Recently, the Ministry of Industry and Information Technology stated that it will coordinate the layout and development of the textile industry at home and abroad.
The background of this statement is that in recent years, part of the production capacity of my country’s textile industry has been continuously transferred to Southeast Asia. According to statistics, Vietnam’s textile and clothing exports increased by 7.5% year-on-year in 2019. Correspondingly, from January to December 2019, my country’s cumulative export volume of textiles and clothing was US$271.8362 billion, a year-on-year decrease of 1.89%.
A textile industry researcher from the CITIC Futures Agricultural Products Team told the 21st Century Business Herald reporter that there is indeed a transfer of textile and clothing production capacity to Southeast Asia, mainly reflected in spinning and garment production. piece. Among them, garment production has low technical content and low added value. It relies more on the low labor cost advantage of Southeast Asia, while most of the spinning production is the transfer of domestic production capacity. In 2019, China’s investment in spinning production capacity in Vietnam accounted for 32% of Vietnam’s total spinning production capacity.
However, many Chinese textile companies have invested in setting up factories in Southeast Asia. While enjoying cost dividends, they will also face The challenge of imperfect industrial chain.
“The wages of Myanmar workers are extremely low, only 400-500 yuan per month, but the raw materials need to be imported from the country, which adds additional logistics costs.” Liancheng (Myanmar) Lei Ming, general manager of the Clothing Co., Ltd., told the 21st Century Business Herald reporter.
The Ministry of Industry and Information Technology also proposed to support the transfer of the textile and clothing industry to the central and western regions, which has also become a new choice for some companies. A reporter from the 21st Century Business Herald noted that in recent years, a number of textile industrial parks in the central and western regions have been built, showing that China’s textile industry is accelerating its transfer to the central and western regions. Taking Sichuan as an example, since this year, relevant industrial parks have been started in Luzhou, Zigong and other places, and local textile production capacity has increased significantly.
The industrial chain difficulties in Southeast Asia
The textile industry in many Southeast Asian countries The export volume of the garment industry has continued to maintain a rapid growth of more than 5% in recent years. Jiansheng Group, a large textile enterprise, pointed out in its 2019 annual report that Southeast Asia has benefited from the transfer of the textile and apparel industry in recent years, and its exports have grown rapidly. For example, Vietnam’s textile exports in 2019 were US$32.6 billion, an increase of 7.5% from 2018 and an increase of 24.42% from 2017.
Behind this are many domestic companies setting up factories in Southeast Asia, such as Lei Ming’s company. He has been engaged in the garment industry for 13 years and decided to transfer part of his production capacity to Myanmar in 2013.
“There are two main reasons why I moved the factory. First, the wages of Myanmar workers are low. More importantly, at that time, the EU gave Myanmar the most preferential country policy and restricted Myanmar’s exports to the EU. products are subject to zero tariffs,” Lei Ming said.
Like Lei Ming’s company, the temptation of low wages and zero tariffs in Southeast Asia has prompted many Chinese textile companies to relocate.
Luo Liangbian, the owner of Jiede Leather Products Co., Ltd., told the 21st Century Business Herald reporter that he has been engaged in textiles since 1993 The clothing industry mainly produces handbags, luggage, belts and other products. The United States is its main overseas market. In 2018, he began to build a factory in Cambodia. The main reason for the move was to avoid tariffs.
Even many listed companies have chosen to set up factories in Southeast Asia. For example, Jiansheng Group, located in Zhejiang, pointed out in its 2019 annual report released in March this year that the company started operating in 2013. The overseas layout of production bases has already planned and constructed three major production bases in Vietnam.
A textile industry researcher from the CITIC Futures Agricultural Products Team said that in Southeast Asia, mainly Vietnam, low costs (labor, water and electricity) and policy support (low taxes) are indeed the key to development. Advantages of the textile and apparel industry. In addition, Vietnam has joined multiple free trade agreements, and its tariff threshold for textile and clothing products has been further reduced.
However, unlike large companies that can set up some upstream industrial chain companies and projects at the same time, small and medium-sized textile companies are trapped in incomplete industrial chains after setting up factories in Southeast Asia.
Lei Ming said that the industrial chain in Southeast Asia is not mature and can only produce OEM products. His company needs to purchase raw materials in China and transport them to Myanmar for reprocessing into garments for export.
In addition, Luo Liangjian said that the production efficiency of Cambodian workers is low, and the skilled workers are only 60% of those in the country. Even the managers have to be brought from China, and it took him nearly a year. Years of training for Cambodian workers.
“The cost of delivering products to customers is lower than in China. For example, the production cost in China is US$10 because of tariffs. When it reaches the customer, it is US$14.3, while the production cost in Cambodia is about It is US$11. But from a production perspective, since raw materials need to be imported from China, logistics fees are incurred, and the comprehensive production cost in Cambodia is higher than that in China.” Luo Liangzhen said.
