China and Vietnam both have different ways of functioning and opt for different methods to achieve successful results. The textile industry in China is the largest on the globe in terms of exports and overall manufacturing. The industry continued to develop at a slow pace until the Sino-Japanese war. Textile mills in Vietnam are an important part of the development of the country and the industry is a major contributor to the economic progress of the country, accounting for about 18 % of the exports and 15% of the total GDP of the Republic of Vietnam.
This has helped Vietnam develop its social-economic success. It is among the top 5 textile and garment producing and exporting countries in the world and is highly likely to observe further progress in the same. This is due to the technological advancements and innovations, availability of a higher number of manual labor, and favorable business policies issued by the government of the country.
Clothing manufacturers in Vietnam produce a diverse range of products and a mixture of dispersed electric mills and the weaving sector.
Earlier, the low labor cost acted as an important aspect of advantage in attaining a market share of some exports over other exporting countries. Other advantages that China had in respect to other developing countries were high productivity, well-built social infrastructure, and efficient management of the supply chain.
Looking at the economy of both countries, it is definite that China has a more developed status whereas Vietnam is still a developing country with many factors that require attention. Vietnam has modest international competitiveness with other countries and the factors affecting this are technology, labor, quality of products, market, customs, tariffs, financial policies, and materials used in the input.
Vietnam has some advantages over China and this raises the country's brand in textile manufacturing and export. These features are stable politics, cheap input cost, and progressing liberalized trade and investment policies. Some disadvantages that limit apparel manufacturers in Vietnam from going ahead of wholesale clothing manufacturers in China are its high dependence on foreign investment for production and small size population.
As of 2020, China's export value in selling garments and other related accessories was worth 13 7.4 billion US dollars, accounting for an 8.6 % loss compared to the previous year. Over the last few years, the United States of America has been Vietnam's top export target for textile and garment export, accounting for more than 40% of its total textile export value every year. Vietnam also exports to other countries including South Korea at 7.8%, European Union at 12.5%, and Japan at 10.2%.
Trade and labor rules and regulations
For the textile industry, the average tariff rate in China was cut down from an initial 11.5% to 8.4%. Tariffs on textiles and clothing have been higher as compared to other manufactured commodities.
Apparently, amid the pandemic, Vietnam has experienced a lot of advantages due to good regulation of the coronavirus. It has helped the Vietnam clothing manufacturers to maintain their economic stability and exports have increased by 6.4 %, accounting for 229 billion dollars in 2020. The overall textile export market has observed a dramatic increase over the last decade.
Due to the rise of the pandemic in China, countries and other global companies have reduced their dependency on China for textiles. This acted as an advantage for Vietnam and helped increase GDP growth providing it with a better chain for supply and infrastructure as compared to other countries. Other areas of advantages for Vietnam as compared to China are raw materials and manufacturing inputs.
Cost of labor
Labor cost in China was estimated to be around 5.51 US dollars in 2018, whereas 2.73 US dollars in Vietnam. The value of the textile industry in Vietnam is around 37.9 3 billion US dollars. The country focuses on the development of factors that are globally more viable and have helped in the progress of the distribution network. The demand for Vietnam's textiles has increased in the local and international markets.
The efficiency of the countries
The economic efficiency of Vietnam is based on a few particular factors such as the country's step towards the opening to liberalization, complementing external liberalization with other domestic reforms, opting for lower cost of conducting business, and through deregulation. Vietnam has also invested huge capital in the development of labor in the country through public investment.
The economy of China is a very well built and developed one but it has faced difficulties due to the coronavirus which has led China to face a downturn in the economy whereas Vietnam was successful in keeping the virus out of the country for a long time with only a few numbers of cases which resulted in a lower impact on the economy of the country and the supply chain continued to remain unaffected.
Vietnam observed growth in the wage rate of 8.8 % between the years 2015 and 2019 but even with this change, the manufacturing cost in the country remains to be highly competitive. It has great relations with other countries including Russia, the European Union, Japan, Australia, the United States of America, and India, so the supply chain and export of the country enjoy a diverse range of demand markets on the international level.
China enjoys a more developed form of textiles due to access to high population, low poverty, literacy rate, and well-built social and technological infrastructure, but with the pandemic, it had to face challenges in its textile industry. On the other hand, with more opportunities arising, Vietnam has focused on increasing the amount of infrastructure and improving in sectors of transportation and construction. It is also focusing on increasing the growth and development of the labor force through training.
The productivity of labor is a major factor affecting the efficiency of a country. A higher per capita GDP which assists in evaluating the value contributed by each individual towards the industry is an indicator of a better level of productivity. China has higher efficiency as compared to Vietnam but within the changes caused by the pandemic, this is estimated to change. Get in touch with premium companies such as Oxymcraft to avail more information about this topic.