【Accessories】Vietnam Textile threatens China's "leader" status Textile companies rush to "escape" preferred Vietnam

According to the “Bit-Port Big Data” analysis, the recently released import and export data is worrying about China's trade. This article explains the reason why China’s exports are continuing to shift to Southeast Asian countries from the perspective of the textile industry: since Vietnam’s accession to the WTO in 2007, Vietnam’s textiles and fabrics And the growth of garment exports has been rapid. Vietnam became the world's eighth largest exporter last year, accounting for only one percentage of China's global exports.

Since the accession to the WTO in 2007, Vietnam’s exports of textiles, fabrics and garments have grown rapidly. Vietnam became the world's eighth largest exporter last year, accounting for only one percentage of China's global exports. The labels of Made in Vietnam are being used more and more in ZARA, GAP, NIKE and other internationally renowned clothing brands. Vietnam has also become Asia's most promising country to replace China's textile industry. From spinning manufacturing to garment manufacturing, especially with Vietnam and the United States signing the TPP agreement, Vietnamese garment exports to the United States, Japan, and South Korea expanded, and the US market was second only to China.

The trend of the times, the transfer of textile industry from China

The decline in the export market, rising raw material costs in the upper reaches of the country, and rising prices of production factors such as the labor force are becoming obstacles in the development of textile companies. Affected by the weakness of the international economic environment such as European debt and the US debt crisis, the export performance of Chinese textile companies in Europe and the United States has fallen sharply and orders have decreased. Changes in the exchange rate of the US dollar have also brought certain risks to companies.

At present, textile companies are faced with difficulties in foreign trade orders and inventory pressure. At the same time, due to rising labor costs, fluctuations in raw material prices, and rising lending rates, China's textile industry will once again fall into the pattern of reshuffling. The export situation is not optimistic.

On the other hand, the spread of cotton between China and the international market has continued to be too high, and the cotton cost of China's cotton spinning companies is at a disadvantage in international competition. Not only cotton spinning companies but also textile companies including downstream textile and garment companies are facing enormous competitive pressures. The cost of cotton is higher than that of the international market, which has long plagued the development of China's textile industry. Especially in the past six months, it has performed even more prominently under the rapid increase of other costs, which has largely led to the international competition in the Chinese textile industry. The force fell. Because of this, Chinese textile companies such as Blum Oriental and Tianhong Textile had to resolve their difficulties through the layout of overseas production capacity.

Vietnam Advantage: Low Labor and Production Costs

In Asia, Vietnam, Cambodia, Bangladesh and Indonesia have successively become the foundry bases for international apparel brands, and Vietnam is emerging with the most prominent regional environmental advantages. Among these countries, Vietnam’s regional environment is clearly superior to other countries. Vietnam has sufficient electricity, abundant water resources, political stability, and relatively high quality of personnel. The efficiency of garment workers is about 70%-80% of that of China, much higher than that of other countries.

At the same time, the cost advantage of investing in Vietnam is very obvious. Vietnam's small and medium-sized enterprises are small in size. The funds for investing in a medium-sized enterprise are only 1 million to 1.5 million U.S. dollars, and the maximum funds for small-scale enterprises are approximately 10 million U.S. dollars. The land price is the cheapest among Southeast Asian countries. In the past, a Vietnamese textile factory was priced at about 1 million VND (about 60,000 U.S. dollars). After the outbreak of the financial crisis, the price of the plant plunged by 40%. Under the background of the continuous appreciation of the renminbi, this will help Chinese companies to purchase factories in Vietnam.

Therefore, the current cost of investing and setting up plants in Vietnam is relatively low. For ordinary SMEs, the investment burden in the early stage is not significant.

