China'S Foreign Investment In Textile Industry

Author Xu Xu, vice chairman of the new China Textile Industry Federation

Main points

The transfer of overseas orders will inevitably lead to the transfer of manufacturing capacity to overseas. The US tariff increase initiative is trying to guide the existing global textile and garment supply chain to shift from China to Southeast Asia and South Asia.

The textile industry is a pillar industry in China's export earning. According to the customs data, according to the textile industry caliber statistics, in the first half of 2019, the total export volume of textiles and clothing in China amounted to 128 billion 400 million US dollars, accounting for 70% of the total contribution rate of China's goods trade surplus. Textile industry is a traditional pillar industry in China. It is also an important livelihood industry and a technology green fashion industry in the new era. Over the past forty years since reform and opening up, China's textile industry has taken the lead in building the world's leading modern manufacturing system of the whole industry chain, and has become the world's largest producer, export and consumer of fiber products. In recent years, China's textile industry has gradually entered the new stage of global layout. From the external environment, with the steady progress of the "belt and road initiative" and international capacity cooperation, as well as the rapid rise of textile and garment industry in many Southeast Asian and African countries, more and more Chinese textile enterprises are going out to sea. Meanwhile, because of the escalating Sino US Trade Frictions Since the beginning of May 2018, the United States is leading the brand buyers to transfer orders. In an attempt to shift the focus of the global textile and apparel supply chain out of China. The latter will pose a substantial threat to the sustainable and healthy development of China's textile industry, which deserves attention and vigilance.

Survey of foreign investment in textile industry

The foreign investment of China's textile industry is accelerating in a multi regional, multi industry and multi form manner, and the awareness of textile backbone enterprises to take the initiative to carry out international layout is constantly increasing. According to incomplete statistics, China's textile industry has more than 10 billion foreign investment stock, and overseas investment is distributed in more than 100 countries and regions, covering Southeast Asia, Africa, Europe, North America, Australia and other key regions, with annual sales revenue of more than ten billion US dollars. According to the statistics of Ministry of Commerce, from 2015 to 2018, foreign direct investment in China's textile industry totaled US $6 billion 230 million, accounting for 7.12% of the total foreign direct investment of manufacturing industry (see Table 1). The external investment of textile industry covers almost the entire textile and garment industry chain, and the main forms of foreign investment include green investment, equity acquisition, asset acquisition and joint venture and other typical FDI forms.

The practice of overseas investment practice of many textile enterprises shows that there are two main lines of development for overseas Chinese textile enterprises. A main line is that enterprises can cooperate in green production and cooperation to create a global rapid reaction manufacturing base mode of "China plus one belt and one road". The model is a typical example of Chinese textile enterprises investing in Southeast Asian countries and African countries. This kind of investment has kept and promoted the leading edge of China's textile industry in the global supply chain. Another main line is from the global integration of quality resources in the industrial chain. China's textile industry capital, through active overseas direct investment and mergers and acquisitions, and deep docking with international resources, will drive the textile industry to penetrate into the high value-added field of the world textile industry value chain as a whole. For example, in the upper reaches of high quality raw material resources control, Shandong Ruyi group's acquisition of Australia's Kirby cotton field, and the acquisition of Canada's new West dissolving pulp company by Fu Li Da group are typical cases. In terms of technology research and development, Jinsheng Group has acquired the world's textile machinery giant Ou Ruikang's natural fiber and textile machinery parts business. Tianyuan garments company of Suzhou has built a fully automated T-shirt production line in Arkansas, USA with the latest technology in the United States. In the field of terminal consumer brand acquisition, YOUNGOR, Ruyi, Song Li Si, Anta and other business groups have made more active attempts and outstanding performance.

