Reflections On The "Going Out" Of Domestic Textile Industry

At present, China is the largest textile and clothing production in the world.

And consumer countries.

2014, China

The total volume of processing accounts for more than 50% of the world's total, and textile and garment exports account for nearly 37.4% of the world's total exports.

In recent years, with the change of economic environment at home and abroad, the growth rate of China's textile industry has not only declined in terms of production scale, export volume and total investment, but also the decline of the main export market share, and even some overseas orders began to withdraw from China.

To cope with the above changes, more and more textile enterprises in China are investing and building factories overseas, and Vietnam is becoming an important destination for Chinese enterprises to invest overseas.

Through the pfer of new capacity, with the help of globalization of procurement, production and sales, domestic enterprises have greatly improved their operational efficiency.

Double factors urge domestic textile industry to "go out"

In 2014, the foreign direct investment of China's manufacturing industry was US $19 billion 330 million, which far exceeded the amount of foreign direct investment attracted during the same period.

By the end of 2014, the domestic textile industry has invested more than 2600 textile and garment production, trade and product design enterprises in more than 100 countries and regions, most of which are distributed in Asia.

Since 2004, about 200 garment enterprises in China have built production workshops in Southeast Asia.

Trade factors and cost factors are the main reasons for promoting the overseas investment of domestic textile enterprises.

In terms of trade factors, some enterprises are coping with some trade protection measures such as Europe and America. For example, Shen Zhou Knitting Group invested in factories in Kampuchea in 2005, breaking through the restrictions of "origin", avoiding the possibility of encountering anti-dumping or "special protection"; some enterprises are trying to avoid trade barriers, such as Tianhong Textile Group's production in Turkey and Uruguay, and directly organize production and sales in the local area, thereby saving 30% customs tariffs set up by the two countries, and some enterprises are enjoying special trade policies. For example, the EU announced the introduction of GSP to the least developed countries in the world in 2011, and many Southeast Asian countries are "on the list".

Therefore, if we export garments to Europe, we need to pay 12% of the customs duties, and the export from these countries can enjoy duty-free preferences, which has attracted many domestic textile enterprises to invest and build factories in Southeast Asia.

In addition to trade factors, comprehensive cost has also become an important factor restricting the day-to-day operation of enterprises.

Labor cost.

Textile industry cluster

The average annual wage increase of manufacturing workers in Zhejiang and Fujian was taken as an example. From 2010 to 2013, the data reached three, 18%, 16% and 17% respectively. In addition to the natural growth of wages, the welfare of employees in the welfare expenditure was also significantly increased due to the change in the employment structure of the population (such as staff housing, leisure and entertainment expenses).

At the same time, the lag of vocational education has led to the shortage of skilled workers in the textile industry, so the rise in labor costs and recruitment difficulties have become a reality.

Land cost.

Most of the textile enterprises in China are concentrated in the eastern provinces. With the increase of orders, the production capacity is expanded, and the new factory buildings become inevitable.

However, the price of land in the eastern part of China is soaring, which is beyond the scope that enterprises can afford.

The cost of raw materials mainly refers to the cost of cotton, which occupies the largest proportion of production costs of textile enterprises.

Since 2011, in order to raise the income of farmers, China has adopted large-scale acquisition of domestic products.

At the same time, the quota restrictions imposed on imported cotton and the Levy of up to 40% tariffs led to a serious shortage of high quality cotton, and the domestic supply of cotton was seriously inadequate.

Over the past three years, more than 30% of the international market has directly boosted the rise in production costs of China's textile enterprises.

Other costs: according to the rough calculation of the tax burden, based on the rough calculation of textile enterprises, taking an ordinary clothing with a market price of less than 100 yuan as an example, including the tax burden of the national tax, the local education attachment, the social security and the water conservancy fund, the tax burden is as high as 27.44%, which does not include all kinds of administrative and business charges that enterprises are often faced with. The environmental protection cost, the situation of China's energy conservation and emission reduction is becoming increasingly severe. The new edition of the environmental protection law strengthens the environmental responsibility of enterprises and promotes the environmental costs of enterprises.

Vietnam is becoming an important destination for domestic textile enterprises to invest abroad.

In the Southeast Asian region where domestic textile industry is keen to invest, Vietnam is becoming an important destination for textile enterprises to invest abroad because of its own characteristics.

Include:

First, adequate labour resources.

At present, Vietnam has a total population of about 90 million, of which about 50 million of the working age population is employed, and the market potential is huge. Moreover, Vietnamese women have more labor force than men.

