Southeast Asia Can Not Do "World Factory", At Most Is A Pfer Station!

Against the backdrop of Global trade turmoil, the latest data from Japan, Germany and the euro area show that the main exporters' power continues to languish, and trade activities are weak enough to create confidence in manufacturing industry.

In February, the initial value of Japanese manufacturing PMI data dropped to 48.5, the lowest level in 32 months.

As the leader of the European economy, the initial value of PMI in German manufacturing fell to 47.6 in February, a new low for 74 months.

The PMI value of the manufacturing sector in the euro zone fell to 49.2 in February, the first time since June 2013.

The purchasing managers' index (PMI) of China's manufacturing industry, which was released by China's National Bureau of statistics, was 49.4 in May, down 0.7 percentage points from last month.

WTO expects global trade activity to grow by only 3.7% in 2019, slowing down from 3.9% in 2018 and possibly further.

One

Cold waves in domestic textiles

Southeast Asia productivity rise

Under the backdrop of Global trade growth, the domestic textile market is not easy.

According to the National Bureau of statistics, the gross profit of China's textile and garment industry has dropped from 12.14% at the end of 2012 to 10.16% at the end of 2018.

The textile and garment industry showed a continuous decline in the gross profit margin under the rising trend of labor costs and environmental costs. The gross profit margin in 2018 dropped to its lowest level in nearly 10 years.

The number of textile enterprises above Designated Size with annual revenue of 20 million yuan has decreased from more than 22 thousand in March 2011 to more than 19 thousand at the end of 2018, and fierce competition has accelerated the textile enterprises' "going to small businesses".

Since the beginning of this year, the boom of the textile market has been on the low side, and many downstream weaving factories have been postponed.

And to the traditional textile peak season, "golden three silver four", the market has not been as popular as ever. "The receipt of hand cramps" has long been unwelcome, especially in the middle and late April, and the market is rapidly turning cold. The most busy time is exceptionally idle, and the flour merchants are afraid to hoard goods.

While the domestic textile industry is struggling, Southeast Asian countries, represented by Vietnam, are rapidly catching up with the textile market.

With the rapid rise of domestic production costs and labor costs, the textile industry is pferring to Southeast Asian countries in large volume, and Vietnam is one of the most important countries to undertake the pfer of China's textile industry.

At present, Vietnam has become the third largest textile exporter in the world, second only to China and India.

All along, the textile industry in India and Vietnam is more concentrated in garment processing, but Vietnam has great ambitions.

On April 24th, Vietnamese Vice Premier Zheng Dingyong signed the government's decision on 18/2019 /Q -TTg -TTg to prohibit the import of machinery, equipment and production lines with a technology life span of 10 years or more. The technology will come into effect in June 15, 2019.

This means that Vietnam will no longer be satisfied with the production market of clothing, and will directly enter the fabric and raw materials market.

It can be briefly summarized as follows: if all textile enterprises put into production in Vietnam want to enjoy tariff preferences in Vietnam, the origin of raw materials such as yarns, fabrics and accessories for textiles must be in Vietnam (at least 90% of the country's origin).

As a result, all textile enterprises put into operation in Vietnam have to reduce their dependence on China's fabric and raw materials supply, thus increasing investment in Vietnam's textile industry and improving the industrial chain.

This is a great challenge for China's textile industry.

Two

Infrastructure in China

It's hard for investors to come easy.

For enterprises pferred to Southeast Asia, local logistics facilities have become the most troublesome problem for them.

As we all know, the infrastructure in Southeast Asia is not perfect, leading to the fact that the logistics facilities in these countries are far less than that in China.

Bad roads, scarce railways and congested ports have greatly increased delivery time and pushed up pport costs.

It is impossible to establish links between factories, suppliers and global customers like China.

As the fastest growing economy in Southeast Asia, Vietnam seems to be able to undertake part of the logistics business of moving out of the factory.

Data show that container throughput in Vietnam's ports has increased from 4 million 400 thousand to 12 million 300 thousand TEUs. However, the lack of deep water ports is still a hard nut to crack in Vietnam's logistics.

China accounted for 7 of the world's top ten ports.

The national railway business mileage is more than 131 thousand kilometers, and the total mileage of high-speed rail accounts for 2/3 of the world.

In fact, the construction of factories overseas often finds that the environment of foreign countries is far less than that of China. After the financial crisis in 2008, Japanese factories moved to Southeast Asia, but in recent years, Japanese factories have moved back to China.

Japanese media have investigated thousands of Japanese companies, and found that Japanese companies most wanted to invest in China, and Southeast Asia, which was highly praised by many enterprises, was not the first choice.

Recently, textile giant Lycra, based on China's infrastructure, textile market, talent pool and so on, has officially launched its fourth global R & D laboratories and the first domestic R & D center, Advanced Textile Innovation Center (ATIC), in Foshan's three hills science and innovation center.

Some practitioners say that some Southeast Asia's proud price advantage is also gradually losing.

The rents of the neighboring provinces of Hu Zhiming, Vietnam, rose to more than 3 times from the US $30 per mu in 2015 to the current US $100.

Labor costs are rising faster, and the average wage is now about 50% higher than that in 2014, reaching about 2300 yuan. Enterprises generally expect Vietnam's labor cost to remain unchanged from 7 years later.

Moreover, the overall quality of workers in Southeast Asia is far from that of Chinese workers.

Thanks to compulsory education, more than 87% of Chinese workers have been educated in secondary schools, and the average education level of workers in Southeast Asia is not high, resulting in factories having to incur additional costs.

With imperfect logistics facilities, factories bear higher costs than in China.

Some countries in Southeast Asia are ambitious to replace China's textile industry, but not all countries can become "world factories". Cost and price advantages do not dominate everything, and this advantage is still shrinking.

China's industrial chain is complete, its operation standards, infrastructure and logistics are highly efficient. Compared with Southeast Asia, the development of China may be the best choice for exporters.