Things you should know about Investment shifting trend in China


Vietnam is a neighbor to China. In recent times Chinese enterprises have increased economic and trade cooperation with Vietnam. Along with the increase in Chinese investment in Vietnam, there is also a rapid expansion in bilateral trade. According to statistics of the General Department of Customs of China, in 2017, China-Vietnam trade turnover for the first time exceeded USD100bn, reaching USD121.3bn.

Even surpassing China-Malaysia trade turnover at that time reached USD96bn, becoming the number one trading partner of China in 10 ASEAN countries. In the coming time, economic cooperation between China and ASEAN countries will also enter a period of rapid growth.

Japanese media reported that the textile industry is an important area in which China earns foreign currency revenue. Especially the US is the largest market for China to export textile products, occupying the leading position in the country’s textile products exports. In 2017, the turnover of Chinese textile products exported to the US reached USD45.4bn. In particular, garment exports accounted for over 70% of the total, turnover of about USD33bn while textile materials accounted for nearly 30% of the total, turnover of about USD12.4bn.

However, up to now, the USD253bn of taxes imposed by the US does not include garments, so the impact on China’s textile industry is not great.

The textile industry cooperation between China and the United States has two characteristics: Firstly, a number of US investment companies in China have shifted production facilities. Famous fashion businesses and a number of US distribution businesses have invested in China for a long time worrying that the US-China trade war will escalate, therefore they are considering the shift of investment in China to establish production facilities outside this country. Now, the US has also used garments as punishment targets and imposed an additional 25% of the tax rate, until then, the impact will be quite large. So in the future, US textile enterprises in China will accelerate the transfer of production locations to ASEAN countries and regions. Secondly, Chinese textile enterprises also speed up the establishment of factories in ASEAN countries and regions. In fact, 10 years ago Chinese companies started investing to establish factories in ASEAN countries and regions. The reason is that China’s labor costs are constantly rising.

Meanwhile, the increasing number of countries joining ASEAN or signing a Free Trade Agreement (FTA) with ASEAN as well as foreign enterprises investing in the ASEAN region enjoy great preferential policies as well. promote Chinese businesses to speed up investment in Southeast Asian countries.

Japanese media quoted a Japanese business figure saying in January 2017 when the US announced its withdrawal from the Trans-Pacific Partnership Agreement (TPP) has now been renamed the Comprehensive Partnership Agreement and Trans-Pacific Progress (CPTPP), some people have said that investment in ASEAN will decline sharply, but the actual situation is quite the opposite, investment in ASEAN has increased significantly.

Although the United States intends to raise tariffs further and increase pressure on China, its businesses have shifted production facilities to Southeast Asia, so the impact that China must bear will not be too big. Moreover, it is believed that this trend of Chinese investment shift will be accelerated in the coming time.


Photo: File