Characteristics of foreign investment cooperation

In the process of foreign investment cooperation, China's textile industry embodies the following industrial and regional characteristics: first, cotton spinning and knitting enterprises have become the forerunners of overseas green space investment in China's textile industry, and overseas investment projects in weaving, printing and dyeing, weaving, chemical fiber and other fields have begun to increase. In the past few years, due to domestic cotton policy and import quota restrictions, to a certain extent, the competitiveness of China's cotton textile industry has been weakened. The domestic cotton textile enterprises are gradually exploring how to "go out" and become the pioneer of overseas green space investment in the textile industry. It is estimated that at present, Chinese cotton spinning enterprises only invest in Vietnam, such as Tianhong Textile Group, Shandong Lu Tai Group, and Bailong Oriental, etc., with an investment capacity of about 3 million spindles. By the end of 2018, only one group of Tianhong Group owns 1 million 380 thousand spindles in Vietnam. In addition, Dai Yin group has 220 thousand spinning projects in Malaysia, the cotton mill project opened by Cole group in the United States and the cotton spinning project in Jiangsu Jinsheng in Uzbekistan. At the same time, taking into account the labor-intensive characteristics of sewing links, knitted garment processing has become a hot front area for China's textile industry to invest abroad. Due to the low labor costs and favorable trade environment in Vietnam, Kampuchea and Burma, large scale knitting enterprises such as Shenzhou International, instant development group and Jiangsu Dong Du have invested in large scale greenbelt investments and international orders, and have completed the production of labor intensive features such as sewing. In recent years, enterprises such as di Shang Group, Lu Tai and Changzhou Hua Lida have gradually transferred the production of woven garments to Southeast Asia and overseas bases in South Asia. In addition to cotton spinning and clothing, the author has noticed that more and more domestic fabrics and weaving and dyeing capabilities are accelerating to overseas. Meanwhile, leading enterprises in China's chemical fiber industry have begun to make international layout, and their overseas business chains are continuously developing to the upstream industry. For example, Cixi Jiangnan Chemical fiber invested in reclaimed polyester staple fiber project in South Carolina, and Hengyi Group invested in Brunei new million tons of oil refining and chemical integration projects. Two, from the perspective of investment area, Southeast Asia is the key area for China's textile industry to invest abroad. The investment projects of textile industry in Europe and America, Africa and the "belt and road" are increasing year by year (see Table 2). China's textile industry presents a layout pattern of "mainland China + Southeast Asia + Africa" in terms of overseas productivity distribution. From the ranking of countries and regions that attract investment, Vietnam ranked second (Hongkong ranked first in China), attracting a total investment of 1 billion 71 million US dollars, accounting for 17.2%. The United States is the destination where China's textile industry has invested the most in the western developed countries, with a total investment of 214 million US dollars. Ethiopia and Egypt are the two most non investment countries in China's textile industry, with a total investment stock of US $185 million and US $147 million respectively. With the advance of the "one belt and one way" initiative, the textile industry has significantly increased investment in the "along the way" countries and regions.

It is noteworthy that Africa is becoming a new hot spot for China's textile industry to invest abroad. Jiangsu sunshine, Wuxi cotton, Inner Mongolia deer king and other domestic textile enterprises have invested in Africa. During the Beijing summit of China Africa Cooperation Forum in 2018, the Chinese government put forward the implementation of eight major actions. The first is to implement industrial promotion actions and encourage Chinese enterprises to strengthen investment in Africa, especially in the traditional and emerging fields such as manufacturing. Undoubtedly, this goal has accumulated strong kinetic energy for all-round cooperation in the field of textile and clothing in China and Africa. Three, a group of textile and garment enterprises are committed to becoming global multinational enterprises through active global vertical industrial chain layout and high-quality resource integration. Take Tianhong Group as an example. As one of the world's leading manufacturers of cotton textile products, Tianhong began to invest in Vietnam ten years ago. While maintaining the fast and steady growth of yarn business, it continued to expand the weaving, dyeing and fabric production lines, but also acquired the Taiwan denim textile denim garment business. Today, the group has formed the whole chain production system of spinning, weaving, dyeing and finishing, clothing integration, and has enhanced the overall profitability of the group. Tianhong Group has built a production base in China, Vietnam, Kampuchea and Nicaragua, with a production capacity of about 4 million spindles and 1400 woven and knitted looms. The typical enterprises that constantly push forward the internationalization layout include Lu Tai Group. Since 2014, Lu Tai has set up manufacturing bases in three countries, including Kampuchea, Burma and Vietnam, covering spinning, dyeing, weaving, finishing and garment processing. At present, Lu Tai's garment processing plants in Kampuchea and Burma have annual capacity of 6 million shirts and 3 million pieces respectively, and their Vietnamese garment factories are divided into three phases, with 9 million planned production capacity and 6 million parts from the first two phases. In addition, Lu Tai also set up a spinning and dyeing production base in Vietnam's Xining province. The first phase 60 thousand and two phase 76 thousand spinning production lines have all been put into operation. The dyed fabric has formed 30 million meters production capacity, and the other 40 million meter colored fabric expansion project is under construction. With the establishment of many manufacturing bases at home and abroad, Lu Tai Group has effectively enhanced the ability to provide quality services to global customers, and the international layout has been constantly improved.

