Last year’s phenomenon of hot orders and “hard to find a factory” has been reversed this year.
In just half a year, nearly 6,000 companies went bankrupt, and factory operating rates plummeted. In order to reduce costs, some companies started a “life-saving mode” of taking three days off a week and reducing wages by 45%.
The person in charge of a small textile company in Wujiang, a textile powerhouse in Jiangsu Province, said that orders have dropped by at least 40% compared with last year. He also said that the situation of surrounding small and medium-sized enterprises is similar. At the beginning of the year, they experienced rising raw material prices and poor product prices, which eroded profits. Now, orders are bleak.
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Large-scale transfer of orders, companies enter the window period in advance
The textile and apparel industry, which benefited from the return of orders last year, has suffered from the outflow of orders this year.
According to the latest estimates from the China Chamber of Commerce for Import and Export of Textiles, the scale of my country’s textile and apparel order transfers in the first half of the year was about US$6 billion.
Among them, the scale of cotton textile order transfer is about 1 billion US dollars, and the clothing transfer scale is about 5 billion US dollars. Cotton textile orders are mainly transferred to India, and clothing orders are mainly transferred to Bangladesh, Vietnam, India, Indonesia, Cambodia and other countries.
It is also expected that in the second half of the year, the transfer of textile and apparel orders in my country may accelerate, with the transfer scale being around US$10 billion. Among them, the order transfer of cotton textiles is about 2 billion US dollars, and the scale of clothing transfer is about 8 billion US dollars.
The manager of Anhui Garment Import and Export Co., Ltd. said that most factories this year will basically have no orders by September. Last year, they could be queued until at least November, and they will continue to receive orders, this year almost earlier than in previous years. It enters the “idle” state after two or three months.
In this regard, a recent questionnaire survey of companies by the China Chamber of Commerce for Import and Export of Textiles showed that only 15% of companies said that current customer orders are relatively stable, and 85% of companies said that customer orders have obviously shifted overseas.
Among them, 26% of companies said that the proportion of customer orders transferred abroad is more than 30%; more than 90% of companies said that the current order schedule has been reduced compared with the second half and fourth quarter of last year; 13% of companies said that orders are serious Insufficient, can only maintain production within 1 month.
Deputy Director of the Social Responsibility Office of the China National Textile and Apparel Federation said: “98% of this industry are small and medium-sized enterprises, and business is indeed bleak compared to previous years, especially the commercial market is empty.”
However, the outflow of orders is only one of the reasons for the bleak textile and apparel market. When overcapacity caused by oversupply meets the shrinking global market, both ends are squeezed, and the challenges become more prominent after the tide recedes.
According to industry data, the overall loom operation rate in Jiangsu and Zhejiang is currently less than 50%, which is the lowest level in the past five years.
Even so, the inventory of gray fabrics is also on the rise. “There is no way to take a holiday, and workers will not be able to find them when they are looking for them.” Yue Jin said that in order to keep the machine running, in addition to orders, they will continue to produce part of the inventory to “hold on.”
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Sino-US textile share declines, Xinjiang cotton restrictions escalate
In addition to the outflow of orders, a more important reason is the United States’ restrictions on related goods from China’s Xinjiang region.
If the United States discovers products with any connection to Xinjiang cotton, these products will be confiscated. If confiscated, exporters may not receive their payments.
According to data from the U.S. Department of Commerce, China’s share of U.S. cotton textile and apparel imports dropped to 17.1% in 2021 from 23.5% in 2019, of which China’s share of cotton apparel imports dropped from 21.8% in 2019 to 15.4%, ranking first from the first place. Dropped to second place, Vietnam became the largest supplier.
Last year, U.S. clothing imports amounted to US$81.59 billion, a year-on-year increase of 27.36%. China supplies 20% of the world’s cotton, nearly 90% of which is Xinjiang cotton. The Xinjiang-related laws introduced by the United States are bound to have a further blow to the global industrial chain.
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Many governments have introduced support policies
Amid sluggish growth in global external demand, in order to help companies obtain orders, governments in many places have successively introduced bailout and assistance policies, and encouraged companies to transform into cross-border e-commerce and expand markets through “representative exhibition participation” and other methods.
It aims to help companies seize the opportunity to go overseas and obtain orders. At the same time, Zhejiang’s Hangzhou, Ningbo, Wenzhou, Shaoxing, Yiwu, as well as Guangdong, Shandong, Henan and other places have provided corresponding subsidies and support for companies to participate in overseas offline exhibitions in the “exhibition agency” mode.
Export credit insurance is considered�A direct and effective support measure for the textile and apparel foreign trade industry. Industry insiders suggested increasing the credit limit for key customers, increasing business coverage in emerging markets such as South America, Africa and Russia, increasing credit insurance support for domestic trade business, and gradually bringing domestic trade into China Credit Insurance’s main business and financial subsidies.
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