In July 2026, China's overall exports grew, but within the textile sector, a glaring divergence emerged: apparel exports stagnated while upstream materials like yarn, fiber, and fabric continued to rise. This contrast paints a vivid picture of the 'China Plus One' supply chain—assembly moves to Southeast Asia, yet the raw material lifeline remains at home. However, tightening rules of origin in the EU and US are turning this seemingly safe path into a new tariff minefield.
The Supply Chain Shift Behind the Data
Chinese customs data show that in June, apparel export growth was limited, while textile raw material exports maintained solid growth. The US market reveals the trend more starkly: US apparel imports from China fell notably, while Vietnam and Bangladesh saw steady increases in garment exports. Yet both countries' imports of man-made filaments and staple fibers from China remained high. TexPro trade data corroborates this divergence: China's knit and non-knit apparel exports to the US declined, while Southeast Asia's dependence on Chinese upstream materials did not diminish.
This means 'China Plus One' is not a true capacity transfer but a split of the value chain: China focuses on upstream yarn and fabric, while Southeast Asia handles cutting and sewing. This division seems logical but harbors hidden risks in origin determination. For buyers, fabric costs account for 60-70% of the total in Southeast Asian quotes, and the origin of this cost component directly dictates final tariff treatment.
The Mechanics of the Origin Trap
EU and US rules for textiles enforce strict yarn-forward and fabric-forward tracing. A garment's origin is not solely determined by where it is sewn but traces back to the source of yarn and fiber. If the core fabric comes from China and assembly occurs only in Southeast Asia, customs verification may still deem it as Chinese-origin, disqualifying it from tariff preferences. This means upfront investment in relocation could be undermined, with risks of retroactive duties and cargo detention.
Many trading companies focus only on low labor costs in Southeast Asia, overlooking upstream material compliance. Vietnam and Bangladesh lack sufficient spinning and weaving capacity, making full local value chains impossible in the short term—a structural weakness of the 'China Plus One' model. For factories, failing to prove local value-added ratios for fabric and yarn means even successful order transfers cannot escape origin audits.
Compliance Rebuild and Industry Impact
The essence of rules of origin is an extension of trade protectionism. Through tracing mechanisms, the West ties tariff preferences to localized supply chains, forcing companies to rethink overseas layouts. For China's textile industry, the outward shift of apparel assembly is a trend, but the competitive advantage in upstream materials remains strong—as evidenced by 2026 raw material export growth. Yet this advantage, if not converted into compliance strength, may be offset by rule-based benefits.
For domestic firms, 'China Plus One' should not be a universal solution to circumvent barriers but a rational choice for global resource allocation. Before expanding overseas, mastering target market origin criteria and compiling complete documentation—from material sources to processing steps and traceability—is now mandatory. During the supply chain restructuring window, opportunities and risks coexist. Only enterprises that place compliance at the strategic forefront can secure their operational bottom line in the new trade landscape.