In the first half of 2026, China's textile exports presented a rare divergence: strong raw materials versus weak garments. Yarn, fiber, and fabric categories maintained growth, while apparel exports lagged. US customs data showed a decline in both knitted and woven apparel imports from China, while Vietnam and Bangladesh increased their fabric purchases from China. This contrast signals the tightening of rules of origin under the 'China Plus One' model in global supply chain restructuring.
Background
The 'China Plus One' strategy involves retaining Chinese capacity while relocating assembly to Southeast Asia. In July 2026, China's overall exports grew, but the textile sector showed internal divergence: garment exports were limited, while upstream materials performed well. US market data was particularly telling—Chinese apparel exports to the US fell, while Vietnam and Bangladesh saw steady growth in garment exports, yet both countries imported large volumes of Chinese fibers and fabrics.
This division—Chinese upstream supply, Southeast Asian sewing, and Western sales—appears as industrial gradient transfer but hides compliance risks. The EU and US enforce strict yarn-forward rules of origin, where a garment's origin is determined by tracing back to the yarn and fabric sources. If core fabrics are made in China and only cut-and-sewn in Southeast Asia, customs may still deem them Chinese-origin, denying tariff benefits and risking retroactive duties or detention.
Industry Impact
For domestic textile firms, this means 'relocation ≠ tariff avoidance.' Many companies focus on labor cost advantages while ignoring upstream origin compliance. Vietnam and Bangladesh lack local spinning and weaving capacity, making full-chain localization difficult—a key weakness of the 'China Plus One' model.
The boom in raw material exports masks potential risks: if Western customs strictly enforce origin rules, transshipment routes via Southeast Asia may be disrupted, affecting upstream orders. For buyers, the illusion of 'de-Chinaization' could raise compliance costs; for factories, lacking traceability documents may erode overseas client trust.
Notably, this trend also forces industrial upgrading. China's upstream textile sector retains advantages in technology, scale, and responsiveness. Firms that proactively adapt to rules and turn compliance into competitiveness can gain an edge in the restructuring.