Chinese firms to make investment in Vietnam textiles to take TPP benefits

The Trans-Pacific Partnership (TPP) of which Vietnam is a member is in the final stretch of negotiations, will lower import taxes in many large member economies like the US, Canada, Australia, and Japan. China is not a member. Import tariffs in the US, the biggest buyers of Vietnam’s leading export, textiles, will be cut from 17-32 percent now to zero. Chinese firms have started making their move into Vietnam to set up garment and textile factories to take benefit of the TPP.

The TPP will also impose many conditions like apparel has to be made using yarn and other materials produced in member countries to benefit from the tax breaks. As, Vietnamese garment manufacturers are not financially strong enough to invest in their own yarn and textile facilities, rely on China and other Southeast Asian countries for most of the feedstock.

Over the last month, it is seen that at least four textile and garment Chinese companies have registered their large-scaled investment projects in Vietnam.

Chinese textile group Yulun Jiangsu has already acquired investment license for a US$68 million on fiber production, textile and dying plant located in Bao Minh Industrial Zone in Vu Ban district of Nam Dinh province near Hanoi.

The factory covering an area of 8 hectares will go on stream from mid 2016 and produce 9,816 tons of yarn and 21.6 million meters of cloth and dye 24 million meters of both a year.

Nam Dinh authorities said that a Hong Kong investor has expressed the intention to build a garment and textile industrial zone on 1,000 hectares in the province.

In Ho Chi Minh City, Forever Glorious Company belonging to Taiwanese Sheico has committed a $50-million investment in a project to produce high end underwater sportswear clothing and accessories for water sports. The factory located in Dong Nam IZ will create jobs for 3,550 workers.

Gain Lucky Ltd, a subsidiary of Shenzhou International Group, specializing in making products for the world’s big brands like Nike, Adidas and Puma, has announced plans to invest $140 million in a project in HCM City for designing and producing high-end products.

According to Dr. Alan Phan, who is believed to have good experiences about Chinese economy that Chinese are looking to expand their investments in Vietnam, the nearest country, as the Chinese economy is predicted not to get big gains in comparison with the last year.

While according to Vietnamese well known economist, Dr. Le Dang Doanh, Chinese businesses have bought more and more stakes of the Vietnamese businesses in difficulties which have to call for more investments. He has warned that the companies will soon turn into Chinese companies, if Chinese can buy the amounts of stakes big enough to control the board of directors.