The phenomenon of hot orders and “hard to find a factory” last year has been reversed this year – the textile and apparel industry is experiencing a deserted situation that has not been seen in recent years…
The person in charge of a small textile company in Wujiang, a textile powerhouse in Jiangsu Province, said that this year is more difficult than 2020, and orders are at least 40% lower than 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.
Big transfer of orders
Enterprises enter the window period in advance
The textile and apparel industry, which benefited from the return of orders last year, has been affected by the outflow of orders this year.
A recent questionnaire survey of enterprises by the China Chamber of Commerce for Import and Export of Textiles showed that only 15% of enterprises said that current customer orders are relatively stable, and 85% of enterprises said that customer orders have obviously shifted overseas. Among them, 26% of companies said that the proportion of customer orders moved abroad is more than 30%, and 39% of companies said that the proportion of customer orders moved abroad is between 10% and 30%.
At the same time, 43% of companies said that the current orders on hand have declined compared with the same period last year, 35% of companies said that orders have remained the same year-on-year, and 22% of companies have said that orders have increased year-on-year. In addition, 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, but overall they can still maintain stable operations. About 59% of companies have order schedules of 1 to 3 months, 28% of companies have order schedules of 3 to 6 months, and only 13% of companies said they have a serious shortage of orders and can only maintain production within 1 month. About 30% of the companies participating in this survey are small and medium-sized enterprises.
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.
With the transfer of orders, some domestic textile companies are having a hard time.
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.”
While market demand is cooling, the impact of trade friction on Chinese companies is also continuing.
Since June, textile companies, industrial clusters and professional trading markets have steadily resumed work and market. However, due to weak demand and insufficient orders, production capacity utilization has generally decreased compared with the same period last year, and the dilemma of low profits and high inventory has not been substantially improved. Commodity prices began to decline after the U.S. dollar interest rate hike, and the prices of finished products in the textile industry subsequently entered a downward channel, increasing the pressure on corporate inventory losses.
Sino-US textile share declines
Xinjiang cotton restrictions upgraded again
The outflow of orders is certainly the direct cause of the bleak textile and apparel market., but what caused the massive outflow of orders?
Putting aside the welfare of manufacturing industries in Southeast Asia, one important reason is that the United States imposes restrictions on related goods from China’s Xinjiang region.
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.
In addition, the USAID-funded Indo-Pacific Opportunities Project regional assessment mission informed BGBA that any clothing produced in Bangladesh cannot enter the United States if it is produced with fabric imported from Xinjiang cotton.
If products are found to be in any way related to Xinjiang cotton, these products will be confiscated. If confiscated, exporters will not receive their payments.
The Bangladesh Garment Buyers Association (BGBA) has issued a directive asking its members to be cautious about sourcing raw materials from the Xinjiang region.
In fact, Bangladesh attaches great importance to China’s economic and trade, but it is actually a helpless move for the Bangladeshi textile industry to stop using Xinjiang cotton and side with the United States. Last year, Bangladesh’s apparel exports to the United States reached US$7.14 billion, and the United States is the largest single destination market for Bangladeshi apparel. From January to October last year, Bangladesh’s apparel exports to the United States even surpassed China, Vietnam and Indonesia, with a growth rate of 27%. If the United States rejects Bangladeshi clothing, it will undoubtedly be a major blow to the Bangladeshi textile industry.
The United States uses Bangladesh’s dependence on it to force Bangladesh to choose a side, but how long can the United States itself laugh? 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 number of garments rejected by the United States may be much greater than the United States itself thinks. The U.S.’s introduction of Xinjiang-related evil laws is bound to have a further impact on the global industrial chain. This is not good news for the United States, which is currently mired in inflation and supply chain crises. The United States will only reap the consequences of its boring political maneuvers.
Meet the challenges
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.
Haining, Zhejiang, which is home to warp knitting, hosiery, furniture, home textiles and other industries, has recently taken the lead in shouting out the slogan “Go overseas to grab orders, and we’ll guarantee your return” and five major assistance measures, aiming to help companies seize the opportunity to go overseas to obtain goods. Order.
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 regarded as a direct and effective support method 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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