Vietnam's 16,200 knitting factories are closed! The industrial chain cannot be self-sufficient

Insufficient raw material inventory, Vietnam's 16,200 knitting factories are closed! The industrial chain cannot be self-sufficient

After creating a good result of 7% economic growth rate last year, Vietnam ’s economy seems to be weak, and import and export data in January were relatively bleak. According to statistics from the Statistics Bureau of Vietnam, Vietnam ’s exports in January fell 1.3% year-on-year, and the market is expected to grow 5.5%; imports in January increased 3.1% year-on-year, lower than market expectations of 3.5%. Although the economic data rebounded slightly in February, insufficient stocks of domestically made raw materials in Vietnam caused many sweater factories in Vietnam to suspend business, which will have a greater impact on Vietnam ’s future exports.

According to the latest statistics from the General Statistics Office of Vietnam, in the first two months of 2020, there will be 11,900 resumption companies in Vietnam, a year-on-year increase of 17.1%; nearly 16,200 factories will be suspended, an increase of 19.5%. In addition, the number of Vietnamese companies that are applying for bankruptcy, suspension of bankruptcy, and direct non-operation have increased significantly, with 3841, 1186, and 2215 non-operating companies directly.

According to European foreign investment analysis, due to labor shortages, salary increases and soaring land costs, Vietnam's largest apparel OEM with production capacity, Vietnam's low-cost production advantages have gradually been lost. The fundamental reason why Vietnam is currently a hot spot for global investment is its low cost as a foundry.

In addition, currently 16,000 factories in Vietnam are suspended, which means that Vietnam's foundry business cannot be restarted in a short period of time. This also reveals an important problem in Vietnam's manufacturing industry: the industrial chain cannot be self-sufficient. According to the Vietnamese factory, most of the Vietnamese factories' stocks of auxiliary materials (textile raw materials) are only enough for production in January. Once China suspends supply, many Vietnamese factories will continue to face closure. This means that in the future, it is likely that more than 16,200 factories will be shut down in Vietnam.

The advantage of China is that China is the only country in the world with all industrial categories, with a complete range of industries. From the textile industry to the high-tech electronics industry, from raw materials to finished products, China's entire industrial chain is online. During this special moment during the epidemic, the entire industry chain made Chinese manufacturing temporarily self-sufficient, while many countries could only suspend production due to insufficient stocks.

In fact, there are many factories and industries in the world that have temporarily suspended operations because China has suspended the supply of raw materials. According to the latest statistics from the Cambodian Ministry of Labor, as of March 3, a total of 33 textile factories in Cambodia have applied for suspension of work, and nearly 20,000 workers have been affected. At present, China is doing its best to coordinate and help restore the normal supply of raw materials as soon as possible. It is reported that about 80% of the resumed Chinese factories have been able to meet about 80% to 90% of Cambodia's raw material demand by the end of this month.

However, prior to the release of data on Vietnam's closed factories, Tao Hui, CEO of Texhong Vietnam, the Chinese yarn maker that dominates the global textile industry, revealed that the company's plan to invest another $ 500 million in Vietnam in 2020 remains unchanged. At present, Texhong's Vietnam factory has resumed normal operations, and production capacity has been restored by 97% to 98%, creating nearly 20,000 jobs in Vietnam.

In fact, Texhong Group is willing to continue investing in Vietnam as planned, and it cannot do without Vietnam ’s sincere and full commitment. In order to obtain this large investment, Vietnam expressed its willingness to strongly support the development of the company in Vietnam. At present, Vietnam has suspended the Chinese visa, so Rainbow has asked Vietnam to allow Rainbow's experts and personnel to enter Vietnam, while speeding up customs clearance procedures.

However, under the circumstances of Vietnam's downturn at this time, Texhong Group still desperately invested in Vietnam also lies in the fact that the company itself is the main supplier of Vietnamese textile raw materials, accounting for 43% of its raw material share. This is obviously enough to allow Rainbow to ensure that its sweater factory in Vietnam is not subject to raw material supply restrictions.