Although the wages of Vietnamese workers have risen rapidly in the past few years, the average wage of the local $200 is still low compared with the wage level of 500 to 600 US dollars in China.

Second, long-term, continuous and preferential investment policies.

The Vietnamese government has made significant concessions in the aspects of enterprise income tax and land rent, such as the policy of "four exemption and nine reduction". The former is "three exemption and seven reduction". That is to say, if foreign enterprises meet the two conditions of satisfying the total number of employees to 5 thousand people and the investment scale breaking 300 million US dollars, they will be exempt from the enterprise income tax within 3 years from the first profit year and the half of the enterprise income tax after 9 years. The preferential conditions far exceed the "two exemption from three half" treatment of foreign invested enterprises in China.

Moreover, Chinese enterprises do not have to pay other taxes similar to urban construction tax and education tax in Vietnam, which greatly reduces the cost of tax burden.

Third, special geographical advantages.

Vietnam joined the World Trade Organization (WTO) at the end of 2006. It is a member of China ASEAN Free Trade Area. Recently, it was committed to the negotiations between the free trade agreement (FTA) and the p Pacific Strategic Economic Partnership Agreement (TPP).

In early October 2015, the 12 countries, including the United States, Japan and Vietnam, reached a basic agreement on TPP and agreed to carry out free trade. This means that Vietnam will impose zero tariffs on textile and clothing exports to the United States in the future, and will stimulate the domestic textile production capacity and gross profit margin in Vietnam. So many domestic textile enterprises have come to Vietnam in advance to prepare for the future share of the dividend policy.

Fourth, other factors.

For example, the water fee in China is 3.5 yuan per ton, while in Vietnam it is 2.4 yuan, and the cost is reduced by 31%.

The electricity tariff in China is 0.65 yuan per time, while in Vietnam it is 0.39 yuan, and the cost is reduced by 40%.

Vietnam's land use cost is only about 20% of the domestic level, and enterprises can import better quality cotton and Australian cotton at the price of 3000 yuan to 4000 yuan per ton.

In addition, compared with other Southeast Asian countries such as Bangladesh, Kampuchea and Indonesia, Vietnam's domestic political environment is relatively stable. The government's attitude towards opening up and attracting foreign investment is more firm, and infrastructure and legal system construction are improving. The strength of local textile industry is relatively weak and labor quality is relatively high, which is also an important reason for attracting Chinese textile enterprises to invest and build factories.

Exploration of domestic textile enterprises in Vietnam

At present, Vietnam has gathered textile enterprises from many countries such as China, Korea, Japan and France.

Although the number of foreign enterprises is relatively small, it occupies 60% of the annual export volume of textile and clothing in Vietnam, and the contribution of Chinese funded enterprises is greater.

In the first quarter of 2015, there were more than 1000 foreign direct investment projects in the 31 industrial parks in the province, attracting foreign investment of about 17 billion 700 million US dollars, and many leading enterprises in the domestic textile industry such as Tianhong, Bailong and Shenzhou built their factories here.

The above Chinese enterprises have the following important characteristics in Vietnam's production and operation:

The Vietnam subsidiary's production line belongs to the new capacity of domestic textile enterprises.

At present, the "go out" textile enterprises basically have not reduced the original domestic capacity. On the one hand, the new capacity pfer to some extent is to meet the needs of overseas customers.

For example, Shenzhou International Group is a knitting garment originals manufacturer (OEM), its main customers are Adidas (Adidas), Nike (Nike) and UNIQLO (Uniqlo) and other famous brands.

In recent years, the above brands have gradually split all orders from mainland China to half of the mainland and overseas. In order to maintain long-term cooperation with major customers, enterprises are forced to pfer new capacity with orders. On the other hand, the pfer of new capacity has not reduced the dependence on Chinese market.

Many Chinese textile companies investing in Vietnam, such as Tianhong Group, will sell most of their cotton yarn to China, reflecting the potential of the consumer market in the mainland.

The overall technical level of the Vietnamese subsidiary is higher than that of the domestic parent company.

Most of the Chinese textile enterprises invested in Vietnam have been listed in the domestic A shares, with strong strength and abundant funds, so they are much better than the Korean and Japanese counterparts in terms of investment scale and design capacity. On the other hand, the Chinese enterprises have imported the most advanced equipment and materials from Europe for the production of key mechanical products and services to the key mechanical products, so the Chinese enterprises have imported the most advanced equipment production lines from Europe to reduce the impact of the low labor quality of Vietnam on production.

