US Giants’ Exit Hits China Hard: 1,500 Textile Factories Shut Down Overnight, Millions Lose Jobs

A long-established U.S.-owned company, Kanglong Textile, located in China's Zhejiang province, has halted production. In early September, restricted accent signs appeared in the factory's production areas. The company's U.S.-based executive gave workers a final farewell through an online video. After nearly 20 years of operations, the U.S.-funded denim factory has officially entered its final shutdown phase. Kanglong Textile was founded in 2005 and officially began production in 2007. It was built with an investment of about 800 million yuan from U.S. company Elevate Textiles. Located in the Jiangxi Economic Development Zone, the factory was a modern enterprise specializing in vertically integrated denim production. It could process raw cotton directly into finished fabric, with an annual output of 28 million yards of high-quality denim. The facility included multiple departments, including spinning, weaving, dyeing, and finishing. It used some of the world's most advanced textile dyeing and finishing technologies. Its parent company, Kone Denim, has 135 years of manufacturing history. The Jiaxing factory focused on high-end denim fabrics, with products mainly serving the U.S. market. For years, it supplied international brands such as Levi's. At its peak, the factory employed more than 1,000 local workers and was considered a flagship U.S.-invested company introduced by the Jiaxing Economic Development Zone. By 2025, the number of insured employees had fallen to about 500. The company implemented employee arrangements based on the N plus 1 compensation standard, meaning the number of years served plus one month of severance. Long-serving employees received up to 180,000 yuan in compensation. In a strategic transformation statement released on September 3, Kone Denim attributed the exit to multiple factors, including changes in global trade patterns, adjustments in customer procurement strategies, rising costs and changes in supply chains and geopolitical conditions. Industry Insider said the decision was a strategic choice under three major pressures. The first pressure came from tariffs. U.S. tariff policies on Chinese textile products have continued to change in recent years. More American brands have asked suppliers to move production closer to the U.S. market and to regions with more favorable tariff conditions. Mexico has become one of the greatest beneficiaries of nearshoring. The second pressure came from rising costs. Industry data showed that since late 2025, that the price of reducing agents used in the dyeing process surged from about 25,000 yuan per ton to about 120,000 yuan per ton, an increase of nearly 380%. The price of H-acid, a key raw material for reactive dyes, rose from 40,000 yuan per ton to more than 80,000 yuan per ton. A manager at a dyeing and printing company in Xiaoxing told media that a commonly used reactive dye called GSPN Black previously cost about 20 yuan per kilogram, but the latest price had risen to 31 yuan per kilogram. The company uses nearly two tons of the dye every day, meaning it now has to spend an additional 20,000 yuan per day on this one dye. At the same time, labor costs, energy costs and environmental compliance costs have continued to rise. Previously, orders were moving overseas and away from Zhejiang. Now, Zhejiang's textile factories are forced to shut down. The third pressure came from proactive adjustment in the group's strategy. Kone Denim described the shutdown as a strategic transformation, rather than a forced bankruptcy. The reduction in production capacity is happening gradually. Existing customer orders are being transitioned, customers are being guided to source denim from the company's production base in Mexico, and all production lines at the Jiaxing factory are gradually being shut down. The shutdown of Konglong Textile reflects a broader reshaping of the global supply chain. In its announcement, Kone clearly stated that its existing production system in Mexico will take over future manufacturing operations and continue serving global customers. The rapid growth of Mexico's manufacturing sector has created strong demand for textile supplies. The country's workwear market is expected to exceed $420 million in demand by 2026, becoming one of the fastest-growing segments in North America. Mexico's textile raw material market is projected to grow from around $18.5 billion in 2023 to more than $23 billion by 2026, with an average annual growth rate of about 5.5 to 6.2 percent. The main drivers are deeper trade integration under the United States-Mexico-Canada Agreement, or USMCA, and the return of manufacturing driven by the nearshoring trend. The shutdown of Konglong Textile also delivered a major shock to factories that rely heavily on a single overseas customer. Under pressure from rising tariff costs, stricter rules of origin, and