When the world reopens.
A month ago, Vietnam’s Ministry of Labor received a large number of calls from companies, applying to extend overtime hours and “snatch back the lost two years.”
There were not only business owners who called, but also many workers who volunteered to work overtime because they could increase their income and get free milk snacks. Serious inflation and massive orders have arrived together, and the prices of eggs and other commodities in Vietnam have doubled. However, workers have no time to worry. “You can only make money if you start working.” The roar of restart spread to major industrial parks.
In the past three years, the world has undergone frequent changes, and Vietnam seems to be waiting for new opportunities. It attempts to copy the Chinese story and become the new center of the world’s factory. In 2021, 51% of Nike’s sports shoes are produced in Vietnam, followed by Indonesia with 26%, and China with 21%. In the same year, Vietnam exported US$57.54 billion in various types of mobile phones and parts, and one-tenth of the world’s smartphones were manufactured in Vietnam. In March this year, China’s total exports of goods were US$276.08 billion, a year-on-year increase of 14.7%; Vietnam’s exports of goods were US$34.06 billion, an increase of 45.5% (a net increase of US$10.64 billion), already surpassing Shenzhen (Shenzhen’s exports in March were US$24 billion). It is very close to Guangdong province’s export volume of US$57.75 billion.
The person in charge of the Vietnam Foreign Business Association regards the early opening as a precious window of time and “efforts to attract investment. This is giving Vietnam an opportunity.” More and more media and scholars are beginning to look at Vietnam and pay attention to its future trends. Vietnam’s replacement for China’s manufacturing industry is mainly the textile industry, agricultural products, etc. Judging from the product production locations of world-renowned apparel companies such as Uniqlo, Nike, and Adidas, most of them have shifted to countries such as Vietnam and Myanmar. In addition, a large number of electronics and home appliance manufacturing industries have also moved their industrial chains to Vietnam. Compal, Dell, Samsung, LG, etc. have all built factories in Vietnam, and their supply chains have also moved to Vietnam. This has a great impact on China’s Pearl River Delta manufacturing industry. It’s a huge challenge.
At the same time, there are reports that Li Ka-shing’s Cheung Kong Holdings and Japan’s Orix Group, through their local Vietnamese partner Van Thin Phat Group, held an important meeting with Pan Van Mai, Mayor of the People’s Government of Ho Chi Minh City, to discuss investment matters in Ho Chi Minh City. Li Ka-shing also began to plan for Vietnam.
From the perspective of the textile industry, Vietnam’s textile and apparel exports have achieved a strong recovery. First, they benefit from the clothing demand in the European and American markets and China’s increased investment in Vietnam’s textile industry; second, they benefit from the rapid vaccination of Vietnam’s domestic vaccines and the COVID-19 epidemic. The relaxation of pneumonia epidemic prevention and control measures; third, the entry into force of RCEP at the beginning of this year, as well as the tariff preferences brought by the EU-Vietnam Free Trade Agreement and the UK-Vietnam Free Trade Agreement, have enabled Vietnamese textile and garment companies to increase their entry into Europe this year market strength. These factors have played a key role in the recovery of Vietnam’s textile and garment industry.
But at the same time, it is undeniable that in 2021, the world will be troubled by the epidemic. Due to the best domestic prevention and control, it has attracted global textile and clothing orders. In addition, the domestic economic recovery momentum is good, and the domestic demand market has also maintained a rapid growth momentum. At that time, the spinning profits of domestic textile companies were at a historical high. The profits stimulated textile companies to actively expand production scale, and textile demand increased significantly. In short, it is the resonance of external demand and domestic demand that has created the market situation of raw materials. Now it is the turn of foreign countries to perform. It can be said that the situation is changing.
At present, my country is strictly controlling the epidemic, resulting in the loss of textile and clothing orders, while foreign textile companies have received a large number of orders lost from China. At the same time, Southeast Asian countries have relaxed epidemic control, and textile companies’ operating rates and profits have remained high, resulting in a surge in demand. India Companies in China, Vietnam and other countries have received orders in the second half of the year. Although international cotton prices have soared and their production has also been affected, textile profits are still better than domestic ones due to lower labor and other costs.
When will the market usher in a turning point? From a fundamental perspective, domestic raw materials are showing signs of weak growth due to textile losses and reduced orders. The same applies abroad. If the price of raw materials continues to rise, when the downward transmission of prices is blocked and textile companies suffer losses, they will definitely reduce their startups and reduce losses. With the arrival of the May Day holiday, it is understood that many local companies in Nanyang, Henan have decided to suspend work and take holidays. According to the analysis of an industry insider, based on past experience, this year is the longest May Day holiday for textile companies. The holiday period is from May 1 to 6, which is three times as long as before. In addition, due to the poor market conditions this year, most textile companies have increased their holiday days to reduce inventory and reduce risks.
All in all, with the decline in industrial and manufacturing capacity utilization and the skyrocketing prices of energy and raw materials, in addition to the “increased outflow” of foreign trade orders in my country, there is also another new pressure that cannot be underestimated – a sharp increase in canceled orders.
Guan Tao, global chief economist of BOC Securities, said that the current economic situationThe industry faces greater uncertainty and challenges. From an external perspective, geopolitical conflicts have intensified and the momentum of global economic recovery has been weakened, which may accelerate the narrowing of my country’s trade surplus.
At the same time, although China’s economy has taken the lead in resuming work and production, our export pricing ability is limited. For example, some foreign businessmen are worried that logistics is not guaranteed, so they will place many orders at the same time. Whoever delivers the goods first will pay the balance to whomever, and he will lose the most deposit. But this will create competition among domestic exporters.
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