Last summer, when the editor visited the market, many cloth bosses showed envy of Vietnamese textile companies, saying that they were slow to receive orders there, with few receiving orders in 10 months. , many can be received by the end of the year.
In the blink of an eye, the old hen turns into a duck. Less than a year later, the situation has changed 180 degrees.
In March this year, Vietnam’s largest shoe factory Bao Yuan submitted a document to the relevant departments regarding the implementation of the recent 2400An agreement for workers to terminate their labor contracts due to difficulties with orders.
On March 27, “Vietnam Economic Review” reported: The order shortage at the end of 2022 is still It continues, causing many southern companies to continue to reduce production scale, lay off employees, and shorten working hours… There are already 7500 many companies have registered to suspend operations within a time limit, Suspension of business pending dissolution and completion of dissolution procedures.
TranThiThuDeputy Director of the General Account Statistics Department of Statistics Vietnam said that orders for textiles and footwear fell by 70% to 80%.
Vietnam is still the same Vietnam. How could it change so much in just one year?
Prosper from this
Southeast Asian countries are very suitable for the development of labor-intensive industries because of their dense population and convenient maritime transportation. Vietnam itself has a relatively stable political situation and a relatively high-quality population, so the textile industry has developed extremely rapidly in recent years.
In terms of policy, the political, economic and cultural game between the East and the West has become intense. Western countries, led by the United States, have always wanted to decouple from China to some extent. Southeast Asia and India are their ideal places to replace China’s manufacturing industry, so they have given Vietnam policy priority. Great convenience.
In the beginning, there was differential treatment in terms of tariffs. Later, some brands directly requested that the “origin” was not in China. Therefore, many overseas giants invested in foundries in Vietnam, and Vietnam’s textile development entered an accelerated stage.
decline from this
From the perspective of clothing companies alone, the cost of production in Vietnam is not necessarily lower than that in China. Now the monthly salary of skilled workers in Vietnam is over 3000 equivalent to RMB. There is also a gap between Vietnam and China in terms of supporting facilities. Therefore, many local garment companies choose to import fabrics from China and then make them into garments for export. They even went to Vietnam to put up a brand and get the name “Made in Vietnam”.
This extra cost is more due to political factors than commercial considerations, which would be okay in normal times. But starting from 2022, European and American countries will stop printing money, and various clothing brands will have a hard time. It would be good if they don’t lower prices, but it would be very difficult to make them pay unnecessary extra costs for this. Difficult.
In addition, Vietnam has policy advantages, as do countries such as Cambodia and Bangladesh. Vietnam has a first-mover advantage, but labor costs are also high. Orders with high quality requirements can be given directly to China, while orders with less high quality requirements can be sent to China with higher labor costs. Bangladesh, especially Bangladesh, is now the world’s third largest exporter of textiles and clothing.
Shrinking international environment
Of course, whether it is competition or cost, although it has an impact, it will not reduce Vietnam’s orders by 7% at once. The more factor is the international economic environment. In recent months, we have seen the storms of Silicon Valley Bank and Credit Suisse, which are only part of the spillover of international financial risks.
Money printing during the epidemic has led to serious inflation in developed countries in Europe and the United States. Residents’ spending power has shrunk significantly, and the demand for alternative consumer goods such as clothing has dropped significantly. Countries in need are in short supply of foreign exchange due to the Federal Reserve’s interest rate hikes, and do not have enough U.S. dollars to purchase textiles. . The problems encountered by China will naturally be encountered by Vietnam.
Chinese textile people said that demand after the beginning of this year has shrunk compared to previous years, and life is tight. However, domestic demand is recovering at least, and the market with a population of 1.4 billion people still has great potential. But unlike China, Vietnam’s textile industry is completely export-oriented and domestic demand is very limited. Therefore, if external demand falls and there is no guarantee of domestic demand, orders may be cut in half.
Awkward positioning
At this stage, Vietnam’s textile industry is in a relatively embarrassing situation. The advantages of policies in previous years have brought a large amount of investment to Vietnam.It has effectively developed part of the textile industry, but on the other hand, the large amount of capital inflow has not improved Vietnam’s hard power such as technology and infrastructure, but has caused real estate speculation. Hanoi’s housing prices are not inferior to those in first-tier cities in China. High investment has also caused Vietnam’s labor costs to rise sharply, causing Vietnam to lose its cost-effectiveness advantage compared with countries with similar conditions such as Bangladesh. On the high-end side, Vietnam still lags far behind China due to its lack of industrial chain and technology. The low-end ones have no advantage, and the high-end ones can’t compare. This situation is very difficult.
In the long run, the transfer of China’s textile industry is a general trend. Whether it is Vietnam or Bangladesh, they may be hit in the short term, but they will always develop in the long run. However, the development of supporting industries is much more difficult than that of garment manufacturing. For a long time, China exported fabrics and accessories and Southeast Asia made garments.
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