Textile Industry Depression Restraining Domestic Cotton Price Rise

The rise and fall of the textile industry will directly affect the demand for cotton.

This year, China's textile and clothing exports have slowed down. At the same time, under the current inflation premise, the export tax rebate has declined, the RMB appreciation has accelerated and the labor cost has been raised to a great blow to the textile industry. At present, the domestic textile industry is facing difficulties and has a relatively large impact on the domestic cotton trend.

Slowdown in domestic textile and clothing exports

In 08 years and 1-5 months, China's textile and clothing exports were 66 billion 200 million US dollars, up 15.4% over the same period last year, and the growth rate dropped by 0.2 percentage points.

Among them, the total export volume of textile products totaled US $26 billion 67 million, an increase of 26.3% over the same period last year, and the total export of clothing and accessories reached US $40 billion 90 million, an increase of 9.3% over the same period last year, which is lower than the national average level, representing an increase of 9 percentage points over the same period of 07 years.

From 07 to 08 May, the total export of textiles and clothing was 128 billion 400 million US dollars, an increase of 16.7% over the same period last year, an increase of 3.7 percentage points from the increase in September.

In April of 08, clothing exports increased by 8.46% over the same period last year, and the year-on-year growth in exports dropped to the lowest level in nearly five years. In May, the 1.08% year-on-year growth rate once again refreshed the lowest record.

The main reason for the slowdown in export growth of textile industry is the acceleration of RMB appreciation since last year, the rising cost of labor and raw materials, the reduction of export tax rebate rate, and the slowdown in international economic growth.

Since September 15, 2006, the export rebate rate of textiles has dropped from 13% to 11%.

This is another downward adjustment after the textile export rebate rate dropped from 17% to 4 percentage points in 2003.

In June 19, 2007, the export tax rebate rate for garments, bags, toys and other products dropped from 13% to 11%, and the export tax rebate rate of viscose fiber was reduced to 5%.

So far, textile and garment export products (except viscose fiber) tax rebate rate is 11%.

The textile and garment industry is a labor-intensive industry with less export profits. The sharp reduction of the textile export tax rebate rate has made some small and medium-sized textile enterprises face the edge of bankruptcy.

According to the statistics of China foreign exchange trading center, in June 27th, the central parity rate of RMB against the US dollar was 1:6.861, which has appreciated by more than 6% over the end of last year.

Since the RMB exchange rate reform mechanism was launched in July 21, 2005, the RMB has maintained a slight appreciation against the US dollar exchange rate. In 2006, the RMB appreciated against the US dollar by about 3.3%.

Entering the 2008, the appreciation of the RMB against the US dollar accelerated significantly. From less than 100 days in the beginning of the year, the RMB exchange rate broke through the 7.2 and 7.1 passes, with an appreciation rate of about 3%. In April 10th, it broke through the integer pass of 7 and entered the "6 era" of the RMB exchange rate.

The appreciation rate of RMB has increased sharply, which has greatly reduced the export profits of export oriented textile industry.

On the evening of June 7th, the central bank announced that it raised the deposit reserve ratio of deposit financial institutions by 1 percentage points. This is the fifth time that China has raised the deposit reserve rate this year. After the rise, the deposit reserve ratio of the deposit financial institutions reached 17.5%.

Tight monetary policy has led to tension in the capital chain of enterprises, which will undoubtedly add to the current textile industry.

The National Bureau of Statistics announced recently that the price of Chinese manufactured goods (PPI) rose 8.2% in May, a record high in recent years.

Among them, food prices rose 11%, general daily consumer goods rose 3.9%, while clothing category rose only 2.4%.

According to the statistical data of sub varieties, almost all the prices of chemical products rose to varying degrees in the price category of chemical products, while polyester filament decreased by 4.6%.

In addition, China's consumer price (CPI) increased by 7.7% in May.

Still at a high level.

Among them, food prices rose by 19.9%, while clothing prices fell by 1.5% compared with the same period last year, of which clothing prices fell by 1.6%.

On the one hand, enterprises must bear the rising prices of raw materials, fuel and power. On the one hand, they must bear the price drop of products caused by the downturn in international and domestic markets; they must bear the changes in the RMB exchange rate and the shortage of funds brought about by financial policies, and also contribute to the protection of people's quality of life and the suppression of prices.

The domestic textile industry is facing great difficulties. Many small and medium-sized enterprises are in danger of losing money or even bankruptcy.

According to the national development and Reform Commission statistics, in May, the national yarn production was 1 million 900 thousand tons, an increase of 12.8% over the same period last year.

In the 1-5 month of this year, the total output of national yarn was 8 million 340 thousand tons, up 11.6% from the same period last year, and the growth rate dropped by 9 percentage points.

Last September to May this year, China's yarn production totaled 15 million 450 thousand tons, an increase of 11.7% over the same period last year, an increase of 8.6 percentage points.

Cotton production has been stable in recent 2 years. According to the US Department of agriculture, the output of 7 million 720 thousand tons was 2007, while domestic consumption exceeded 11 million tons, with a gap of about 3300000 tons. Last year, China imported about 2 million 460 thousand tons.

But with the slowdown in textile exports this year, the demand for cotton has slowed down, thereby affecting the decline in imports.

According to customs statistics, 240 thousand tons of cotton were imported in May, lower than the average annual output of 275 thousand tons in three years.

The import volume of 1 million 30 thousand tons in 1-5 months is also lower than the average 1 million 200 thousand tons in the past three years.

We can see from the spot market trend, the domestic cotton trend is relatively stable, steady rise slightly.

As of July 2nd, the domestic 328 cotton price index was quoted at 13859 yuan / ton, an increase of 9 yuan / ton compared with the beginning of March, rising 13 yuan / ton compared with the same period last month.