China'S Textile Industry Is In The Dilemma Of Industrial Chain In Southeast Asia

Recently, the Ministry of industry and information technology said that the coordinated layout and development of the textile industry at home and abroad was promoted.

The background of this statement is that in recent years, part of China's textile industry capacity has been transferred to Southeast Asia. According to statistics, Vietnam's textile and clothing exports will increase by 7.5% in 2019. Correspondingly, from January to December of 2019, the cumulative export volume of China's textiles and clothing was 271.836.2 billion US dollars, a year-on-year decrease of 1.89%.

The textile researcher of the agricultural products team of China Securities construction investment futures told the 21st century economic report that there is indeed a transfer of textile and clothing production capacity to Southeast Asia, which is mainly reflected in spinning and garment production. Among them, the clothing production technology content is not high, the added value is low, more depends on the Southeast Asia low labor cost advantage, and spinning is mostly domestic capacity transfer. In 2019, China's investment in Vietnam accounted for 32% of Vietnam's total spinning capacity.

However, many Chinese textile enterprises invest and set up factories in Southeast Asia. While enjoying the cost dividend, they will also face the challenge of imperfect industrial chain.

"The wages of Myanmar workers are particularly low, only 400-500 yuan per month, but raw materials need to be imported from China, which increases the extra logistics costs." Lei Ming, general manager of Liancheng (Myanmar) Garment Co., Ltd., told 21st century economic reporter.

At the same time, the Ministry of industry and information technology proposed to support the transfer of textile and clothing industry to the central and western regions, which has become a new choice for some enterprises. The 21st century economic reporter noted that in recent years, a number of textile industrial parks in the central and western regions have been completed, which shows that China's textile industry has accelerated its transfer to the central and western regions. Taking Sichuan as an example, since this year, there have been related industrial parks in Luzhou and Zigong, and the local textile production capacity has been greatly increased.

The industrial chain in Southeast Asia

In recent years, the export volume of textile and clothing industry in many Southeast Asian countries has maintained a rapid growth of more than 5%. Jiansheng group, a large textile enterprise, pointed out in its annual report in 2019 that Southeast Asia has benefited from the transfer of textile and garment industry in recent years, and its export has grown rapidly. For example, Vietnam's textile export volume in 2019 is 32.6 billion US dollars, which is 7.5% higher than that in 2018 and 24.42% higher than that in 2017.

Behind this, many domestic enterprises set up factories in Southeast Asia, such as the enterprise where Lei Ming works. In 2013, he decided to shift part of Myanmar's clothing production capacity.

"I moved for two reasons. First, the wages of Myanmar workers were low. More importantly, at that time, the European Union gave Myanmar the most favored nation policy and implemented zero tariff on Myanmar's exports to the EU." Said Lei Ming.

Like raming's company, the temptation of low wages and zero tariff in Southeast Asia has prompted many Chinese textile enterprises to shift.

Luo Liangcha, the boss of Jiede leather products Co., Ltd., told the 21st century economic report that he has been engaged in textile and garment industry since 1993, mainly producing handbags, bags, belts and other products. The United States is its main overseas market. In 2018, he began to build a factory in Cambodia, and the main purpose of the transfer is to avoid tariff.

Even many listed companies choose to set up factories in Southeast Asia. For example, Jiansheng group, located in Zhejiang Province, pointed out in its 2019 annual report released in March this year that the company began to set up production bases overseas in 2013, and has planned to build three production bases in Vietnam.

According to the textile industry researcher of the agricultural products team of China Securities construction investment futures, low cost (labor, water and electricity) and policy support (low tax) are indeed the advantages of developing the textile and clothing industry in Southeast Asia, mainly Vietnam. In addition, Vietnam has joined a number of free trade agreements, and its textile and clothing tariff threshold has been further reduced.

However, different from the large enterprises that can set up some upstream industrial chains at the same time, the small and medium-sized textile enterprises have suffered from the incompleteness of the industrial chain after they set up factories in Southeast Asia.

Lei Ming said that Southeast Asia's industrial chain is not mature and can only do OEM products. Their companies need to purchase raw materials in China and transport them to Myanmar for re processing as ready-made clothing exports.

In addition, Luo Liangcha said that the production efficiency of Cambodian workers is low, and only 60% of the skilled workers in China. Even the managers have to bring in from China. He also spent nearly a year training Cambodian workers.

