Vietnam joins CPTPP, and the competitiveness of the world's third largest textile and apparel export
The Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP&rdquo) came into force in Vietnam on January 14, 2019, and Vietnam became the seventh country to ratify CPTPP. The agreement has already entered into force in Japan, Canada, Australia, New Zealand, Mexico and Singapore. According to statistics, the gross domestic product (GDP) of CPTPP countries accounts for 13% of the world's gross domestic product, involving more than 500 million people. CPTPP will become the third largest economic alliance in the world, after the North American Free Trade Area (NAFTA) and the European Union (EU).
What changes will the entry into force of CPTPP bring to Vietnam's textile and apparel industry? What new factors will emerge to drive Chinese textile enterprises to invest in Vietnam? How to calmly and objectively view the impact of Vietnam's accession to CPTPP on the development of local textile and apparel industry?
Perfecting the Industrial Chain, Rendering & ldquo; Vietnam Manufacturing & rdquo; More Competitive < br />
It is generally believed that joining CPTPP will make“ Vietnam Made” have more bottom gas. It is understood that CPTPP member countries have agreed to exempt Vietnamese imports from 97% to 100% tariffs in accordance with the rules of origin. Fan Chunhong, chairman of the Textile Association of Ho Chi Minh City, Vietnam, said that for the textile and apparel industry, after CPTPP came into force, Vietnamese products meeting the requirements of origin and common technical standards would enjoy zero tariff export preferences. At present, Vietnam's average tariff rate for market exports without FTA is more than 10%.
More importantly, Vietnam's accession to CPTPP can diversify its export market, with Canada and Australia being the two most potential markets for Vietnam's textile and apparel exports, Fan added. Previously, Canadian, Australian and New Zealand purchasers hardly paid attention to Vietnam's textile and apparel production. However, recently, many purchasers from these countries have gone to Vietnam to learn about local textile and apparel production and actively signed relevant procurement contracts.
Especially in the past month, the member enterprises of the association are launching human resources training as soon as possible, making great efforts to innovate technology and equipment and optimize production supply chain. In order to translate opportunities into specific orders and maintain long-term cooperative relations, local textile enterprises also take the initiative to understand the environmental and quality standards involved in CPTPP and new issues such as product sources. It can be seen that Vietnam is making full use of the benefits brought by CPTPP to actively enhance product competitiveness and enhance the reputation and reputation of & ldquo; Vietnam Manufacturing & rdquo.
In recent years, Vietnam's textile and apparel industry has developed rapidly and become a key market for overseas investors to seek profits. Vietnamese textile and Apparel Group General Manager Li Jinchang said publicly that in 2018 Vietnamese textile and apparel exports reached 3.6 billion US dollars, an increase of 16% over the same period last year. Vietnam is closely following China and India as the world's third largest exporter of textiles and clothing. Li Jinchang commented that the achievements of Vietnam textile and garment industry in 2018 were to actively improve the role of the industrial chain for many years, and then win customers'preferences.
As we all know, Vietnam has a serious shortage of raw materials for textile and apparel. According to local media in Vietnam, after releasing the good news that CPTPP will land in Vietnam, Vietnam's textile industry attracted 2.8 billion US dollars of FDI in the first half of 2018, bringing the total amount of FDI in the industry to nearly 17.5 billion US dollars. For example, Germany has invested 50 million US dollars in cashmere yarn factories in Dawei City, Vietnam, and the United States has also built sewing thread factories in Tongnai Province, Vietnam.
Among them, Dawei Cashmere Yarn Factory is a joint venture between German Sudwell Group, which produces shuttle yarn, and Ho Chi Minh Lianfang Co., Ltd. covering an area of 61,000 square meters, of which the workshop area is 3.Twenty thousand square meters, the planned annual output of 4000 tons of yarn, half for export. The annual operating income of the plant will reach US$100 million after it is put into operation, which will create employment opportunities for more than 400 local workers. It is reported that the products of the factory mainly supply Vietnamese domestic manufacturers who use cashmere yarn to produce downstream products. Previously, Vietnamese producers relied mainly on imports of cashmere yarn from Australia.
In addition to other countries'investment, we can provide a complete upstream and downstream production supply chain. Within the CPTPP contract, the rules of origin of CPTPP especially encourage the integration of production among member countries, so as to promote the formation of a complete supply chain among member countries. This will make up for the weakness of the local industrial chain and make it more competitive.
Multifactor Driven Capacity Centralized Location in Vietnam
At present, Southeast Asian countries represented by Vietnam have become the main force to undertake China's industrial transfer because of their young population structure, geographical location and infrastructure advantages. Especially as a member of ASEAN, Vietnam can enjoy preferential tariff policies from many countries through several free trade agreements, which is very helpful for Vietnam to develop export-oriented economy. According to incomplete statistics, Vietnam is currently involved in nearly 20 FTAs, including Vietnam's accession to CPTPP.
At the end of 2018, China's well-known color textile supplier and manufacturer - mdash; & mdash; Huafu Fashion Co., Ltd. announced plans to invest in a new yarn project in Longan Province, Vietnam, through its subsidiaries, with a capacity of 500,000 spindles and a total investment of 2.5 billion yuan. The project is the first phase of a new type of 1 million spindles yarn project planned by the enterprise. Previously, the opening ceremony of Huafu Industrial Park in Vietnam and the signing ceremony of the project were held in Vietnam.
Sun Weiting, chairman of Huafu Fashion, believes that Vietnam has become a rapid reaction production base of Huafu in Southeast Asia. Investing in Vietnam can effectively reduce the impact of price differences between domestic and foreign raw materials on costs, make full use of local policies, labor costs and location advantages, reduce international logistics costs, avoid tariff barriers and improve product competitiveness.