increasing domestic material and labor costs, peer-contract manufacturing models without control over product development or end-user data are the most vulnerable to supply chain restructuring. Konglong Textile's products are all exported to the United States, and almost all of its customers were American brands. When customers asked suppliers to move production capacity to Mexico, the factory had almost no bargaining power. Observers noted that Kone Denim's exit was an orderly strategic withdrawal, not a sudden financial collapse. The company's business registration information still shows it as operating, and the cancellation process has not yet been completed. But that is precisely what makes the situation worth considering. When a company decides to leave, it chooses a dignified exit, rather than being forced into closure. This suggests the decision had likely been developing for years, while factory workers were the last to receive the news. The case also offers a lesson for Chinese companies. The businesses that survive economic cycles are not necessarily those that push costs to the lowest levels, but those who have bargaining power and control over customers and sales channels. The 500 employees at Konglong Textile received adequate compensation and left with dignity, but the next textile factory that shuts down may not have such a respectful farewell. A mainland Chinese user posted that a Yuheng printing and dyeing company in Jiangsu province had shut down. The large factory, which had operated for more than 20 years, reportedly stopped production suddenly, and the company currently has no specific compensation plan. Comments included, How many people once worked hard here? Seeing videos like this is heartbreaking. I really don't know how we're supposed to survive if this continues. More and more factories are closing, and more and more stores are shutting down. Another comment said, Orders have all moved to Vietnam. How many years did this prosperity last? Slowly everything is going backward. If we become poor, we'll become poor together. Another user uploaded a video saying that on August 30th, a large textile factory where they worked completely shut down. They said they had worked countless night shifts there, leaving sweat across every workshop. Now the factory buildings are empty, the machines have stopped, and former co-workers who struggled together have gone their separate ways. In the end, the moment of farewell still arrived. Some users commented, Any textile factory that has managed to survive until today is already doing pretty well. Some had already collapsed in 2024. Another wrote, This year is the hardest year for almost every industry. On June 1st, Ningbo Yida Garment Company, a high-end shirt manufacturer with 33 years of history, officially halted production. Backed by Hong Kong-based Esquil Group, the long-established company mainly served global premium brands, including Ralph Lauren, Tommy Hilfiger, Hugo Boss, and Nike. It once produced millions of shirts annually for export and was considered a flagship company in the Yangtze River Delta. The reason for the shutdown was also representative of broader industry changes. Since 2020, some of its production bases had been placed on overseas risk lists. Continued sanctions led to difficulties clearing products through customs and a major loss of high-end orders. Users commented, Esquil was actually a very good company. It kept its promises and paid suppliers quickly. I really never expected it to shut down. Another said, Our factory's almost going bankrupt too. From spinning yarn, weaving fabric, to making finished clothes, our factory once had tens of thousands of workers. Now there are probably only 2,000 to 3,000 left. Many workshops and departments have been shut down. Last year, our own workshop nearly closed. This factory has been around for almost 40 years. It's called Jiangsu Sunshine Group. Data shows that Jiangsu Sunshine Group had assets of 17 billion yuan and employed 16,000 workers. It had long ranked among China's top 500 companies, with businesses covering wool textiles, clothing, biomedicine, real estate, and solar photovoltaics. In June 2025, the group announced that it had entered bankruptcy restructuring, shocking the industry. According to data released by the Guangzhou Intermediate People's Court, the bankruptcy liquidation case was accepted by the court in January this year, and a bankruptcy administrator was appointed. In May, the court declared the company bankrupt. Chen Chu, a garment industry insider in Guangdong said, Recently, many companies have struggled to operate. Many migrant workers from other provinces have returned to their hometowns. Factories have no orders, but they still have so many workers to support. They're losing money every day, so they can only shut down. In Dongguan, some people were asked to leave in July if they were unemployed and came from other provinces. Some