For example, the production cost of Cambodia is about $10.00, which is lower than the production cost in China. However, in terms of production, as raw materials need to be imported from China, resulting in logistics costs, the comprehensive production cost in Cambodia is higher than that in China. " Luo Liangcha said.

Because of the difficulty of industrial chain, not all Chinese textile enterprises are suitable for transferring to Southeast Asia.

Xu Heng (pseudonym) is an employee of the Development Department of a textile foreign trade company in Guangdong Province. His company has been engaged in the textile industry for 12 years, mainly engaged in knitting products. Two years ago, in order to expand production and reduce labor costs, he went to Vietnam for investigation, but finally decided to keep the production capacity in China.

Xu Heng believes that the supply chain of large enterprises is relatively complete, from manufacturing, printing and dyeing to ready-made clothes, but small enterprises like them are difficult to move in and lack funds.

Language barrier is also a problem that Chinese enterprises must face. Luo Liangcha frankly said that when he first arrived in Cambodia, he didn't know the language, so he had to ask for a translator for everything, which resulted in a lot of labor and time costs. Secondly, it takes at least 4-6 months to register a company in Cambodia, while it only takes 10 days in China.

Support the transfer of industries to the central and Western Regions

At present, the flow of orders to Southeast Asian countries is also an important reason for Chinese textile enterprises to transfer to Southeast Asia.

Lei Ming said that their export customers are more supportive of setting up factories in Myanmar, and some customers declare that they must produce in Southeast Asia when placing orders.

However, more orders do not mean more profits. When more and more Chinese textile enterprises pile up in Southeast Asia, the competition among enterprises is gradually upgrading.

Lei Ming said that since he opened his factory in Myanmar in 2013, Chinese garment factories have been transferred to Myanmar. As far as he knows, most of Myanmar's Chinese funded factories are not profitable, and only a few well managed factories may make some money. From the perspective of processing plants, it is good to invest tens of millions of yuan a year and earn millions of yuan. "Some factories will choose to take orders even if they receive losses in order to support the workers here."

In this case, how should China's textile enterprises choose a reasonable layout at home and abroad?

On the 17th of the 13th National People's Congress, the Ministry of industry and Commerce of the people's Republic of China issued a reply to the 13th National People's Congress on promoting the development of the textile industry. We will support textile and garment enterprises to speed up technological transformation, improve automation and intelligence, support the transfer of textile and clothing 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 steadily optimize the textile industry chain and supply chain.

So, is it the choice of enterprises to transfer the textile and clothing industry to the central and western regions? The reporter of 21st century economic report found that there are indeed textile and garment enterprises opening factories in Southeast Asia.

Lei Ming is considering going back to the mainland to set up factories, because there are factories in Myanmar, Vietnam and other Southeast Asian countries, as well as factories in China. "In China, such as Guangxi, Xinjiang and Shandong, there are less than 3000 yuan of wages."

According to the textile industry researcher of the agricultural products team of China CITIC construction investment futures, the competitive advantages of China's textile and clothing industry are mainly reflected in the more complete supporting of the overall industrial chain and the high-quality textile technical workers in China. In particular, with the policy regulation of China's reserve cotton this year, the price difference between domestic and foreign cotton has been running at a low level, and the cost performance of domestic cotton has been improved, and the cost advantage of China's cotton yarn has been reflected again. But for the global textile raw materials, cotton fiber only accounts for about 25%, most of which are contributed by polyester staple fiber, viscose fiber and other chemical fibers. In this regard, China has absolute advantages in chemical fiber production capacity, and the textile industry chain is more complete.

"At present, one of the difficulties lies in the gradual increase of the cost of production factors, and the other is that the impact of trade barriers on the foreign trade market is gradually increasing." The above-mentioned researchers pointed out that the textile and clothing industry does have the phenomenon of transferring to the central and western regions of China, but it is still difficult to solve the problem of trade barriers, and the advantages of Southeast Asia do exist.

Due to the huge advantages of textile and clothing volume and industrial chain, the position of China's textile and garment industry in Global trade is still difficult to shake. Although the spinning capacity is gradually transferred to Vietnam, the main export place of Vietnam's cotton yarn is still in the Chinese market, while the imported synthetic yarn is mainly from China. From this point of view, Vietnam's textile industry is more like a supplement to China's industry.

Luo Liangcha believes that there is still room for breakthrough in the domestic clothing industry chain. At present, the clothing industry is polarized. A clothing enterprise such as H & M and UNIQLO can make use of the cost advantage because of its high quality, low price and large quantity. The other is that the supply chain in China is mature enough to produce.