Companies in China are increasingly shifting their production base of low value-added goods out of the country. The reason is the wages have been doubled in the last five years when apparel makers have been under heavy pressure from clients to cut costs. The country exports about $169 billion worth of clothing annually.
More and more Chinese apparel makers have been prompted to shift their production base to neighbouring Vietnam where labour costs are about 60 per cent lower. Such moves do involve a certain amount of risk due to the nations' territorial dispute in the South China among other factors.
Nameson Holdings, maker of sweaters and other knitwear-to-order based in the Guangdong Province plans to increase production in Vietnam. The company began production in the Southeast Asian country at a factory in the suburbs of Ho Chi Minh City in 2015. It expects to complete the second phase of construction at the plant in April next year.
Nameson mainly supplies garments to Japan's Fast Retailing, operator of the Uniqlo chain of casual clothing stores. Over half of the Chinese company's revenue comes from sales to the Japanese retailer.
Nameson's production shift is partly due to a 2009 economic partnership deal that has in principle eliminated tariffs on Vietnamese textile exports to Japan. Nameson is trying to expand its customer base in Japan.
Bosideng International Holdings, a major Chinese manufacturer and retailer of down jackets has also started its output unit in Vietnam. It currently produces garments on a trial basis at a Vietnamese textile factory affiliated with Japanese trading company Itochu, with which it has a capital partnership.