Textile and apparel industry “flying southeast” has advantages and risks

Affected by the recent events in Vietnam, some Chinese textile companies in Vietnam have temporarily suspended production to ensure safety. Texhong Textile and Blum Oriental both announced the resumption of production and said that the incident did not have a major impact.
In recent years, due to problems such as the high price difference between domestic and foreign cotton and rising labor costs, some Chinese textile companies have set up factories overseas to reduce costs through industrial transfer and enjoy preferential trade policies.
“The risk of building factories overseas has always existed, and the Vietnam incident has served as a warning to companies planning to build factories overseas.” Sun Liwu, a cotton industry analyst, said in an interview with reporters on the 20th that companies must weigh the pros and cons of building factories overseas. “In some areas, Problems such as high industrial product prices, saturated labor force, political unrest, and backward infrastructure will affect the overall operation and development of enterprises.”
However, he also said that in the short term, Southeast Asian countries still have obvious cost advantages.
​Textile companies “fly southeast”
According to the reporter’s understanding, there are currently about 112 Chinese companies in Vietnam, including some large and even listed textile and apparel companies.
“The industrial transfer of the textile industry is to save costs and improve competitiveness.” At the China Cotton and Cotton By-product Industry Summit held in Jinan a few days ago, Xu Wenying, vice president of the China Textile Industry Federation, said that currently, my country’s cotton textile enterprises are facing internal and external challenges. There are many pressures such as cotton price difference, labor force, taxes, etc. “Companies do not need quotas to buy cotton in Vietnam, imports are also tax-free, and there are no tariffs when making yarn and exporting it.”
In the past two years, under the pressure of the high price difference between domestic and foreign cotton and the rising production costs such as labor and taxes, some qualified textile companies in China have gradually established overseas factories, including Tianhong Textile, Blum Oriental, and Huafu Colored Textile. , Taiwan Far East Textile, etc.
The recent events in Vietnam have affected cotton textile companies to varying degrees. Among them, some of the property of Tianhong Textile was damaged and its trading was suspended on the 24th; in order to prevent emergencies, Vietnam Blum also suspended production for 3 days starting from May 14th.
Due to the minor damage, Tianhong Textile applied to resume trading on the 15th. On the 19th, Tianhong Textile announced that the company’s facilities in southern Vietnam have generally returned to normal operations. Blum Oriental announced that Blum Vietnam has fully resumed normal production and construction on the 17th.
Overseas advantages weaken
Not only are Chinese textile and apparel companies investing and building factories in Southeast Asia, but foreign textile and apparel companies are also transferring production capacity to Southeast Asia, including the transfer of many foreign-owned garment factories in China.
It is reported that many Japanese companies plan to build Indonesia into a new major clothing production and processing base. Vietnam has become a key area for the relocation of South Korea’s textile and apparel industry. In order to promote industrial upgrading, the South Korean government actively provides financial subsidies to enterprises and rewards the relocation of labor-intensive industries.
“Enterprises move to Vietnam because of cost advantages and trade advantages.” Sun Liwu also said that in fact, labor costs in some Southeast Asian countries are also increasing.
Gao Yong, vice president of the China Cotton Textile Industry Association, believes that cotton spinning’s “going out” is mainly to cope with the high price difference between domestic and foreign cotton. However, the cotton yarn products of enterprises will eventually return to China, and the clothing and knitting industries are “going out” , is to seek low-cost labor. He believes that if cotton prices at home and abroad are basically unified, cotton spinning companies will not be so motivated to “go global.”
“Due to the change of domestic cotton purchasing and storage to direct subsidies, the current price difference between domestic and foreign cotton has shrunk to about 1,700 yuan/ton.” Sun Liwu told reporters, while previously the price difference per ton reached four to five thousand yuan.
Rising costs and increased risks make companies more cautious when “going global”. Lukang Technology, which plans to invest and build a factory in Vietnam, has stated that it will consider suspending or suspending this investment based on the actual situation. The company is still in the process of negotiating with local target companies and has paid a cooperation deposit of approximately 1.4 million yuan.
Sun Liwu said that although labor costs in Southeast Asian countries have increased, they are still lower than domestically. “The short-term cost advantage is still obvious, and many Southeast Asian countries have no trade barriers when exporting products to Europe and the United States.”