The continuous rise in labor costs in China has not only forced many international apparel brands to migrate their foundries to other countries in Southeast Asia, but China’s spinning companies are equally overwhelmed. Compared to the wages of textile workers, which are nearly 3,000 yuan in China, Vietnam has abundant and low-cost labor, which is half of the Yangtze River Delta and Pearl River Delta regions. Take the pay of garment workers as an example, the labor cost of garment workers in Vietnam is only around RMB 1,000. While the value-added tax of enterprises is only 10%, water fees and electricity charges are only half that of China, which can further reduce production costs.

In addition, following the signing of the Trans-Pacific Partnership Agreement (TPP) between Vietnam and the United States, spinning, weaving, and printing and dyeing of major manufacturing processes are carried out within the member states, and export tariff reductions can be enjoyed. Duty-free treatment will further enlarge the global competitiveness of Vietnam's textile manufacturing industry in the context of the advantages of low processing costs. Orders for textile companies in Vietnam are expected to increase further.

Status rises or becomes a major textile export country

During the period from 2009 to 2015, the average annual growth rate of textile and apparel exports in Vietnam reached 18.6%, which was more than 6 percentage points over the same period in China. China’s share of Japan’s textile and apparel import market has also rapidly dropped from over 80% to below 70% last year.

According to statistics, the national yarn production capacity in Vietnam is about 600-7.5 million spindles, 82% of the yarns produced in the country are exported to China, Indonesia and other places; the export of knitted garments is increasing by 30% every year. In 2015, the garment export has reached 28.3 billion US dollars, but 88% of apparel fabrics are imported from China and South Korea.

Foreign experts said that 2015 is a good opportunity for Vietnam's textile and clothing industry to break through. At present, Vietnam is rated as a highly competitive country in the global textile supply chain. Therefore, global investors regard Vietnam as an ideal center for export textile production. In 2014, 20 new FDI projects were approved in this field. At present, the total amount of foreign capital in the textile industry has reached more than 2 billion U.S. dollars.

According to the Vietnam Textile Association (VITAS), if the FTA and the Trans-Pacific Partnership Agreement between South Korea, the European Union and the Russian-Kazakhstan Customs Union are signed as planned in early 2015, Vietnam will surely face many new opportunities. The textile industry is striving to achieve a total export value of US$ 28-88.5 billion in 2015. Therefore, it is entirely possible for Vietnam to become a major textile exporter.

Recently, the Ministry of Industry and Trade of Vietnam has also drafted a draft “2020 Textile and Clothing Industry Development Plan and Vision Plan for 2030 in Vietnam” to re-arrange the textile and clothing industry to meet international demand. “Vietnam is increasingly integrating itself into the international economy and the world with depth and breadth. 80 countries have signed bilateral and multilateral cooperation agreements, which require the textile and clothing industry to innovate and meet actual needs."

Tariff discounts, entering the international market are healthier

Vietnam's preferential tariff conditions make it easy to enter the international market. Even if Europe and the United States impose anti-dumping duties on Vietnamese products in the future, the tax rate will certainly be lower than that of China. From a global perspective, the total amount of Vietnam's product exports is far smaller than that of China, so China may impose a punitive tariff of 30%-40%, but Vietnam will only receive a few percent to a few dozen percent. On the other hand, the entire country's GDP is only over 100 billion yuan. For Europe and the United States, it is difficult for the growth to be even greater.

Chinese companies investing in Vietnam are also based on the consideration of the globalization of enterprises and hope to enter the ASEAN market through Vietnam. Some companies stated that the shipment of spare parts into the Vietnamese market will be converted into finished products sold locally or even in the ASEAN market, which can save some of Vietnam's import tariffs because the tariff on spare parts is low and the tariff on finished products is much higher.

There are also some companies that are close to the origin of raw materials. One of them is Blum Oriental Co., Ltd.: In order to protect the development needs of domestic agriculture, China generally imposes high tariffs on foreign cotton imports. After relocating to Vietnam, it can avoid the high tariffs caused by imported cotton.

