Many Chinese textile manufacturers are building factories in Vietnam. Reason: apparel produced in the Southeast Asian country for the US market will be tariff-free under the new Trans-Pacific Partnership agreement. The prospect of a sweeping Pacific trade agreement is led by the United States, and excluding China, is also driving Chinese yarn companies to gain a foothold in Vietnam, lest they be shut out of the lucrative American market.

Before the zero-tariff policy under TPP, many labor-intensive Chinese industries had already shifted to Southeast Asian countries like Vietnam. Labor costs there are four to five times cheaper than in China. Chinese companies are putting money in R&D centers in Vietnam covering the whole industry chain, including cotton, spinning, weaving and dyeing.

Vietnam has become a major importer of fabrics and a leading exporter of clothing. But weak domestic production has left local companies struggling to cope with international demand. So in a way the Chinese can be credited with getting textile jobs back.

Textile production in China is becoming increasingly unprofitable after years of rising wages, higher energy bills and mounting logistical costs as well as new government quotas on the import of cotton. In China, the whole yarn manufacturing industry is losing money. Manufacturing wages adjusted for productivity have almost tripled in China over the last decade.