returned to Hunan, and some returned to Jiangxi. A textile business owner in Xiaoxing, named Yan Zhiqiang, told reporters that this year, his company's orders have mainly been short-term and small-volume orders. Customers have become increasingly strict about delivery times. He said, In the past, one order could keep us busy for several months. Now, many orders only last a few days, and they're not stable. Delivery deadlines have also become shorter. There are inspections everywhere now, including tax checks and investigations into overseas income. Many business owners have already lost the motivation to continue. On the night of April 16, 2025, textile industry entrepreneur Bi Guangjun died at the age of 56, leaving behind an autistic son and significant debt. The man whose brand once became well-known across the Yangtze River Delta ultimately fell during the darkest period of his entrepreneurial journey. In 1991, the 23-year-old Bi Guangjun entered the textile market with 500 yuan he borrowed and started working in fabric manufacturing. At the time, he woke up at 4 a.m. every day to move goods, slept among piles of fabric at night, and survived on cold-steamed buns and pickles. In 1995, he discovered a gap in the domestic market for a certain patterned fabric. He mortgaged his family's assets to bring in production equipment and worked with his employees through repeated trials to perfect the manufacturing process. After the first batch of products hit the market, they became a major success. He sold 5 million meters of fabric in one year and earned his first 5 million yuan. Over the next 30 years, he worked tirelessly. He negotiated orders late at night and returned to the factory early in the morning to inspect fabrics. Through his expanding textile business network and partnerships with well-known brands, his annual revenue repeatedly exceeded 1 billion yuan. But behind the success was endless hardship. Former employees recalled that during last year's industry downturn, he chose to mortgage his own properties rather than lay off workers. He personally monitored the payroll process to ensure that hundreds of employees received their wages. This sense of responsibility earned him respect, but it also became a heavy psychological burden. Many people don't know that 70% of the socks sold on Chinese e-commerce platforms come from the Datang sock market in Zhuji, Zhejiang. Foreign trade and e-commerce once turned this small town into a place where entire streets were filled with small factories, generating annual revenues of millions of yuan. Datang sock market also became one of the most prosperous sock trading centers in China and even the world. But today, even during the busiest hours in the afternoon, the market is nearly empty. A female business owner who has been making socks for 30 years used to rely on a family workshop model and earn a stable gross profit of 300 to 400,000 yuan each year. But since last year, that figure has dropped to only around 100,000 yuan. At the end of spring, she received only one online order customer in an entire week. They bought one package of socks, 100 pairs. She earns only a few cents per pair. She worries that she may not even be able to cover this year's 60,000 yuan shop rent. Compared with getting new orders, her more urgent problem is clearing last year's inventory. Most clothing factories now operate on a model where goods are delivered first and payment comes later. Raw materials, wages and electricity costs have already been paid. But if inventory cannot be sold, the money cannot be recovered, leaving factories afraid to restart production. She said that last year, one customer placed a 1 million yuan order and promised to collect the goods in January. But the customer still has not shown up. Nearly 2 million yuan worth of leftover socks from last year remain unsold, and she has no idea when they'll be cleared. Not being able to get orders and make money is easy to understand. But an even more serious problem facing factories now is that even when they receive orders and products become popular, they still may not make money, or may even lose money. The reason is that competitors quickly enter the market with lower prices, creating oversupply in a short period of time. A factory owner who produces clothing fabric said that last year, a women's clothing fabric became an online hit. The factory produced about 20,000 meters, but sold fewer than 10,000 meters. The rest became inventory. Now the only option is to sell at a loss. Without cutting prices, it can't be sold. He said that whenever one style becomes popular, competitors immediately follow and begin producing similar products. What's even more worrying is that this strategy, which used to be a last resort move, has now become normal practice. A women's clothing factory in Taizhou has been deeply affected by low-cost imitation products. A piece of clothing the owner priced at 100 yuan