For apparel manufacturers in South and Southeast Asia, the U.S.’s sweeping ban on all products, including Xinjiang cotton, initially seemed like a windfall as the ban all but killed China’s role as the world’s largest textile manufacturer. But the reality is more complex, because global textile supply chains are so deeply intertwined that what seems like a potential boon can become a heavy burden.
Concerns have aroused concern after the Bangladesh Garment Buying Association (BGBA) asked its members to be cautious in purchasing raw materials imported from Xinjiang after the United States’ comprehensive ban on Xinjiang cotton was escalated.
Qazi Iftakr Hussain, president of the association, told The Washington Post that while the bill has not yet affected Bangladesh’s garment industry, it could still face setbacks due to U.S. import restrictions. Bangladeshi exporters have to prove that no Xinjiang-produced materials – in whole or in part – are used to make Bangladeshi garments, so that’s a real challenge.
When explaining why it is difficult to change China as the main source of procurement, Hussain said that about 40% of Bangladesh’s cotton products are imported from China. South Asian countries have been steadily growing their market share in textile exports to the United States over the past few years as labor-intensive industries began to shift away from China.
The U.S. boycott of Xinjiang cotton is a catalyst for this trend, which could further fundamentally reshape the global textile supply chain by isolating China, the world’s largest textile producer, exporter and consumer.
According to data from the U.S. Department of Commerce, in the first five months of this year, the share of cotton products imported by the United States from China was 21.5%, a decrease of 3.7 percentage points from 2020. At the same time, the proportion from Bangladesh increased to 10.2% from 8.4% in 2020, and the proportion of imports from India increased from 16.5% to 19.2%. Vietnam’s share has remained at around 9% in the past two and a half years. But for countries like Vietnam and Bangladesh, even as they face increasing competition for clothing manufacturers to source Western markets, they still rely heavily on Chinese fabrics and yarns, especially high-end materials.
According to a survey analysis, for some countries, fabrics and yarns from China account for 70% of their total imports. Most high-end yarns and fabrics are actually made from Xinjiang cotton and are of very good quality. As we all know, Vietnamese yarn is usually made from cotton from Xinjiang.
In 2021, Xinjiang’s cotton output was 5.27 million tons, accounting for 91% of the country’s cotton output and about 20% of the world’s total output. Most of the cotton and yarn produced in Xinjiang are made into fabrics, clothing or other textiles in other mainland provinces and sold to domestic and foreign markets. Last year, 67% of China’s cotton consumption came from Xinjiang.
In the first half of 2022, Bangladesh was China’s largest importer of cotton products, with imports reaching US$1.48 billion. Customs data shows that the majority of imports are various fabrics, followed by yarn. This was followed by Vietnam, which imported US$1.01 billion worth of Xinjiang cotton products during the same period. Customs data shows that Bangladesh’s imports do not come directly from Xinjiang, but from coastal provinces such as Jiangsu. Vietnam purchased $582,000 worth of cotton products from Xinjiang this year, mostly in June.
Although the Xinjiang Cotton Act prohibits the United States from importing any products from Xinjiang unless there is clear and convincing evidence, lawyers said that due to capacity constraints, U.S. Customs’ review is unlikely to be expanded to clothing imported from third countries in the short term.
According to a survey of 34 major U.S. fashion companies conducted from April to June by Sheng Lu, associate professor of the Department of Fashion at the University of Delaware, 86% of respondents said they would reduce the purchase of cotton clothing from China, while more than 92% There are no plans to reduce clothing purchases from Asian countries other than China.
A survey of Chinese yarn and fabric mills showed that their South and Southeast Asian customers requested evidence of compliance with the U.S. Act, but the overall proportion was relatively low and the requirements were not as stringent as for U.S. or European imports.
A Chinese textile manufacturer with a factory in Vietnam said some downstream customers have requested documents on the origin of their products. In this case, the manufacturer must go through a lengthy investigation process. However, U.S. Customs cannot regard it as a DNA test. In fact, in the end, it only needs to read documents with sufficient evidence to prove that “Xinjiang cotton is not used.”
The factory manager said it is difficult to distinguish the different origins of cotton products entering Vietnam because they may be mixed together while being transported by sea. Suppliers can do this so that they can deceptively label Xinjiang cotton as coming from somewhere else to circumvent U.S. law. I have never heard of the Vietnamese government taking action to prevent Xinjiang cotton from entering Vietnam.
Still, with one-fifth of the world’s cotton at risk of being shunned by global markets, India, another major global cotton producer, could emerge as a major alternative for downstream manufacturers. The industry expects India to become the preferred destination for textile and yarn exports. said Raja Shamugam, managing director of Warsaw International, a textile manufacturer in Tirupur, India, and chairman of the Tirupur Exporters Association.
Due to Xinjiang cotton ban, China’s epidemic prevention work and other issues, many brands hope to�From China to India. This will help countries such as India improve their export capabilities, and Shanmugam, who is planning to expand production capacity, added that banning Xinjiang cotton will also have a negative impact on the Indian textile industry because Chinese textile manufacturers are also importing large quantities of Indian cotton, pushing That boosted commodity prices already inflated by the war in Ukraine. The ban on purchasing Chinese cotton is not conducive to the Indian textile industry, causing production costs to increase by about 100%. It also coincides with a significant reduction in Indian cotton production, and the export of raw cotton has further caused a shortage of domestic supply.
According to an internal report by the China International Economic and Trade Center in May last year, one of the goals of the U.S. Xinjiang cotton ban is to establish a new textile industry chain that excludes China, but the report cast doubt on the feasibility of the plan, saying that China’s Production capacity is irreplaceable.
China is a country with the most complete textile industry chain and the most complete product categories. In terms of output, China’s textile industry accounts for more than 50% of the world’s total output. Even if the share of China’s textile industry is transferred out of China, no other economy can accept it.
The economic part of the Indo-Pacific strategy is the formation of a new industrial and supply chain consisting of the United States, Japan, India and Australia. The report said that the United States is responsible for technology-intensive industries, while India is responsible for labor-intensive industries. The Indo-Pacific Economic Framework (IPEF) launched by the United States in May this year further strengthened this trend. IPEF initially included 13 Asia-Pacific countries accounting for 40% of the world’s GDP, and most importantly did not include China. This framework is not a traditional free trade agreement, but seeks to establish rules in areas ranging from supply chain security to carbon emissions.
Ping An Securities said in a report last month that the United States’ alliance strategy is changing, and the trend of Chinese products entering the United States through Southeast Asia has shown signs of weakening since the second half of 2021. The report shows that since the early days of the U.S.-China trade war in 2018, the proportion of U.S. imports from countries such as Vietnam and Thailand has increased significantly, and the proportion of these countries’ imports from China has also increased significantly. Since the second half of 2021, the proportion of Vietnam, Thailand, India and other countries in U.S. imports has continued to increase, while the proportion of these countries’ imports from China has dropped significantly.
This means that Southeast Asia, India and other countries have begun to expand their production capabilities. There are signs that the relocation of some labor-intensive industries has become more prominent.