Vietnam's Textile Industry Soars, Are Chinese Reaping the Benefits
Duration:
Oct 01 - 31, 2024
Location:
Vietnam
On the eve of the National Day, the Vietnam Textile & Garment Industry Expo (VTG) was held at the Saigon Exhibition & Convention Center in Ho Chi Minh City, Vietnam, with more than 400 textile enterprises participating. Made-in-China.com also took part in the expo. Through interviews with over 100 exhibitors and attendees, we bring you the latest market information:
Global Order Shifts Fuel Vietnam's Textile Industry Surge
Opportunities come with risks
Global Order Shifts Fuel Vietnam's Textile Industry Surge
According to statistics from the Vietnam Textile and Apparel Association (VITAS), many positive changes have occurred in Vietnam's textile and garment export turnover in the first eight months before 2024. Vietnam ranks first in growth rate among the top three global textile and garment exporters and has become the world's second-largest exporter of textiles and garments (second only to China). Moreover, Vietnam has surpassed China in market share of garment exports to the United States and has taken the lead. As the autumn and winter seasons approach and buyers often stock up on supplies before the US elections, it is believed that Vietnam's textile and garment exports to the US may continue to increase in the second half of this year. No wonder some Chinese exhibitors at VTG jokingly say that Vietnam's textile industry is soaring.
This result is not due to a rebound in global demand but a shift in orders.
Amid frequent geopolitical conflicts, the lingering impact of the pandemic, and an unstable supply chain, traditional textile powerhouses such as Bangladesh, Indonesia, the Philippines, and Turkey face challenges with significant declines in export volumes. Unsurprisingly, countries like Vietnam, Pakistan, India, Cambodia, and Sri Lanka have received the shifted orders, highlighting the unprecedented importance of a stable environment in the current international situation.
This result is not due to a rebound in global demand but a shift in orders.
Amid frequent geopolitical conflicts, the lingering impact of the pandemic, and an unstable supply chain, traditional textile powerhouses such as Bangladesh, Indonesia, the Philippines, and Turkey face challenges with significant declines in export volumes. Unsurprisingly, countries like Vietnam, Pakistan, India, Cambodia, and Sri Lanka have received the shifted orders, highlighting the unprecedented importance of a stable environment in the current international situation.
From a Textile Big Country to a Textile Powerhouse
So, what role has China played in this surge?
China accounts for one-third of the global textile and garment export market share. Taking the VTG expo as an example, Chinese enterprises make up seventy percent of the 400 exhibitors. Regardless of how Vietnam promotes itself as the new "world factory," the fact that China is the world's largest exporter of textiles and garments is unlikely to change in the short term, if at all.
"Vietnam cannot do without China's supply chain," a Vietnamese attendee told Made-in-China.com at the VTG. Indeed, 55% to 60% of Vietnam's textile industry's raw and auxiliary materials supply comes from China, especially garment raw materials, yarns, and fabrics, which are mainly imported from China. At the expo, the most popular booths, aside from those displaying raw materials, were those showcasing various operational machines. Chinese companies have a distinct advantage in the development of textile technology, automated production equipment, and eco-friendly materials, allowing them to deeply participate in various aspects of Vietnam's textile industry chain through technology exports and investment in factories.
As Vietnam's export growth accelerates, exports from China to Vietnam have also increased, suggesting that the intermediate stages of production for export goods may be shifting to Vietnam. This shift is beneficial for the optimization of China's foreign trade supply chain on a global scale. "Although the production efficiency in Vietnamese factories is not high and the profits are not as good as domestic factories, it is possible to receive orders that domestic factories cannot obtain," said a business owner from Zhejiang at the scene. "For most industries, the difference in tariffs for exports from China and Vietnam to the United States is significant. Some products even face anti-dumping and countervailing duties against China, known as double tariffs, but the tariffs for Vietnam are very low, sometimes even zero." This is one of the main reasons why a large influx of Chinese capital has been flocking to Vietnam in recent years.
According to data from China Customs, from January to August 2024, China's cumulative exports of textiles and apparel amounted to $197.987 billion, a year-on-year increase of 1.2%, achieving moderate growth. Although the growth rate is far behind Vietnam's, this is an exceptional outcome achieved after overcoming numerous difficulties against the backdrop of insufficient domestic and foreign demand, intensified market competition, and increased risks and challenges due to geopolitical instability and uncertainty.
So, what role has China played in this surge?
China accounts for one-third of the global textile and garment export market share. Taking the VTG expo as an example, Chinese enterprises make up seventy percent of the 400 exhibitors. Regardless of how Vietnam promotes itself as the new "world factory," the fact that China is the world's largest exporter of textiles and garments is unlikely to change in the short term, if at all.