The overall pfer of the industrial chain of domestic textile enterprises to Vietnam is obvious.

For example, shortly after the investment and construction of Bailong east to Vietnam, Shenzhou International, Shandong Lu Tai and Taiwan state fabrics and textile enterprises, which are located downstream of the industrial chain, have been pferred here.

The above phenomena are mainly based on two reasons: first, the overall strength of Vietnam's textile industry is not strong enough, and the layout of the whole industry chain is uneven, which is mainly made up of garments, and it can provide Chinese enterprises with insufficient supporting industries. Two, the United States firmly advocates the principle of "yarn priority" (yarn-forward) in TPP, that is, the textile and clothing that requires zero tariff to enter the US market, the production of raw materials from yarn to cloth, and the process of cutting from tailoring to sewing must be completed in TPP member countries. This has also become an important factor for the pfer of large quantities of textile enterprises to Vietnam.

At present, Tianhong Group has invested in a large industrial park covering an area of 3300 hectares in northern Vietnam, Guangning. The main planning industry of the park is fiber, spinning, weaving, printing and dyeing, and machinery manufacturing.

YOUNGOR group also plans to invest one billion yuan level Vietnam Industrial Park project, the fabric and other capacity into the park.

In the future, the entire industrial chain built by Chinese funded enterprises will be formed in the above industrial parks, which can not only meet the relevant regulations of TPP, but also greatly improve the overall profitability of China's textile industry.

Paying attention to localization management is a common practice of various Vietnamese subsidiaries.

The survey found that Vietnam's Chinese textile enterprises have a high degree of localization, and the vast majority of employees come from local recruitment.

At the same time, it has become a common practice for all Chinese funded enterprises to appropriately increase the proportion of employees in the South Vietnamese staff in management. For example, in Tianhong Ren Ze company, from the production workshop team leader to the management team members of the company, we can see the figure of the Vietnamese workers, and the management efficiency of the company has also been greatly raised.

In addition, the salaries of Chinese funded enterprises are slightly higher than those of local enterprises. The company also provides employees with benefits such as dormitories, canteens and free medical care, so Vietnamese workers generally attach great importance to this work.

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Reflections on the "going out" of domestic textile industry

Some media have thought that the textile and garment industry has low technology content, limited innovation space and poor profitability. It is the representative of "sunset industry".

However, the fact that the chairman of UNIQLO reelected Japan's richest and the founder of ZARA has become the richest man in the new world reveals that there is still room for improvement in the profitability of China's textile industry.

In order to pform the big textile country into a strong textile country, we should pform the domestic textile industry as soon as possible with the help of new ideas, new technologies and new models, and promote "pformation" with "pfer" so as to enhance the competitiveness of the industry.

(1) grasp the law of economic development and make adequate preparations as early as possible.

It is not difficult to look back on the development of the developed countries in Europe and America. It is a normal economic phenomenon that the cost push forward industry pfer is a kind of normal economic phenomenon.

With the increasing emphasis on high-tech industries in various regions of China, the survival space of traditional labor intensive industries such as textile and garment industry is shrinking. Therefore, through industrial pfer, effective allocation of resources and market development, the production and processing sectors are selectively migrated to areas with lower cost or near terminal market. The parent company has increased investment in new product design, R & D and marketing, and has climbed to the two sides of the "smile curve", which is an effective way to promote industrial upgrading.

Although some of the textile enterprises that have invested abroad have established successful cases for their counterparts in China, they have accumulated valuable experience.

However, if we fail to make adequate preparations and ignore the risk management and control of enterprises, the probability of industrial pfer failure is still large.

The preparations for "going out" include: due diligence and feasibility analysis of investment target countries.

Not only does it include factors such as labor productivity, industrial chain matching and hydropower costs, but also must fully understand the local legal system, cultural customs and political environment and other factors, so as to make a comprehensive evaluation.

For example, the Cole group of Zhejiang invested 218 million yuan to set up a production base in South Carolina, even though the local labor cost is more than three times that of China, but it can be recovered through the cotton raw materials and cotton power consumption. At the same time, the utilization of local developed logistics industry can also greatly reduce the storage cost of cotton, and the talent pool for overseas investment.

Having a number of highly qualified foreign language talents, excellent business management and high quality talents is an important guarantee for enterprises to go out. Especially the skills of management are very important in daily communication and coordination with the host government departments.

On the other hand, not all domestic enterprises are suitable for "going out".