Headquartered in Ningbo, Zhejiang, Shenzhou Knitting Co., Ltd. is a knitting manufacturer with a vertical supply chain system. It mainly provides knitting products to the visitors by OEM. Its main customers include Uniqlo, Adidas, Nike, Puma and other well-known international brands. The products are exported to Asia-Pacific, European and American markets. Shenzhou has fabrics and garments factories in Vietnam. It is estimated that overseas employees (Cambodia and Vietnam) will account for more than one third of the total number of employees. However, the per capita output of Vietnamese factories is still lower than that of Chinese factories in Shenzhou, so there is still room for improvement in the future. Taking advantage of CPTPP Dongfeng, Shenzhou plans to add 5,000 workers in Vietnam in the second half of 2019 (currently more than 11,000 local workers) to improve workers'efficiency through continuous automation.
Regarding the uncertain risk of Sino-US trade frictions in recent years, the head of international business in Shenzhou said he hoped to avoid the risk through overseas production capacity. He disclosed that the United States currently occupies the third largest single market position in Shenzhou, while Vietnam's production capacity can be directly supplied to the United States.
In order to avoid Sino-US trade frictions and venture capital investment in Vietnam, Zhejiang knitting enterprise Jiansheng Group completed the full production of Vietnamese sock production base in the first half of 2018, which increased by 80.7% year on year, and achieved production of about 120 million pairs in 2018. In addition, Jiansheng also pays attention to the expansion of upstream matching in Vietnam. In April 2018, the Spandex Rubber Factory in Haifang City of Vietnam expanded its production again, mainly for the production of covered yarn. In Vietnam, the dyeing factory in Hingan Province can complete 4000 tons of dyeing products in one year. The upstream perfect supply chain combined with downstream production and manufacturing links expansion can effectively ensure Vietnam's local textile and garment production efficiency. Jiansheng recently announced that a new 90 million pairs of medium and high-grade cotton socks production line were built by Jiansheng Vietnam (Socks) Co., Ltd. with a total investment of 200 million yuan. A new seamless knitting sportswear project with an annual output of 18 million pieces was funded by Jiansheng (Vietnam) Textile Printing and Dyeing Co., Ltd. with a total investment of 2..5 billion yuan. According to the statistics of China Customs, Jiansheng socks have been in the forefront of the export of similar products in China for many years. According to its latest earnings report, the number of JHS customers and customer orders increased significantly in 2018 under the favorable influence of the local release policy in Vietnam.
The investment boom has caused Vietnam's production costs to rise too fast
Some people in the industry said that compared with the TPP signed in 2015 before the withdrawal of the United States, the size and standards of CPTPP have declined significantly. After the withdrawal of the United States, Japan actually shouldered the burden of leading the CPTPP. Under the circumstances of weak domestic economic recovery and declining international competitiveness, it is questionable whether Japan can play a coordinating and leading role of 11 countries.
In addition, Vietnam's economy has many worries in the process of rapid development. At present, Vietnam's economic development mainly depends on expanding the total investment, and depends heavily on foreign capital. Once the global economic crisis occurs, the decline of investment will lead to Vietnam's economic decline. For example, after the world financial crisis in 2008, foreign capital fled Vietnam one after another, resulting in a decline in local GDP growth. In addition, Vietnam's production efficiency needs to be improved. According to the statistics of the International Labor Organization, Vietnam's labor efficiency is only one third of that of China. Although Vietnam's local government and industry organizations are paying more and more attention to the quality of labor force, Vietnam's economy is small and its risk resistance is weak. Therefore, once the global economic situation changes dramatically, Vietnam's economy will suffer a heavy blow.
More importantly, at present, foreign investment in Vietnam is mainly used in the construction of factories. The price of industrial land has risen greatly, which is not a small pressure for investment enterprises. According to local media reports, production costs are no longer low in some key areas of textile and garment industry in Vietnam, such as Ho Chi Minh City, Pingyang Province, Longan Province and Tongnai Province. Although these areas have good transportation facilities and channels, cost pressures have become a burden for investment enterprises. The head of a textile enterprise from Shanghai pointed out that the cost of land, labor and building materials in Vietnam has soared in recent years due to the investment boom. In an industrial park in Tongai Province, about 70 kilometers from Ho Chi Minh City, the price of long-term leased industrial land has risen from $60 to $70 per square meter last year to $90. The textile enterprise invested in a garment processing plant in Hanoi, Vietnam, and the investment land alone accounted for a large part of the enterprise's capital. He said that, especially in recent months, the cost of building factories in Vietnam has soared, and many enterprises can not afford to relocate at the initial stage, such as changing factories, transferring automation production lines from China, and paying subsidies to send Chinese skilled workers to Vietnam, which costs a lot more than building factories of the same size in China. Although enterprises have received many orders recently, due to the pressure of cost input, profits are not high. Therefore, the company is not prepared to expand its investment in Vietnam.
Some economists have said in this regard that, to be practical, Vietnam has a long way to go to replace China as the world's factory. In 2018, Vietnam's GDP totaled 240.5 billion US dollars, while China's GDP totaled more than 10 trillion US dollars. There is a big gap between the two economies. Moreover, Vietnam's total import and export trade in 2018 was the first record, but it was only the same as that of a coastal province in China.
In addition, Vietnam's relatively backward level of enterprise management, limited territory and the lack of some raw materials have also restricted the development of manufacturing industry. According to the economist, it is almost impossible for Vietnam to become a world factory, especially to replace China, on its own terms. Therefore, despite Vietnam's accession to CPTPP, Chinese textile enterprises should correctly assess their own financial situation, market share, raw and auxiliary material production capacity, labor force and equipment, etc. They should not blindly invest in Vietnam for a while, so as to lose.
