CPTPP takes effect Vietnam or become a bigger winner

The Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) came into force on December 30, 2018 in Japan, Canada, Australia, New Zealand, Mexico and Singapore, and officially entered into force on January 14, 2019 in Vietnam. In addition, Brunei, Chile, Malaysia and Peru will begin implementation of the agreement 60 days after the completion of the agreement approval process.

It is reported that the CPTPP agreement country accounts for 13% of gross domestic product (GDP) and involves a population of over 500 million. After the official entry into force of CPTPP, Japanese officials told the media that in 2019 Thailand and the United Kingdom might join the negotiations of this agreement and become a new signatory to the agreement.

CPTPP

The Comprehensive Progressive Trans-Pacific Partnership (CPTPP) is the new name for the United States to withdraw from the Trans-Pacific Partnership Agreement.

On November 11, 2017, 11 Asia-Pacific countries that initiated the TPP negotiations jointly issued a joint statement announcing that “a fundamental and important consensus has been reached on the new agreement” and decided to change its name to “Trans-Pacific Partnership”. Progress Agreement (CPTPP).

On March 8, 2018, representatives of 11 countries participating in the negotiations on the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) held an agreement signing ceremony in Santiago, Chile.

On December 30, 2018, the Comprehensive and Progressive Trans-Pacific Partnership Agreement entered into force.

The impact of CPTPP on the Vietnamese economy depends to a large extent on Vietnam’s ability to seize opportunities and overcome challenges. CPTPP gradually eliminated 98% of agricultural and industrial product tariffs, relaxed investment regulations and strengthened protection of intellectual property rights. Joining CPTPP has brought an unprecedented market to Vietnam, and “Made in Vietnam” has become a bigger winner.

Vietnam's accession to the CPTPP is a concrete measure by the Central Committee of the Communist Party of China to implement the policy of integration into international integration, confirming the role and geopolitical status of Vietnam in Southeast Asia, the Asia-Pacific region and countries. Being a member of CPTPP is of great significance to Vietnam's use of external resources and integration of domestic advantages to effectively serve domestic construction, national defense and development.

According to the calculation of the National Center for Social and Economic Information and Prediction of the Ministry of Planning and Investment of Vietnam, by 2035, CPTPP will increase Vietnam's GDP by US$1.7 billion and increase exports by more than US$4 billion, up by 1.32% and 4.04% respectively. The agreement will open up new opportunities for Vietnam's trade and create more impetus to promote domestic economic restructuring and improve the business environment.

China's textile and garment industry is worthy of vigilance

The people in this land of Vietnam are not only hardworking, but also full of vitality. At present, the number of young and middle-aged people is about 30 million. The population of China is aging, and the population of Vietnam is relatively young. For a long time, Vietnam will maintain this advantage and the competitiveness of the labor force will increase.

In the textile sector, "Made in Vietnam" is now quietly crowding the market for "Made in China".

In 2009, Nike's Vietnamese foundry completed a comprehensive transcendence of China's production capacity;

In 2012, Adidas' last mainland China factory was closed in Suzhou;

In April 2018, Uniqlo announced that China's production capacity will shift to Southeast Asia, and Vietnam will bear 40% of its total production.

Not only foreign brands, but also attracted by the cheap labor, many shoes and hats and clothing enterprises that were originally rooted in Guangdong and Fujian, China, set off a wave of moving factories to Vietnam. Chinese textile and garment companies have also accelerated their pace of moving to Vietnam. Chinese down jacket manufacturer and distributor Bosideng will also expand production in Southeast Asia. With the capital cooperation relationship with ITOCHU Corporation in Japan, Bosideng began pilot production at a textile factory in Vietnam related to ITOCHU Corporation, and plans to further expand production based on production trends.

The reason for the transfer is not complicated, because the labor cost to Vietnam can be as low as 50%. The average monthly wage of production workers in Vietnam is $216. Moreover, according to World Bank data, Vietnam is one of the countries with more labor force in Southeast Asia, with 57.5 million workers, while Malaysia and the Philippines are 15.4 million and 44.6 million respectively.

In the context of Sino-US trade frictions, China’s foreign trade orders are struggling, and Vietnam is striding forward, which cannot but cause industry vigilance.

