As the cost and location advantages of Southeast Asian production areas become more apparent, the expansion of Chinese textile enterprises to Vietnam and other Southeast Asian countries has become a trend. How will the trade war affect China’s textile industry? What textile sub-sectors are still growing? What companies are investing in Vietnam?

1. Industry Report: Textile Industry
(May 2019)
May 2019
Table 1: YoY growth rate for China’s textile and apparel
products in terms of product value (%)
Textile exports declined in April 2019
According to the China customs data, the total export
volume of China's textile and clothing in April 2019 was
19.4 billion US dollars, down 8.84% YoY, with textiles
decreasing 6.93% and clothing 10.7%.
For January to April, total export volume for textile and
clothing was 75.76 billion US dollars, down 3.69% YoY.
Textile exports increased by 0.81% YoY, while clothing
exports decreased 7.56% YoY. Both segments had slower
growth than the same period in 2018 (Table 1).
Retail Market for Textile/Clothing Products Still
Growing
According to the National Bureau of Statistics, the total
retail sales of consumer goods in March 2019 was 3.17
trillion yuan, a year-on-year increase of 8.7%. Among
them, the retail sales of clothing, shoes, hats and other
textiles increased by 6.6% year-on-year. In the first
quarter of 2019, China’s tax reduction policy boosted
consumer confidence. Those first and second tier cities
had stronger consumption in particular.
In terms of textile products, March data shows that yarns
and fabric sales appear to be recovering from their drop
experienced in January and February of this year. The
increase in output may point to a recovery of
downstream orders.
Upstream raw materials
From the beginning of 2019 to May 2019, the price of
National Cotton 328 has increased by 1.78% to 15,671
yuan / ton (Table 4). According to the USDA forecast in
May, China's cotton production and consumption in
2018/19 were 6.04 and 9.03 million tons respectively,
signifying a demand gap of 2.99 million tons. This part of
the gap will be mainly met by imports.
China’s National Development and Reform Commission
will increase the import slip tax quota of 800,000 tons
this year, and the USDA expects China's annual cotton
import volume to be 2.395 million tons. According to
reports, China’s short-term market supply of the national
reserve cotton has increased, but in the long run, the
cotton supply and demand pattern is generally tight.
Table 3: Cumulative sales growth of major textiles products
(YoY: %)
Table 4: China Cotton Price (328) Index Trend (yuan/ton)
Source：China Textile Association ,China Statistics Bureau
Table 2: Retail sales growth of clothing, shoes, hats for retail
enterprises above designated size since 2017 (YoY: %)

2. Overseas production capacity increase
As the cost and location advantages of Southeast Asian production
areas become more apparent, the expansion of Chinese textile
enterprises to Vietnam and other Southeast Asian countries has
become a trend. It is expected that Vietnam’s production capacity
will continue to increase in the future due to future investment.
Vietnam expects to reach 40 billion USD in terms of textile exports
in 2019, a 11% YoY growth.
This trend is evident in recent investment by Chinese listed
companies. Since 2013, many Chinese listed companies have
announced factory investments in Vietnam and other Asian
countries, with some Chinese companies setting up one third of their
global capacity in Vietnam. This ratio is expected to increase in
coming years.
Company Name Region Overseas Production News Ratio of Overseas
PRoduction
Bai Long 百隆东⽅
(601339.SH)
Vietnam
First Phase in November 2012 (100,000 spindles); Second Phase in January
2014 (200,000 spindles); Third Phase (April 2015) put Vietnam's total output to
500,000 spindles; Plans to add another 500,000 spindles i next three years.
45%
Lu Tai 鲁泰A
(000726.SZ)
Vietnam
In 2017, the first phase of its Vietnam project was completed (30 million-meter
yarn-dyed fabric project and a 3 million shirt project). In 2018, the second phase
was built (76,000 spindles, 40 million-meter yarn-dyed fabric, and the second
part of the 3 million shirt project).
Cambodia
In December 2013, the first phase (3 million shirt project) was put into
production; in November 2015, second phase (3 million shirt project) was
completed.
Myanmar In 2015, a 3 million shirt project was completed in Myanmar.
Hua Fu Fashion
华孚时尚
(603558.SH)
Vietnam
At the end of 2017, about 300,000 spindles of yarn capacity have been put into
production; in December 2018, it was announced that it plans to build another
500,000 spindles.
20%
Jian Sheng
健盛集团
(603558.SH)
Vietnam
In March 2015, Jian Sheng invested in a cotton socks facility (40 million pairs).
In 2017, a second phase was completed (130 million pairs of medium/high-
grade cotton socks and 15,000 tons of textile printing and dyeing project). In
2018, a high-grade cotton sock line was completed (6,500 pairs), making the
production capacity in Vietnam around 140 million pairs. In December 2018,
Jian Sheng announced that 200 million RMB will be invested for the
production base of 90 million pairs of cotton socks and 250 million RMB for a
seamless knit underwear production base (18 million pieces).
1/3
Shen Zhou
申洲国际
(2313.HK)
Vietnam
In 2017, the fabric materials production capacity reached 190 tons/day, and in
2018, it was increased to 300 tons/day. In addition, a garment factory has
already started production in the first phase, and the second phase is expected to
be put into production in 2019.
Raw Material
40%；Clothing
30%
Cambodia
In 2018, a new garment factory was put into operation, with an estimated scale
of 1,000-2,000 people.
Tian Hong
天虹纺织 (2678.HK)
Vietnam
In 2017, Tian Hong’s Vietnam production capacity reached 1.25 million
spindles in Vietnam; in 2018, it plans to add 220,000 spindles. 40%
Lian Fa
联发股份
(002394.HK)
Bangladesh
Its Bangladesh factory has already been put into production and is responsible
for mass production of large goods.
-
Cambodia Lian Fa has 2 Cambodian subsidiaries engaged in shirt production.
Table 6: List of Southeast Asian Capacity Distribution of Leading Enterprises in China's Textile Industry
Source：Qian Zhan Research 前瞻产业研究院整理理
2016 2017 2018 2019E
Vietnam’s Global
Textile and Clothing
Exports
28.7 31.1 36.1 40.0
Growth 8% 16% 11%
Table 5: Growth in Vietnam’s Textile Market (billion
USD)
Vietnam’s key textile export markets include the United
States, Japan, China, Korea, and Germany.
Source: World Bank

