The global supply chain crisis under the epidemic has brought a large number of return orders to China’s textile industry.
Data from the General Administration of Customs show that in 2021, China’s clothing exports increased by nearly US$33 billion (approximately RMB 209.9 billion) to US$170.26 billion, reaching a new high since 2015. Prior to this, China’s clothing exports had been declining year by year due to the transfer of the textile industry to lower-cost regions such as Southeast Asia.
However, the return of production capacity brought about by the epidemic may not be sustainable. Ernst & Young consulting services partner Zhou Liang told China Business News that being immersed in the low value-added development model of the past is a waste of national resources. China still needs to return to the original track and upgrade to high value-added links in the apparel industry chain. .
Return 200 billion
Thanks to favorable factors such as the recovery of external demand and the resurgence of orders caused by the epidemic, China’s garment exports have once again reached the US$170 billion mark after five years.
According to statistics from the General Administration of Customs, national textile and clothing exports in 2021 were US$315.47 billion (this caliber does not include mattresses, sleeping bags and other bedding), a year-on-year increase of 8.4%, reaching a historic high. Among them, clothing exports for the whole year were US$170.26 billion, a year-on-year increase of 24%, the largest growth rate in the past decade.
my country is still the world’s largest textile producer and exporter. However, with rising domestic costs and shifting international procurement trends, China’s clothing exports have been declining year by year after reaching a peak of US$186.28 billion in 2014. From 2015 to 2020 The average growth rate during the year was -4%. Coupled with the impact of the epidemic, exports in 2020 once dropped to US$137.38 billion, falling back to the level of 10 years ago.
Clothing export data in the past ten years show that the growth rate curve in 2021 is particularly prominent, showing a steep growth against the trend. In 2021, foreign clothing orders will return more than 200 billion yuan. Data from the National Bureau of Statistics show that from January to November 2021, the clothing industry output was 21.3 billion pieces, a year-on-year increase of 8.5%. This means that foreign clothing orders increased by approximately 10% in one year. 1.7 billion items.
Zhou Liang told China Business News that due to its institutional advantages, China controlled the COVID-19 epidemic earlier and better during the epidemic, and the industrial chain has basically recovered. In contrast, the recurrence of epidemics in Southeast Asia and other places has affected production, leaving Europe, the United States, and Japan and Southeast Asian purchasers will directly or indirectly transfer orders to Chinese companies, bringing about the return of clothing production capacity.
Looking specifically at exporting countries, China’s apparel exports to the three major export markets of the United States, the European Union, and Japan increased by 36.7%, 21.9%, and 6.3% respectively in 2021, and exports to South Korea and Australia increased by 22.9% and 29.5% respectively.
The status of the United States as my country’s largest textile and apparel export market remains stable. In 2021, my country’s apparel exports to the United States exceeded US$40 billion for the first time, setting a record high of US$41.13 billion. On the one hand, driven by the U.S. fiscal and monetary stimulus plan, market demand has exploded compensatoryly, and U.S. clothing retail sales have repeatedly hit record highs; on the other hand, despite the ongoing economic and trade frictions between China and the United States, China, with its efficient and stable industrial chain, is still the largest buyer The most rational choice is that the United States is still dependent on China’s clothing industry.
After years of development, China’s textile and apparel industry has obvious competitive advantages. It not only has a complete industrial chain, a high level of processing supporting facilities, but also has many developed industrial clusters. During the epidemic, China, as the center of the world’s textile and apparel industry chain, has strong resilience and comprehensive advantages, playing the role of “stabilizing the sea”.
CCTV has previously reported that due to the epidemic, many textile and garment companies in India, Pakistan and other countries are unable to guarantee normal delivery. To ensure continued supply, European and American retailers have transferred a large number of orders to China for production. Wang Desheng, general manager of Guangdong Foshan Ligao Garment Co., Ltd., once said that the factory’s orders in mid-2021 have been scheduled to the end of the year, and orders from Australia have even been scheduled to 2022.
Major trend of industrial transfer
The return of orders brought about by the capacity substitution effect during the epidemic may not be sustainable.
Zhou Liang believes that the recovery of the domestic garment manufacturing industry during the epidemic is “false prosperity”: “Sooner or later, the epidemic will pass, and China will still have to return to the original track.”
As countries such as Southeast Asia resume work and production, orders that previously returned to China have begun to be transferred back to Southeast Asia. Data show that in December 2021, Vietnam’s clothing exports to the world increased by 50% year-on-year, and exports to the United States increased by 66.6%.
The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said that in December 2021, the country’s ready-made garment shipments increased by approximately 52% year-on-year to US$3.8 billion. Despite factory shutdowns due to the epidemic, strikes and other reasons, Bangladesh’s total apparel exports will still increase by 30% in 2021.
In the second half of 2021, the growth rate of domestic clothing exports is also gradually slowing down. In the first and second quarters of 2021, due to factors such as the recovery of international market demand and a small base in the same period last year, my country’s clothing exports grew rapidly. In the third quarter, the growth rate slowed down significantly. In the fourth quarter, due to the surge in holiday purchase demand in foreign markets, the growth rate There has been a certain recovery.
The epidemic has slowed down the transfer of the textile industry to Southeast Asia and other countries, but as the epidemic is gradually brought under control, global textile and apparel manufacturing will continue to accelerate its transfer to Southeast Asia and other places. Zhejiang textile and apparel company Jiansheng Group pointed out in its 2021 semi-annual report that “the transfer of mid- to low-end production capacity to Southeast Asian countries with lower factor costs and less disruption from tariff disputes is still the general trend.”