Vietnam jumps to the world's third largest textile and apparel exporter

On December 26, 2018, the "Vietnamese Newsletter" reported that Li Jinchang, general manager of Vietnam Textile and Garment Group, said at the press conference that Vietnam's textile and apparel exports reached US$3.6 billion in 2018, a year-on-year increase of 16%. This figure shows that the textile and garment industry in Vietnam has achieved growth not only in quantity but also in quality. It is worth noting that Vietnam has become the world's third largest exporter of textiles and clothing, second only to China and India.

Li Jinchang said that the breakthrough factor in promoting the export of textiles and garments in 2018 is that the textile and garment production bases of various countries have shown a trend of shifting from China to Vietnam. At the same time, foreign big companies have also seen Vietnam's better investment opportunities than India and Bangladesh.

Based on the above results, Li Jinchang commented that the results achieved in 2018 were brought about by the implementation of various strategies for many years, including investment in the construction of international-level production facilities, the use of green technology, care for workers, and thus win customers' preferences.

2.5 billion built "all-round fast anti-factory"

"Chinese enterprises must go two ways to be bigger and stronger: one is to take advantage of China's 1.4 billion people, and to upgrade the industry in the process of keeping up with consumption. The other is to "go out" to lay out national markets." Sun Wei, who is known for his prudent and prudent investment, said: Vietnam is the “One Belt, One Road Bridgehead” that Chinese textile and garment enterprises have to lay down.

According to the announcement of Huafu Fashion, the company plans to invest in a new yarn project through its subsidiary Huafu Vietnam. The project is the first phase of the company's planned 1 million spindle new yarn project with a production capacity of 500,000 spindles and a total investment of 2.5 billion yuan. The source of investment funds is the company's self-raised funds.

Huafu has been deeply involved in Vietnam for four years. In 2013, Huafu established a subsidiary in Long'an Province, becoming a foreign-invested enterprise with a large investment scale in Longan. The company also has an overseas production base earlier. Up to now, Huafu Vietnam has high-quality dyeing and spinning equipment in the industry, built 280,000 spinning capacity, dyeing capacity of 20,000 tons, research and development center of 2,000 square meters, supporting production and living facilities of 110,000 square meters.

The new journey is immediately open. As the world's largest new yarn manufacturer and supplier, Sun Weiting said that Huafu has positioned the Vietnamese company as a “Southeast Asian all-around rapid response” base, close to major international customers and producing standardized products. Compared with domestic, Vietnam's local orders are shortened by 12 days, and orders from Bangladesh, Hong Kong and South China are expected to be shortened by 2-4 days. Competitive advantages can be achieved through quality differentiation, product differentiation and cost differentiation.

At present, the five major production bases of Huafu Zhejiang, Changjiang, Huanghuai, Xinjiang and Vietnam have their respective focuses, and the trend of capacity transfer to Xinjiang and Vietnam is obvious. In the future, Zhejiang is positioned as China's “Italy” and has become “the capital of fashion design”. The “Net Chain Headquarters” established by Huafu in Zhejiang Shangyu is a demonstration base for fashion industry; at the end of 2018, the company has a high-quality long-staple cotton production base in China. The production capacity of 1 million ingots in Xinjiang Aksu will also be completed and put into production, and the domestic consumption upgrade and the export markets of Central Asia and Europe will be launched.

As for the recent source of self-raised funds of 2.5 billion yuan, Sun Weiting said that it can consider raising funds from Vietnamese companies' own funds and overseas financing methods, and does not rule out domestic equity financing. In view of the financing liabilities of private enterprises that are generally concerned about the market, the shareholdings of listed companies held by Huafu Holdings are not pledged, and the debt ratios of listed companies and groups are maintained at 50%-60% of the manufacturing health level.

Earlier, Sun Weiting said that the company's capacity expansion "does not have an upper limit." Data show that as of the first half of 2018, Huafu Fashion's production capacity reached 1.88 million spindles, an increase of 12.57% compared with the same period of 2017, and the overall production capacity is expected to continue to increase to 2 million spindles.

In the process of reform and opening up in the past forty years, the industrial zone model has become the soil for the rapid development of Chinese enterprises. Nowadays, overseas industrial parks have become an important part of the “Belt and Road” construction, and many Southeast Asian countries have begun to use the industrial park model. Trying to drive your own industrial development.

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