After years of sustained high-speed growth, Vietnam has become the "rising star of Asia." The British Economist Intelligence Unit has for many years listed Vietnam as the most attractive foreign direct investment destination for emerging market countries after relaying the "BRICs." Vietnam’s implementation of China’s “going global” strategy is of great significance, and if such Chinese companies “go global” in the form of evacuation from China, superimposed foreign capital will continue to retreat due to operating costs and a weak global economy, it will export to China. And the economy has caused more pressure. These beliefs have been reflected in the weak import and export data.

Video: Vietnam accelerates the development of the textile industry

The textile and apparel industry in Vietnam has great potential for development. At present, Vietnam has 2.5 million workers in the textile industry, spinning 6.2 million spindles, producing 1.7 billion square meters of fabrics, and clothing exports worth US$24 billion. It is estimated that by 2025, the number of workers in the textile industry will increase to 5 million, spinning will increase to 17.9 million spindles, fabric production will increase to 12 billion square meters, and garment exports will increase to 40 billion US dollars. The Vietnamese government has introduced a series of policies to encourage the development of the textile industry and invest in infrastructure. At the same time, some large industrial parks have also been established to attract investment. For example, there are 1,400 hectares of parks in Nanding Province, and 600 hectares of parks in Xining and Quang Ninh provinces respectively, and sufficient human resources also lay a good foundation for the development of the Vietnamese textile industry.

Why did textile fabric companies rush to "escape"? Why Vietnam?

Difficulties in recruitment, high labor costs, rising raw material costs, excessive homogeneity of products, and continuous decline in export profits have plagued textile and apparel companies in China in recent years. In order to win development in the fierce market competition and achieve a better allocation of resources, the overseas transfer and foreign investment of the textile and garment industry has become China's textile and clothing industry to adapt to the domestic industry, economic, social development and compliance with the international economic development trend. As a typical labor-intensive industry, reducing costs is the main driving force for the transfer of the textile and apparel industry.

It is because of the above reasons that Chinese enterprises have developed their foreign investment rapidly. According to a series of data given by Chen Zhong, there are nearly 30,000 Chinese companies currently investing abroad. Among them, the textile and garment industry has invested in 802 foreign companies. Among these, a number of powerful international companies have formed.

“Vietnam is the first place for China’s textile industry to go out.” Hong Tianzhu, chairman of the board of directors of the Tianhong Group, believes that it is also an exercise for Chinese companies. Among the 12 signatories of TPP, only Vietnam’s textile and clothing industry is the most competitive. He suggested that competent Chinese companies should go to Vietnam to set up a factory. "But not all companies are suitable to go out. If they don't walk out at home, they won't necessarily be good. Vietnam is good, but it's not Vietnam. The problems have been solved.” It is reported that Tianhong has an investment scale of 1.25 million spindles in Vietnam, and the investment scale has reached 800 million U.S. dollars, which is the largest investment scale for mainland Chinese enterprises.

Sun Weiting, chairman of Huafu Color Spinning Co., Ltd., even believes that "Vietnam is a place to go." According to him, following the layout of production in Zhejiang, the Yangtze River, Huanghuai, and Xinjiang, Huafu began its international layout. "The establishment of a subsidiary in Vietnam reduces the impact of the current domestic and foreign material price differentials on the cost of the company's major raw materials, makes full use of the advantages of lower local labor costs, reduces international logistics costs, effectively evades tariff barriers, and further enhances cost competitiveness and services in the ASEAN market. Ability.” Sun Weiting said that going to Vietnam is not only a requirement for customers and the market, but Vietnam itself is also a future consumer market.

Yang Weixin, chairman of Blumovo, believes that Chinese companies “going out” can't go beyond the TPP and go out, but “the market and customers let you go out and get it right.” He also reminded that Vietnam does not lack spinning mills. What is lacking now is the fabric, knitting and printing and dyeing enterprises can go out in the next step. However, Vietnam’s environmental protection requirements are strict and stricter than China’s. Wastewater must be 100% qualified to be discharged, so “the Vietnamese market has not been so good.”