Vietnam Cotton Industry Grows on Chinese Demand

Despite some concerns that the industry would continue to decline, Vietnam’s cotton imports have increased in the first few months of 2016-17. It is estimated that imports will experience an increase of 18%.

One of the major reasons for the uptick in Vietnam’s cotton industry is the demand for yarn in China. This is explained by the recent growth in the Chinese garment industry. This industry has thrived on the demand from the US and Europe for cheaply manufactured clothes. In China this industry focuses on produces finished textile goods, which explains the demand for the yarn from Vietnam.

Some experts and industry watchers are worried that China’s internal cotton production has increased to the point where its prices will be low enough to render Vietnam’s cotton unproductive. However as many in China increasingly turn to the cities for employment and the urban lifestyle the Chinese Communist Party is having a harder time meeting its agricultural labor needs.

The situation in East Asian garment industries is particularly interesting because spinning prices are so low right now. As a result many expected demand for spun yarn to take a hit. However the industry beat expectations and returns in Bangladesh, Pakistan, India, and other places have been higher than expected.

It remains to be seen what the future holds for the garment industry. One thing that could have an outsized effect is US production. The USDA recently released a report that said that US cotton consumption is down while US production is on the rise. The resulting surplus could be enough to drive prices down to the point where textile heavy economies start feeling real impacts.

There are other ways the US could influence the East Asian cotton industry. Many are also worried that trade policies will be altered by President-Elect Trump. Such a move could introduce volatility into an already fragile market.

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