Texhong is pushing production capabilities in Vietnam to take advantage of “cost advantages” and avoid challenges that China’s textile and apparel enterprises are facing. As the fate of the TPP is uncertain due to vocal opposition from the US presidency’s candidates, the company is still determined to keep going forward.
CEO Zhu Yongxiang believed that Vietnam’s competitiveness “is very strong, among all Southeast Asian countries and even compared to Chinese production bases”.
Vietnam has three major advantages other than TPP that attracts Chinese textile manufacturers.
First of all, tariffs on exported goods from Vietnam to other countries are lower than goods exported from China.
Costs of electricity, labor and production are also lower in Vietnam than in China.
Lastly, Texhong’s existing complex in Quang Ninh province is adjacent to China’s Guangxi Zhuang Autonomous Region. A Vietnamese establishment which is that close to the border can link with Southern China’s production chain and make exporting convenient.
The size of the investment remains undisclosed. However, when operation begins next year, Texhong’s annual expected capacity is 60 million meters of gray fabrics, 40 million meters of woven dyed fabrics, and 7 million pieces of garments.
Texhong is not alone in its decision to move production to its southern neighbor, however. At Saigon Textile Exhibition 2016 held in April this year, out of 1,065 registered exhibitors, 750 were Chinese enterprises.
According to Mr. Andrew Kay, organizer of SaigonTex 2016, most of these Chinese exhibitors are fabric manufacturers. They are here to take advantage of Vietnam’s textile industry as a signatory of TPP. Dyed fabrics are among the most invested textile segments by Taiwanese and Chinese companies.
China is the most important supplier of Vietnam’s textile industry. According to General Department of Vietnam Customs' half-year report, textile materials imported from China are worth $2.63 billion, a 4.1% increase from 2015.