Chinese and Hong Kong companies are investing heavily in Vietnamese textile plants. They have bought entire complexes on which they plan to erect units that will enable start-to-finish production covering every process, from spinning to dyeing to sewing. A Hong Kong sewing company plans to build a factory jointly with a Sri Lankan company. Another Hong Kong business is considering investing $100 million to build a jeans factory.

The main reason for this sudden interest is that Vietnam is taking part in the Trans Pacific Partnership negotiations. If talks conclude with an accord, the US will very likely remove tariffs on textiles and sewn products from Vietnam. The country exported roughly $18 billion worth of sewn products last year, more than half of which went to the US.

To qualify for tariff waivers under the TPP free trade agreement, clothing exported from Vietnam will have to meet the rules regarding country of origin. This means yarn used in those clothes will have to be spun in Vietnam.  That’s why Hong Kong and Chinese companies are interested in boosting the capacity of their Vietnamese plants.

However Vietnam is looking at the rising tide of Chinese investment with mixed feelings. Chinese investment may help the Vietnamese textile industry by bringing advanced production technologies. But it could also destroy local sewing companies and related businesses, resulting in higher dependence on Chinese raw materials.