could be offered by factories in Guangdong for only 60 yuan. And ordinary consumers could hardly tell the difference. Take socks as an example. A pair of pure cotton socks with 97% cotton content costs about 2.5 yuan to produce. By adding polyester and reducing the cotton content to 60%, the production cost drops to only 1.5 yuan. Even factories that want to maintain higher quality find it difficult to resist customers' demands for lower prices. A cotton yarn factory owner also said, the original manufacturer that creates a hit product actually does not make particularly high profits, but businesses that copy and imitate the design often make higher profits. For example, if our company launches a hit product today, the market will start copying it the next day. Our cost for this product is more than 3 yuan, but copycat sellers dare to sell it for just over 1 yuan. They don't care if their accounts get banned. Selling even one item counts, and they have more than one account anyway. This phenomenon of bad money driving out good money is largely related to the decline in foreign trade orders and the rise of e-commerce. E-commerce sellers rarely rely on reputation. If one account gets shut down, they simply switch to another. Some sellers advertise products as pure cotton but ship polyester versions instead. Most operate by testing data and gambling on probabilities. For example, if the same product sells for 9.9 yuan, a high-quality product may cost 8.9 yuan to produce, leaving only 1 yuan profit per item. If 10 items are sold and one is returned, the seller makes no profit at all. But a low-quality product costing only 5.9 yuan leaves 4 yuan profit per item. Even with one return out of 10 sales, the seller can still make 36 yuan in profit. And even after deducting shipping costs, the earnings are higher. The direct result of this business model is that planned and stabled orders are becoming increasingly rare. A business environment lacking strong IP protection and effective regulation has eventually triggered an industry crisis. At the end of 2024, a story came out about clothing factory owners in Zhejiang province fleeing after financial problems. Within a month, 26 clothing factory owners reportedly disappeared, leaving workers unpaid and affecting many suppliers. Some people said they were still working last night and the next day the owner was gone. Some workers waited outside factory gates and trying to stop the owners from leaving. But often their efforts came to nothing. Local officials said that the overall market conditions had been poor in recent years and some clothing factories had indeed fallen behind on wages. The situation was even worse in surrounding areas. Some small workshop-style factories had struggled to survive, but with rising costs and very few orders, owners eventually could not hold on. Data from China's textile and garment industry shows that during the first five months of 2026, the number of above-designated size enterprises in the textile, clothing, and apparel industries fell by a combined 1,500 companies. Reports have emerged about Jiaxing in Zhejiang, Guangzhou in Guangdong, and Suzhou in Jiangsu. U.S. and Japanese-funded companies operating in China are filing bankruptcy, shutting down their factories, and making workplace adjustments. The Hong Kong Textile Council, citing data from China's National Bureau of Statistics, said that from January to May, the number of above-designated size textile enterprises in China stood at over 20,000, a decrease of 389 year-on-year. The number of such enterprises in the textile, clothing, and apparel industry fell by 1,100 year-on-year. Based on these figures, industry organizations estimate that nearly 1,500 enterprises exited the above-designated size statistical category in the first half of the year. Above-designated size industrial enterprises refer to industrial legal entities with annual main business revenue of about 20 million yuan or more. This category does not necessarily mean a company has completely shut down. It could also include cases where revenue falls below the statistical threshold, mergers and restructuring, deregistration, bankruptcy, or changes in statistical classification. Data released by China's National Bureau of Statistics show that from January to July 2026, above-designated size textile enterprises recorded operating revenue of 1.2 trillion yuan, up 2.2% year-on-year. Total profits reached over 32 billion yuan, an increase of nearly 8% year-on-year. During the same period, the textile, clothing, and apparel industry recorded operating revenue of 562 billion yuan, down 3% year-on-year. Li, a management executive at a foreign-funded manufacturing company in the Yangtze River Delta, said, These figures are only for officials to look at themselves. The decline of the textile industry did not start today. How could profits possibly be increasing? That is completely unrealistic and nonsense.