Cotton Enterprises Are In Great Difficulty Due To The Epidemic Situation. Experts Suggest Strengthening Support To Promote Confidence Recovery

On May 20-25, the China Cotton Association carried out a survey on the recent operation of processing trade enterprises, warehousing and logistics enterprises and textile enterprises in the cotton industry. The survey results of nearly one hundred enterprises show that the epidemic has a great impact on the production and sales of enterprises. Shrinking orders and shortage of working capital are the main difficulties; It is suggested that relevant departments and financial institutions should increase tax and fee reduction, credit support, stabilize the cotton market through measures such as reserve cotton rotation, cotton planting subsidies, and enhance industry confidence.

1、 Enterprise survey

（1） Cotton processing and trade circulation enterprises: slow progress of cotton sales

From March to March, 80% of cotton trade circulation enterprises started construction in succession, and the rate of construction reached 95% at the end of April. From the perspective of cotton sales progress of processing and trade circulation enterprises, 10% of enterprises have completed sales, 23% of enterprises have achieved sales progress of more than 80%, 23% of enterprises have achieved sales progress of 50-80%, and 44% of enterprises have achieved sales progress of less than 50%. From the perspective of cotton business volume, compared with the previous year, 14% of enterprises were basically flat, 38% enterprises decreased by 20%, 38% enterprises decreased by 20-50%, and 10% enterprises decreased by more than 50%.

The vast majority of enterprises said that the epidemic situation had a great impact on their business operations, mainly including: the loss caused by the fall in cotton prices, the slowdown in sales and inventory caused by insufficient demand for downstream textiles, the increase in financial costs and the pressure on repayment of loans caused by the slow return of funds. In addition to common suggestions such as tax and fee reduction, credit support, and financial discount, 33% of processing enterprises proposed to increase cotton planting subsidies and increase support to the mainland to stabilize cotton farmers' enthusiasm for cotton planting; 24% of circulation trade enterprises proposed to stabilize the market and expectations through regulation measures such as stock collection.

（2） Cotton warehousing and logistics enterprises: obvious business differences

Judging from the losses that the epidemic has brought to enterprises, there is a big difference between cotton warehousing and logistics enterprises. 57% of enterprises said that they have suffered great losses or their operations have been blocked, but 30% of enterprises said that they have no losses or little impact. The shortage of storage capacity and the reduction of inventory coexist. Enterprises generally say that inventory turnover is greatly affected. Warehousing and logistics enterprises believe that the uncertainty of market expectations is the biggest difficulty they are facing at present. They hope to expand domestic demand, restore production capacity and increase support for SMEs.

（3） Textile enterprises: orders dropped sharply

According to the survey, 95% of textile enterprises have started construction in March and March. From the effect of resumption of production, 43% of enterprises have a start-up rate of more than 90%, 10% of enterprises have a start-up rate of 70-90%, 29% of enterprises have a start-up rate of 50-70%, and 18% of enterprises have a start-up rate of less than 50%. Since 2020, compared with the same period last year, the total number of orders of only 5% of enterprises has increased, 36% of enterprises' orders have declined 0-20% year on year, 50% of enterprises' orders have declined 20-60% year on year, and 9% of enterprises' orders have declined more than 60% year on year. The decline in foreign trade orders of textile enterprises is more obvious, with 19% of enterprises' foreign trade orders falling 0-20% year on year, 52% of enterprises' foreign trade orders falling 20-60% year on year, and 29% of enterprises' foreign trade orders falling more than 60% year on year. Judging from the losses that the epidemic has brought to enterprises, only 9% of the enterprises think that the impact is not significant, and 91% of the enterprises say that the losses are relatively large, which are mainly reflected in the sharp decline in sales revenue, backlog of products, shrinking orders, etc.

From the two indicators of orders and profit expectations, 14% of the surveyed enterprises are expected to increase the number of new orders and profits by more than 20% in the second quarter, 29% and 18% are expected to increase by 0-20%, 14% and 23% are expected to be flat, 38% and 36% are expected to decrease by 0-50%, and 5% and 9% are expected to decrease by more than 50%. At present, 77% of textile enterprises think that the decrease of orders and the uncertainty of market expectations are the main difficulties, and 64% of enterprises have a shortage of working capital. Enterprises generally hope to continue to reduce taxes and fees, increase loan support, introduce targeted preferential policies, and wait for the market to recover; Some enterprises also expressed their hope to increase cotton import quotas and expand procurement channels.

2、 Policy recommendations

everything Include cotton and textile into key supported industries. The cotton and textile industries involve 6 million cotton planting farmers, 20 million textile workers and millions of circulation workers, most of whom are migrant workers. They are low-income groups that need key support. One third of China's textiles and clothing rely on exports, which is an industry hit by the epidemic. Statistics show that from January to April, the added value of textile industries above designated size dropped by nearly 11%, ranking second among 17 major industries. The "six guarantees" proposed by the central government put "ensuring employment" in the first place, including employees in the cotton and textile industries into key groups, and introduced temporary relief measures to support tax relief, financing loans, and income security, so that enterprises can "survive" and ensure that the income of practitioners does not decline significantly. Second We will increase support for cotton production in the mainland. At present, 85% of China's cotton output is in Xinjiang. Considering the industrial security, rational regional distribution, and ensuring the income of cotton farmers in the mainland, it is recommended to implement the policy of "professional storage supervision+notarization and inspection in the warehouse" of cotton in nine provinces in the mainland as soon as possible, increase financial support and promote the normalization and institutionalization of policies to stabilize the confidence of the mainland to resume production. Third Start the rotation of reserve cotton timely. At present, China's cotton inventory consumption ratio is 106.3%, which is the highest value in recent three years. Low consumption and high inventory put pressure on the industry. It is suggested to improve the rotation mechanism as soon as possible to solve the problems arising from earlier rotation, not transfer the burden to enterprises, and timely rotate reserve cotton, which will be put on the market when demand recovers to ensure the stability of the supply chain and boost industry confidence.