"Vietnam cannot do without China's supply chain," a Vietnamese attendee told Made-in-China.com at the VTG. Indeed, 55% to 60% of Vietnam's textile industry's raw and auxiliary materials supply comes from China, especially garment raw materials, yarns, and fabrics, which are mainly imported from China. At the expo, the most popular booths, aside from those displaying raw materials, were those showcasing various operational machines. Chinese companies have a distinct advantage in the development of textile technology, automated production equipment, and eco-friendly materials, allowing them to deeply participate in various aspects of Vietnam's textile industry chain through technology exports and investment in factories.
As Vietnam's export growth accelerates, exports from China to Vietnam have also increased, suggesting that the intermediate stages of production for export goods may be shifting to Vietnam. This shift is beneficial for the optimization of China's foreign trade supply chain on a global scale. "Although the production efficiency in Vietnamese factories is not high and the profits are not as good as domestic factories, it is possible to receive orders that domestic factories cannot obtain," said a business owner from Zhejiang at the scene. "For most industries, the difference in tariffs for exports from China and Vietnam to the United States is significant. Some products even face anti-dumping and countervailing duties against China, known as double tariffs, but the tariffs for Vietnam are very low, sometimes even zero." This is one of the main reasons why a large influx of Chinese capital has been flocking to Vietnam in recent years.
According to data from China Customs, from January to August 2024, China's cumulative exports of textiles and apparel amounted to $197.987 billion, a year-on-year increase of 1.2%, achieving moderate growth. Although the growth rate is far behind Vietnam's, this is an exceptional outcome achieved after overcoming numerous difficulties against the backdrop of insufficient domestic and foreign demand, intensified market competition, and increased risks and challenges due to geopolitical instability and uncertainty.
Opportunities come with risks
At the VTG exhibition site, nearly half of the Chinese exhibitors visited by Made-in-China.com were attending the exhibition for the first time and took the opportunity to explore the Vietnamese market. Some Chinese textile and footwear enterprises that entered the Vietnamese market early did earn orders and opportunities, but whether it is still suitable to enter the market now and how to do so requires careful consideration.
Discussing labor costs, Vietnam was once known as a paradise for low labor productivity and cheap labor. However, the Zhejiang business owner interviewed at the site waved his hand excitedly and said, "It's nothing like what's advertised!" He told Made-in-China.com that at the request of an American client, he opened a factory in Bac Ninh Province, Vietnam. Now, the salary of an ordinary worker, including overtime pay, is nearly 4,000 RMB per month. This is not at all advantageous compared to his own domestic factory, not to mention that the productivity and enthusiasm of Vietnamese workers are far less than that of Chinese workers. Due to cultural differences, managing local staff is not easy.
Moreover, although Vietnam's textile industry exports are growing this year, the overall economy is not doing well. Many other industries are experiencing a downward trend in exports. With the rise in raw material prices, sea freight rates, and interest rates, the survival rate of factories in Vietnam is not high.
In addition, a local Vietnamese entrepreneur told us that the textile and footwear industry is enduring stringent standards in the import market, with different brands having different standards. Particularly, the green standards proposed by Europe, America, and Japan for textile products are challenging: some require the use of solar energy, some require the hiring of ESG specialists, and some demand that wastewater meets discharge standards and is recycled. This results in constantly increasing costs for suppliers, yet it is difficult to raise order prices.
Made-in-China.com will continue to innovate its services by partnering with Chinese enterprises to participate in global trade shows. Our commitment is to unearth global business opportunities for Chinese suppliers and overseas buyers, capture the latest market information, and facilitate trade interactions between both parties. Please stay tuned for more updates!
Discussing labor costs, Vietnam was once known as a paradise for low labor productivity and cheap labor. However, the Zhejiang business owner interviewed at the site waved his hand excitedly and said, "It's nothing like what's advertised!" He told Made-in-China.com that at the request of an American client, he opened a factory in Bac Ninh Province, Vietnam. Now, the salary of an ordinary worker, including overtime pay, is nearly 4,000 RMB per month. This is not at all advantageous compared to his own domestic factory, not to mention that the productivity and enthusiasm of Vietnamese workers are far less than that of Chinese workers. Due to cultural differences, managing local staff is not easy.
Moreover, although Vietnam's textile industry exports are growing this year, the overall economy is not doing well. Many other industries are experiencing a downward trend in exports. With the rise in raw material prices, sea freight rates, and interest rates, the survival rate of factories in Vietnam is not high.
In addition, a local Vietnamese entrepreneur told us that the textile and footwear industry is enduring stringent standards in the import market, with different brands having different standards. Particularly, the green standards proposed by Europe, America, and Japan for textile products are challenging: some require the use of solar energy, some require the hiring of ESG specialists, and some demand that wastewater meets discharge standards and is recycled. This results in constantly increasing costs for suppliers, yet it is difficult to raise order prices.
Made-in-China.com will continue to innovate its services by partnering with Chinese enterprises to participate in global trade shows. Our commitment is to unearth global business opportunities for Chinese suppliers and overseas buyers, capture the latest market information, and facilitate trade interactions between both parties. Please stay tuned for more updates!