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When the United States announced it was slapping a 20% “reciprocal” tariff on most imports from Vietnam, effective from Aug. 7, thousands of factories across the Southeast Asian nation began accelerating production, hoping to deliver their goods ahead of the deadline.
In Shanghai, the move also triggered a reaction from Kane Top, a Chinese textiles company, to speed up its globalization plans.
Chinese textile enterprises are becoming a common sight in Vietnam, as the highly liberalized apparel manufacturing industry leads the expansion in China’s outbound direct investment, which exceeded $162.78 billion in 2024.
Immediately after the U.S. announced its tariffs policy in April, executives and managers across Kane Top’s operations in Shanghai and Vietnam’s Ho Chi Minh City convened to assess the impact and discuss the company’s potential response.
The resulting action plan exemplified the latest approach in the globalization of Chinese companies, which prioritizes market access over cost savings, with “proximity to customers” serving as the key driver.
Chain reaction
Established in Hong Kong in 1984, Kane Top went through its last major expansion in 2003, two years after China joined the World Trade Organization (WTO), which saw the U.S. and European Union lift restrictions on 87 categories of Chinese textiles.
The policy change unlocked an estimated $4 billion in trade potential and fueled fresh growth in Chinese manufacturing. Seeing an opportunity, Kane Top took the bold step to relocate its headquarters to Shanghai.
However, as labor and production costs in the Chinese mainland continued to rise, in 2013, the company’s clients began suggesting it move production overseas — yet its executives were hesitant.
The apparel supply chain encompasses raw material cultivation and harvesting, garment design and production, and eventually retail distribution. Establishing a competitive enterprise in this sector requires both convenient sourcing and efficient distribution.
It took China about 40 years after the launch of its “reform and opening-up” policy in 1978 to build a complete and efficient supply chain system, ultimately becoming the world’s largest textile producer, consumer, and exporter.
In the mid-2010s, Kane Top’s CEO, Macy Yau, and her team spent five years conducting on-site investigations across Southeast Asia, by which time Vietnam was already becoming a hotspot for Chinese manufacturers. However, the more they looked, they realized that it would be difficult to replicate China’s mature apparel supply chain elsewhere.
China exported $165.24 billion in clothing in 2024, accounting for 29.6% of the global market, just 0.1 percentage point behind the European Union, according to figures from the WTO. It was the first time the country had slipped into second place since 2006.
For years, Kane Top thrived within the domestic ecosystem, which holds significant advantages in manufacturing capability, delivery efficiency, and supply chain coordination. Setting up overseas would mean not just building a factory from scratch but also reconstructing an entire supply network, including reliable access to materials — a daunting, high-stakes endeavor.
The greatest challenge is the dispersed nature of upstream suppliers.
Kane Top can now source about 90% of its raw materials from Vietnamese suppliers with quality comparable to Chinese standards, yet these enterprises are scattered across the region, making it difficult to visit more than one supplier in a single day. In contrast, China’s industrial clusters, such as the Wangjiang County textile park in the eastern Anhui province, integrate spinning, dyeing, and printing processes, enabling one-stop solutions.
By the time Kane Top finally decided to go overseas, the move was no longer optional, it was existential.
In August 2018, the company’s leadership team was invited to attend an annual supplier conference by a major international client, during which one of the client’s executives suggested in private to Yau that Kane Top risked being phased out of the global supply chain if it did not move ahead with overseas production, as Chinese manufacturing costs were becoming too high.
The most striking difference was in labor expenses. In 2018, Vietnamese workers earned about $200 a month, while Chinese workers earned five times that, according to Kane Top’s data.
At the time, Kane Top was the client’s only supplier still operating solely in China. Yau understood the message: adapt or lose the business — and this was not a client Kane Top could afford to lose.
Lucky find
For its overseas expansion, Kane Top had a decision to make: replicate its Hong Kong-to-Shanghai transition in a foreign country, or keep its “brain” in Shanghai while extending its reach.
It chose the latter option. However, Yau concedes that luck had a lot to do with it.
She had initially planned to purchase land and build a factory abroad, but finding a satisfactory site was proving to be a struggle. Unexpectedly, the company stumbled upon an opportunity to form a joint venture with a Vietnamese state-owned garment factory.
It looked like a slam dunk. Frequent direct flights already connected China’s eastern Yangtze River Delta and southern Pearl River Delta with major cities in Vietnam, while the Southeast Asian nation offered mid-sized manufacturers like Kane Top cost advantages, decent industrial infrastructure, and lower barriers to entry.
Yet, operating in Vietnam also came with challenges.
Kane Top primarily serves mid-to-high-end international brands, which demand complex production processes, detailed procedures, and strict quality control. Full ownership of the factory would have simplified quality control, but the joint venture structure required additional effort to align production standards across operations.
