatment of Uyghurs in the Xinjiang region. In April, sales dropped 78% compared to the same period in 2020, according to Morningstar Inc.
Adidas’ German arch-rival Puma is shifting production away from China as well. The company, which makes more than a quarter of its products in the People’s Republic, is keen to diversify its manufacturing base and supply chains, not to mention avoid US tariffs by producing more of its running shoes, sportswear and other products in Bangladesh, Cambodia, Indonesia and Vietnam. The brand faced online attacks in March following statements it made about the treatment of Uyghur Muslims in China, which prompted uncertainty about the company’s future sales in the country. Sales did slow after a strong first quarter, and Puma CEO Bjorn Gulden said: “There is less activity in the Western brand stores [in China] than there would have been if tension wasn’t there”.