Changes and challenges

At present, the domestic and international situation faced by China's textile and garment industry is grim and complicated. In particular, the escalation of Sino US economic and trade frictions and the comeback of the reverse globalization trend have brought severe challenges to China's textile industry's external trade, industrial structure adjustment and transformation and upgrading. First, the Sino US trade friction situation, the industry manufacturing capacity to accelerate the transfer of overseas, the industry's long-term sustainable development capacity is impaired. Since the implementation of the United States tariff collection list on 250 billion goods, the export products of China's textile industry are mainly textiles, yarns, fabrics, knitted and downstream industrial products, and some household textiles. In the first half of 2019, the total export volume of textile products added to the 250 billion list declined by 21.9% compared with the same period last year, showing a marked downward trend compared to the 0.66% decline in the US textile industry's exports to the United States. Especially for chemical short fiber and filament, carpet, industrial textiles and fabrics, exports to the US decreased by 20% - 40% compared with the same period last year. In August 2019, the office of the United States Trade Representative (USTR) again released a list of tariffs on 300 billion products, covering clothing, clothing, towels, bedding and other large household textiles. Under such a trading environment, China's textile enterprises are facing more trade substitution and investment transfer, and the large number of orders from the United States has shifted from China to Southeast Asia and South Asia. The impact on China's textile industry can not be underestimated. The transfer of overseas orders will inevitably lead to the transfer of manufacturing capacity to overseas. The US tariff levy is to guide the transfer of the existing textile and garment supply chain from China to Southeast Asia and South Asia. If fully assisted by the United States, Southeast Asian and South Asian countries are expected to successfully establish a more perfect textile industry chain system in 5 to 8 years. China's textile industry will face a very serious risk of international order loss, and at the same time, it may lose substantially the leading international comparative advantage in the textile industry. According to the Ministry of commerce data, in 2018, the overall foreign investment of China's textile industry slowed down, down 17% compared to the same period last year, but the investment volume of the key countries along the belt and road, such as Indonesia, Vietnam, India and Kampuchea, increased by 256%, 116%, 22.3% and 14% respectively. There are many overseas textile enterprises that are worried about the situation of Sino US trade friction. Two, the competition of the international comparative advantage facing the textile industry is becoming increasingly fierce. Under the background of the global total demand growth is weak, China's textile and garment industry is facing the practical difficulties of rising comprehensive cost, shortage of industrial workers and resource and environment constraints, and the leading international comparative advantage has been significantly weakened. At the same time, the global trade policy reform is deeply affecting the supply chain remodeling of the global textile industry. Some regional trade agreements also pose a great challenge to the healthy development of China's textile industry. If the bilateral FTA signed by Vietnam and the EU will enhance the competitiveness of Vietnam's textile and clothing exports to the European Union, the European Union and Japan will accelerate the transfer of some international orders from China through giving preferential preferential tariff policies to some Southeast Asian countries. A new round of industrial revolution and consumption revolution in the world is beginning to show. It shows that China's textile industry is very urgent to break through the low end of the value chain. At present, China's textile industry occupies a dominant position in the manufacturing chain of the global supply chain, but it still lacks the dominant position in the high-end textile industry value chain, such as intelligent manufacturing core technology, global high-quality raw material resources control, aesthetic original design and fashion leading ability, international brand and market channel control. With the rapid and large-scale penetration of overseas consumer goods fashion brands in the Chinese market in recent years, the pressure on capital accumulation and development potential of domestic clothing brands has become increasingly prominent. In the future, the high quality development of China's textile industry will face many challenges.

Opportunity and vision

For China's textile industry, "six corridors, six roads, many countries and many ports" (six corridors) refers to the six major international economic cooperation corridors of the new Eurasian Continental Bridge, China, Mongolia, Russia, China, Central Asia, West China, China, Central South Peninsula, China Pakistan and Bangladesh, China, India and Burma. The six way refers to the comprehensive information network of railways, highways, shipping, aviation, pipelines and space. In the early stage of cooperation, "multi port" refers to a number of cooperative ports that guarantee the safe and smooth passage of maritime transportation routes. It points out that the overseas key investment areas and countries, especially the "China South Central peninsula" in the six major economic corridors, is the investment gathering place of China's textile industry's capital green space, and the economic corridor of China, Pakistan, China, India, Burma and China Central Asia is also rich in developing the textile industry. Factor resource endowment. In Africa, such as Ethiopia, Egypt and other pilot and demonstration countries, also have great potential to develop the textile industry. The "five links" index system of "one belt and one road" is accelerating the construction of a deeply integrated international and domestic market and a more suitable offshore investment environment. It can provide better quality factor resources supply and unified market for the linkage layout of domestic and foreign textile enterprises. With the input and mutual commitment of many political, diplomatic and economic resources, it will also create a safe and stable medium and long term economic and geographical environment for our textile enterprises in the countries along the line. At present, the world is undergoing a great change in the past hundred years. Under the joint promotion of technological innovation and trade and investment cooperation, the global industrial chain, supply chain and value chain are deeply intertwined, and the division of the global industrial division is reshaping, and international competition is becoming increasingly fierce. But the general trend of world development is still "open sharing, win-win cooperation". To successfully achieve the strategic goal of building a strong textile country, we must take advantage of the global perspective to take advantage of transnational resources allocation and control. We need a group of genuine textile transnational conglomerates to go abroad, grow up and mature on the world stage, and develop into a global conglomerate with continuous profitability and innovation capability. This also requires the joint efforts of Chinese textile people, textile enterprises, trade associations and government departments.