The company assigned Zhou Bin’er, its chief operating officer, to Vietnam to oversee local operations, and sent six technical workers to help standardize production. Yau also visited once or twice a year to accompany clients on site visits.
“The (major international) client transferred half its orders to Vietnam for trial production in the first quarter,” Yau says. “They were satisfied with the results, but I knew that if quality had slipped, we’d have had to halt production immediately.”
The factory delivered its first batch of orders within six months. Encouraged by the success, Kane Top used the momentum to expand its production capacity in the country.
In 2022, the company acquired a struggling factory in Ho Chi Minh City that employed 260 workers. Compared with its joint venture, which had largely been smooth sailing from the start, setting up a self-operated production base was to prove a new experience.
For Chinese enterprises, a common concern is how to motivate the local workforce in Vietnam to ensure high productivity while complying with local regulations.
Even with overtime pay, Vietnamese workers are reluctant to work extra hours. Labor laws also cap both weekly and monthly overtime, with violations resulting in severe penalties and complex compliance procedures. Attendance can also be irregular — workers will frequently quit after receiving their salary, only to return once their money runs out. These factors are a challenge for production planning and capacity allocation.
Zhou recalls that, “as soon as I set foot in the factory, I wanted us out.” Unlike Kane Top’s plants in China, the atmosphere at the Vietnamese facility was dispirited, with tired and unmotivated workers.
The factory forms part of an industrial park that also houses a South Korean garment factory with some 3,000 employees. Yau observed that successful recruitment directly correlates with Vietnam’s continued ability to attract major foreign investment. In recent years, orders and production capacity have shifted to surrounding countries such as Bangladesh and Cambodia, causing labor force movements that have intensified market instability.
In the past five years, the average monthly wage of a Vietnamese worker has increased nearly 60%, from $206 to $315, according to the National Statistics Office of Vietnam.
Kane Top spent three years turning around its Vietnamese factory. While front-line managers and workers were hired locally, Zhou improved operations by reforming its incentive systems, monitoring orders, verifying materials, arranging work schedules, and conducting quality spot-checks.
During this time, the company also discovered an increasing number of suppliers in Vietnam with stable quality and delivery capabilities, even for materials like wool and cashmere, which require strict standards and competitive pricing. These suppliers — largely funded by enterprises in Taiwan as well as mainland cities such as Ningbo, in the eastern Zhejiang province, and Dongguan, in the southern Guangdong province — have helped Vietnam’s supply chain mature.
Shifting priorities
Kane Top’s self-operated factory in Vietnam now has more than 1,000 workers and forms a crucial part of its production capacity, while its joint venture is also scaling up. This has allowed the company to create a dual operational model, with overseas factories serving international clients and Chinese factories focusing on the domestic market.
Shanghai continues to serve as Kane Top’s innovation hub, while its production lines in the city’s southern Jinshan District are equipped with customized automated manufacturing systems handling product development, sample making, and small-batch, quick-response orders.
Visitors to the facility can tour its showroom to see samples capturing the latest fashion trends and experience its advanced production processes on the factory floor. The company plans to replicate this model at its bases in Anhui and Ho Chi Minh City.
The recent U.S. tariff hikes have not only increased the frequency of Yau’s visits to Vietnam but also prompted deeper strategic thinking about the future. Although most of Kane Top’s orders are from Europe, an internal assessment found that the tariffs would affect about 15% of its business.
To ship goods before the Aug. 7 deadline, the company’s Vietnamese factories had to shift into high gear, running extended day shifts. Kane Top also communicated with some European and Asian customers about delaying shipments, pausing non-urgent production tasks to prioritize the U.S.-bound orders.
In September, Kane Top will again attend its international client’s annual supplier conference, with additional stops in Turkey and Italy, marking a new phase in the Chinese company’s overseas factory site selection.
Yau and her team had the idea of diversifying beyond China and Vietnam when the pandemic disrupted global supply chains. Now, with U.S. tariffs creating fresh uncertainty, this vision is taking shape.
Yau’s goal is to extend Kane Top’s production network into Europe, and potentially North America. While these regions lack advantages in land and labor costs, she believes digital capabilities will be the key to entering their markets.
The digital process management system and smart production lines operating in Shanghai represent part of the company’s digital transformation. Yau believes that when automated equipment can handle more than 30% of production line tasks, labor costs will no longer be an overwhelming barrier.
Advantages once unique to Chinese manufacturing could now be replicated and extended globally through technological solutions, she says.
Reported by Zhou Fangying.
A version of this article originally appeared in Jiemian News. It has been translated and edited for brevity and clarity, and is republished here with permission.
Translator: Chen Yue; editors: Wang Juyi and Hao Qibao.
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