For Texhong Textile Group, even as uncertainty looms over the free trade pact, the company is firmly committed to further expansion in its southern neighbor. Texhong, one of the world’s largest yarn suppliers, has been aggressively building up production capabilities in TPP signatory Vietnam. Founder and Chairman Hong Tianzhu has said one of the main intentions of investing there is to deal with the trade agreement. But even without the TPP, the competitiveness of the Vietnam operation “is very strong, among all Southeast Asian nations and even compared to Chinese production bases.”
Vietnamese production has at least three advantages besides the TPP.
(1) Favorable tariff rates. Even before the TPP, tariffs on yarns exported from Vietnam to Japan, South Korea and Europe were lower than from China.
(2) Production costs. “Compared to China, its labor, electricity and other costs are lower in Vietnam.”
(3) The factory’s location is “very good.” Its Vietnamese production complex sits in Quang Ninh Province, which is adjacent to China’s Guangxi Zhuang Autonomous Region. This enables the company to include its Vietnamese factory in a production chain already established in southern China. And being close to the port makes exporting convenient.
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