3. Growing Sub-sectors: Children's Wear / Sportswear
Benefiting from consumption trends and the second-child policy dividend, China's children's wear market is still experiencing
positive growth. It is estimated that the market size of the children's wear industry will exceed revenue of all the other clothing
sub-sectors. In the below chart (Table 6), growth is expected to be around 5.5% in 2019.
In addition to children's wear, another growing sub-sector is sportswear. In recent years, the China government has issued a
series of policies to promote physical fitness, athletics and domestic sports. These policies have had a positive impact on
sportswear demand. The sportswear market consists of three key composites: the professional training apparel market (33%),
outdoor apparel market (17%), and sports-derived apparel accounts (50%). In the Table 7, sportwear maintained a 9-10% growth
in 2018, which is above most other textile segments.
US-China Trade War Update
On May 10, 2019, the United States added a 25% tariff on the Chinese goods worth US$200 billion. This will impact specific
parts of the textile industry including yarns, fabrics, industrial finished products and some household textiles. It is estimated that
those textile sectors impacted could be around 4 billion US dollars. Considering that China's total textile industry has exports of
more than $270 billion a year, the overall impact to the industry is around 2%, making it a small amount. However, according to
World Bank Statistics, China’s textiles and clothing exports accounted for about 37% of textile imports to the United States
(2017 - China Imports - 42.5 billion USD vs Total Imports - 114 billion USD). Despite efforts by US purchasers to find cheaper
suppliers in countries such as Vietnam, India, and Mexico (See Chart 8), the immediate impact could cause US consumers to pay
higher costs for their textile products (See Table 9).
On May 13, the Office of the US Trade Representative announced it is planning an additional 25% tariff on about 325 billion US
dollars on Chinese goods, including other textile industry exports such as domestic textiles and some textile machinery products.
This amount is expected to be more than $40 billion. The United States is currently seeking public comment on the list and will
hold a public hearing on June 17. If this part of the commodity tariff is imposed, it could also have an impact on China’s
domestic textile industry.
Table 8：2012-18 China’s Athletic Clothing Market
Size（100 million RMB，%）
Table 7：2013-2019 China’s Children Wear Sales and
Forecast (100 million RMB，%）
Table 9：Impact on Consumers in the United States’
Consumer from Tariffs (Athletic Shoes/Children’s Shoes)
Athletic Shoes Children’s
Shoes
Retail Price（Prior to
25%）
HK$48.18 HK$13.96
Retail
Price（Following
25% Hike）
HK$60.93 HK$18.36
Real Price Increase
for Consumers
26% 32%
Table 8: Trend in Textile Exports per Country to the United
States from 2014 to 2017 (billion US dollars)
2014 2017 CAGR
China 43.0 40.9 -1.3%
Vietnam 9.9 12.3 5.4%
India 7.4 8.2 2.6%
Bangladesh 5.1 5.3 1.1%
Mexico 5.5 5.5 -0.2%
Indonesia 5.3 4.9 -1.6%
Sources: World Bank, Quartz, Euromonitor, Qian Zhan

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