China's export data for July 2026 presents a striking contrast: overall exports grew, but within the textile sector, a clear divergence emerged—apparel exports slowed while upstream materials like yarn, fiber, and fabrics maintained robust growth. This is not a simple category shift but a reflection of how the 'China Plus One' strategy is encountering the hard realities of rules of origin amid global supply chain restructuring.
Divergence Behind the Data
Customs data shows that in June, China's apparel export growth was limited, while textile raw material exports performed strongly. The US market data is even more telling: imports of Chinese clothing declined notably, while Vietnam and Bangladesh saw steady increases in apparel exports to the US—yet both countries continue to import large volumes of fiber and fabrics from China. This suggests that the so-called industrial relocation is essentially moving only the cutting and sewing operations, while upstream fabric and yarn supply remains firmly in Chinese hands.
This division of labor appears rational: Chinese enterprises supply raw materials, Southeast Asian factories handle assembly, and goods are exported to Europe and the US under local labels. However, TexPro trade data reveals an overlooked fact—US Customs statistics show that Chinese exports of knitted and non-knitted apparel to the US have dropped, while imports of man-made filaments and staple fibers from China by Vietnam and Bangladesh remain high. Chinese fabrics, after simple processing in Southeast Asia, are being sold to the US under new labels—this is the true picture of the current supply chain.
The Invisible Barrier of Rules of Origin
The EU and US enforce strict yarn-forward and fabric-forward rules of origin for textiles. The origin of apparel is not solely determined by where it is sewn; it traces back to the production source of core materials. If fabrics and fibers originate from China and only cutting and sewing occur in Southeast Asia, customs inspections may still deem the product as Chinese origin, disqualifying it from tariff preferences. This means that the initial investment in relocation may be wasted, and companies could face back tariffs and cargo detention risks.
Many companies focus only on Southeast Asia's labor cost advantages, ignoring the compliance issues of upstream material origin. Vietnam and Bangladesh lack sufficient spinning and weaving capabilities, making full local supply chains difficult in the short term—this is precisely the Achilles' heel of the 'China Plus One' model. What appears as a successful order transfer may actually be a trap set by rules of origin.
A Rational View of the 'China Plus One' Strategy
For domestic textile enterprises, industrial relocation is not a universal solution to circumvent trade barriers. Before expanding overseas, companies must thoroughly understand the origin determination criteria of target markets, organize complete documentation of material sources, processing steps, and traceability, and prepare compliance plans. In the wave of supply chain restructuring, the shift of apparel manufacturing outward is a trend, but China's competitiveness in upstream materials and fabrics remains solid.
The key is to move from 'point relocation' to 'chain compliance'—not only considering production costs but also assessing how rules of origin affect tariff benefits. Companies that equate 'China Plus One' with simply 'sewing elsewhere' are paying the price for this cognitive bias.