The manufacturing cost of a T-shirt in China is five times that of Southeast Asia. A person in the clothing industry said: “A pure cotton T-shirt produced in Bangladesh costs less than 1 US dollar for local raw materials and labor. It sells for 5 US dollars in discount stores in European and American terminal markets. -8 US dollars, while the labor cost of producing a T-shirt with the same raw materials in Guangdong is more than 5 US dollars, and the market price has to be doubled.”
“In the past, China’s labor force was cheap, so European garment manufacturers were willing to come to China to get goods. Now India, Bangladesh, and Turkey have taken over this advantage.” said the above-mentioned industry insiders.
China’s market share in major importing countries is declining year by year. From January to November 2021, according to statistics from importing countries (regions), China’s share of imported clothing from the United States and Japan was 30.6% and 56.9% respectively, down 8.5 and 1.8 percentage points respectively from the high point in 2020. Even compared with the epidemic In 2019, the US market share also dropped by 2.6 percentage points. In 2009, the share of Chinese clothing imported into the two major markets of the United States and Japan accounted for 36.6% and 82.9% respectively.
As the resumption of work and production in Southeast Asia and other places accelerates, orders are once again flowing out of the country, and the share of Chinese clothing in the markets of developed countries is likely to continue to show a slowly declining trend.
Zhou Liang believes that the relocation of low value-added industries to Southeast Asia, which has comparative advantages, to form a regional industrial chain is the overall pattern in the future, and for China, a reduction in such exports is not necessarily a bad thing.
Towards a textile and clothing power
Despite having a clothing export volume of more than 170 billion US dollars, data from the National Bureau of Statistics shows that the operating profit margin of the export clothing industry in 2021 is less than 5%. Affected by factors such as rising raw material prices, the overall profit level has continued to decline in recent years.
An industry insider bluntly said that China’s textile industry has the problem of being big but not strong. In the future, it is the right way to increase industrial upgrading and pursue moderate profits.
The textile and apparel value chain includes raw material production, fabric production, product design, and textile and apparel manufacturing. Textile and apparel manufacturing is the link with lower profit margins and the most fierce competition in the apparel value chain, and is a labor-intensive link.
Zhou Liang believes that if we blindly immerse ourselves in the past development model and develop low value-added labor-intensive industries, it will be a waste of national resources. “Processing orders in international trade will not be of any benefit to the Chinese economy,” he said. “GDP and employment have increased, but the added value of profits has not remained in China and has been taken away by the upstream, at the expense of our environment and energy.”
In an interview with a reporter from China Business News, Chen Zhonghao, co-founder of Zhijing Technology, mentioned that the government once said that the state subsidizes the use of electricity by enterprises, but some enterprises produce some products with a gross profit of only 3-5 points and sell them. , and can’t even make up for the energy consumption. “Both the country and the industry hope to reconstruct and upgrade the overall industry structure and gradually eliminate low-end products.”
In the clothing industry chain, fabric production and product design are the links that achieve added value and high added value in the value chain. The fabric technology of clothing is closely related to high technology and is a technology-intensive link, while product design requires the joint support of economy and culture and is an intelligence-intensive link.
“Sooner or later, the epidemic will pass, and China must develop into a high-end environment in the industrial chain and turn labor-intensive industries into technology-based industries.” Zhou Liang believes.
The transformation and upgrading of the textile and apparel industry is also a path taken by major textile countries such as Japan, and their transformation experience may serve as a reference. The global textile industry has experienced five rounds of migration, from the United Kingdom to the United States, the United States to Japan, Japan to South Korea, Taiwan, Hong Kong, and mainland China, and then from China to Southeast Asia.
The textile industry has played a huge role in the revitalization of Japan’s economy. However, after the 1980s, due to factors such as rising labor costs, Japan’s textile exports declined sharply. Since then, the Japanese government has increased investment in the research and development of high-end chemical fiber materials and textile machinery, focused on cultivating high-end clothing design talents, and moved low-end manufacturing links abroad. Domestic resources have been concentrated on the production of popular clothing and apparel products with higher added value.
At present, Japan has world-renowned clothing brands such as Issey Miyake, KENZO, and Uniqlo, and has top chemical fiber technology second only to the United States. Japan’s Toray is the world’s largest manufacturer of carbon fiber, the “king of new materials,” and owns more than 30% of the world’s Carbon fiber market share. At present, my country’s carbon fiber materials still rely heavily on foreign imports. In 2019, about 20% of imports came from Japan.
Despite the return of manufacturing capacity brought about by the epidemic, China still needs to get back on the right track of industrial upgrading, as Japan and other countries have experienced, stripping off low-end manufacturing links and investing in high value-added links in the textile and apparel industry.
China not only has a strong foundation for the garment industry, but also has a new demographic dividend – a large middle-class consumer group. It is only a matter of time before China becomes a powerful country in the textile and garment industry.
, as Japan and other countries have experienced, stripping off low-end manufacturing links and investing in high value-added links in the textile and apparel industry.
China not only has a strong foundation for the garment industry, but also has a new demographic dividend – a large middle-class consumer group. It is only a matter of time before China becomes a powerful country in the textile and garment industry.
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