The difficulties in the industrial chain mean that not all Chinese textile companies are suitable for relocation to Southeast Asia.
Xu Heng (pseudonym), an employee of the development department of a textile foreign trade company located in Guangdong, his company has been engaged in the textile industry for 12 years, mainly making knitted products. Two years ago, in order to expand Production, reduce labor costs, went to Vietnam for inspection, but the final decision will still be��Can stay in the country.
Xu Heng believes that large companies have relatively complete supply chains in all aspects, from manufacturing, printing and dyeing to ready-made garments, but it is difficult for small businesses like them to move there, and it is still difficult. lack of funds.
Language barriers are also problems that Chinese companies must face. Luo Liangjie said frankly that when he first arrived in Cambodia to open the factory, he didn’t understand the language and had to hire a translator for everything, which resulted in a lot of manpower and time costs. Secondly, registering a company in Cambodia is very slow, taking at least 4-6 months, while it only takes 10 days in China.
Support the transfer of industries to the central and western regions
Currently, orders The flow to Southeast Asian countries is also an important reason that forces Chinese textile companies to move to Southeast Asia.
Lei Ming said that their export customers are more supportive of setting up factories in Myanmar, and some customers state that when placing orders, they must be produced in Southeast Asia.
However, more orders do not mean more profits. As more and more Chinese textile companies gather in Southeast Asia, competition among companies is gradually escalating.
Lei Ming said that from the time he opened a factory in Myanmar in 2013 to now, Chinese garment factories have continued to move to Myanmar. As far as he knows, most Chinese-owned factories in Myanmar are not very profitable, and only a few well-managed factories may make a little money. From the perspective of a processing plant, investing tens of millions of yuan a year and earning several million yuan is considered good. “Even if some factories receive orders at a loss, they will choose to take them in order to support the workers here.”
In this case, how should Chinese textile companies choose to expand domestically? Reasonable layout outside?
On September 17, the Ministry of Industry and Information Technology stated in its reply to Recommendation No. 8321 of the Third Session of the 13th National People’s Congress that it will coordinate the layout and development of the textile industry at home and abroad. Support textile and garment enterprises to accelerate technological transformation, improve the level of automation and intelligence, support the transfer of the textile and garment industry to the central and western regions, guide and standardize enterprises to carry out international production capacity cooperation in an orderly manner, promote positive interaction between international cooperation and domestic industrial upgrading, and stabilize and optimize the textile industry chain and supply chain.
So, is it the choice of enterprises to move the textile and clothing industry to the central and western regions? A reporter from the 21st Century Business Herald found that there are indeed textile and garment companies that have opened factories in Southeast Asia and are considering this issue.
Lei Ming is considering returning to the mainland to set up a factory, because whether it is factories in Southeast Asian countries such as Myanmar and Vietnam, or factories in China, there are some that are run well and some that are not. “In places like Guangxi, Xinjiang and Shandong, there are also wages of less than 3,000 yuan.”
A researcher in the textile industry of CITIC Futures Agricultural Products Team said that my country’s textile and garment industry has The competitive advantage is also mainly reflected in the more complete supporting facilities of the overall industrial chain and the high-quality textile technical workers in my country. Especially with the policy regulation of China’s cotton reserves this year, the price difference between domestic and foreign cotton continues to remain low, the cost performance of domestic cotton has improved, and the cost advantage of Chinese cotton yarn has once again been reflected. However, for the entire global textile raw materials, cotton fiber only accounts for about 25%, and most of it is contributed by chemical fibers such as polyester staple fiber and viscose fiber. At this point, China has an absolute advantage in chemical fiber production capacity, and the textile industry chain is more complete.
“One of the current difficulties is that the cost of production factors is gradually increasing, and the second difficulty is that the impact of trade barriers on the foreign trade market is gradually increasing.” The above-mentioned researcher pointed out that textile and clothing There is indeed a phenomenon of industries moving to the central and western regions of my country, but this is still difficult to solve the problem of trade barriers. The advantages of Southeast Asia do exist.
Due to the huge advantages of textile and apparel volume and supporting industrial chain, the position of China’s textile and apparel industry in global trade is still difficult to shake. Although spinning production capacity is gradually transferred to Vietnam, The main export destination for Vietnamese cotton yarn is still the Chinese market, while imported synthetic yarn mainly comes from China. From this point of view, Vietnam’s textile industry is more like a supplement to the Chinese industry.
Luo Liangbian believes that there is still room for breakthrough in the domestic clothing industry chain. The current clothing industry is polarized. Clothing companies like H&M and UNIQLO are high-quality and low-priced. And with large quantities, you can take advantage of cost advantages. The other type is small in quantity and fashionable, with strong seasonality. China’s supply chain is quite mature, so it can be produced. </p