For example, Wei Qiao Textile Group, the largest cotton spinning enterprise in China, has always insisted that the production base should remain in the northern plain of Shandong Province. For many years, it has also gained a higher profit rate by means of industrial chain integration and employee motivation.

(two) dialectically understand trade rules and actively respond to changes in the situation.

With the rapid development of economic globalization, a country's industry will have more opportunities to enhance its position in the global value chain only if it fully participates in international division of labor, cooperation and competition, and speeds up the internationalization process of enterprises.

At present, the development of China's textile industry is faced with pressure from domestic cost increase, blocked financing and export slowdown, as well as the "double squeeze" from the developing countries' order diversion and the high tariff barriers in the European and American markets.

Therefore, accelerating the promotion of powerful enterprises' "going out" and realizing the external pfer of industry should form a consensus in China's textile industry.

We should encourage the leading enterprises in the industry to strengthen cooperation with the host government in the industrial park, and avoid single fight, so as to drive the small and medium-sized enterprises supporting the industry to "ship to sea" to form a tug of war and scale effect, so as to improve the success rate of the industrial pfer to the outside world. This is also the successful experience of Taiwan enterprises in the pfer of foreign countries.

Up to now, a number of textile industrial parks have been established overseas by more powerful enterprises such as Yue Mei Group (Nigeria), Tianhong Group (Vietnam), and Hong Kong Group (Kampuchea). This has reduced risks for other textile enterprises in China to implement the strategy of "going global".

In the process of industrial pfer, enterprises should also grasp market information in time and dialectically understand the rules of international trade.

If the entry into force of the TPP agreement will bring trade diversion effect to China in the short term, the United States and Japan will be more likely to import from the TPP member countries in the future due to the reduction of tariffs and the principle of origin.

At the same time, the TPP agreement has not only improved the standards of intellectual property rights, but also added labor and environmental provisions and linked them with trade, which may become a way for developing countries to impose trade sanctions against developing countries with non TPP members in the future.

However, we should also see that the high standards and new rules of TPP represent the direction of economic globalization. Only when domestic enterprises prepare ahead and respond positively, can they not lose their way in the future competition. By integrating domestic and foreign R & D, brand and channel resources, they will step up to the high end of the global value chain, and realize the rational distribution of production and sales in the world.

(three) seize the opportunity of technological revolution and promote pformation by means of pfer.

Today, with China's economy entering a new normal, the new round of technological revolution represented by information technology provides an opportunity for the pformation of traditional manufacturing industries.

The development of China's textile industry should keep pace with the times. With the opportunity of global industrial pfer, we should rely on new ideas, new materials and new technologies to promote industrial upgrading.

The concept of "Internet +" is deeply affecting the various sectors of the manufacturing industry. It expands the scope of innovation subjects, expands from single enterprises to multiple industrial alliances. It can realize the replacement of machines by digital control, and at the same time, it greatly improves labor efficiency.

Many textile enterprises in China are plagued by the fact that the existing production machines have not yet completed their estimated useful life and have not yet recovered their investment costs. They are reluctant to completely replace the machinery with higher efficiency.

The textile enterprises pferred to developing countries can import more advanced production equipment with lower tariff prices, and build intelligent manufacturing production lines and digital chemical plants by steps, and integrate all links of the industrial chain to realize intelligent management. It can not only alleviate the impact of the shortage of technical personnel in the host country on production, but also adapt to the development trend of the downstream fast selling brand, meet the personalized and differentiated demand for small orders, and expand the potential consumer market.

The concept of "green manufacturing" also affects the future direction of domestic textile industry.

In the past, textile industry was often regarded as a representative of "high energy consumption and high pollution". Many enterprises were unwilling to invest too much in environmental protection in order to increase profits.

Since January 1, 2016, the new version of the environmental protection law has been implemented, improving the environmental protection requirements and increasing penalties for illegal polluters.

In fact, attaching importance to environmental protection and realizing green manufacturing are becoming the consensus of governments.

If the level of economic development is not as good as that of our Vietnamese government, we must put forward a rigid requirement for all foreign enterprises, that is, the sewage treatment system must reach the level a, otherwise the project application will not be approved.

Therefore, by encouraging enterprises to "go out", the pformation of domestic industry is gradually becoming a reality.

On the other hand, the use of advanced energy-saving equipment and technology to reduce the amount of pollutant emissions, reduce water consumption and energy consumption in production, green manufacturing throughout the entire production process will also help to increase the added value of textile products, breaking the EU based on environmental protection standards set up non tariff barriers, so as to ultimately improve the profitability of enterprises.