Industry Observation: Six Problems Restricting The Development Of China'S Textile Industry

For more than half a year, on the road of economic development, China has been continuously squeezed by both internal and external forces. With the constraints of demand side and cost side, the main economic indicators of China's textile industry, such as production, export and investment, have continued to slow down, and the industry has encountered unprecedented difficulties. At present, what are the main problems restricting the development of textile industry?

Overcapacity is large but not strong

In the process of rapid development of textile industry, the contradiction of industrial structure makes the problem of overcapacity, large but not strong. 60 years ago, there were only 5 million spindles in China, accounting for 5% of the global total; 30 years ago, China's production capacity reached 18 million spindles, accounting for 11% of the global total; 10 years ago, China's production capacity exceeded 120 million spindles, with an annual growth rate of close to or even more than 10%, and the production capacity reached more than 50% of the global capacity. By 2012, with the "4 trillion" economic stimulus subsided, the textile industry will go up the road of production capacity and eliminate backward production capacity. At present, the market operation environment is bad due to the superimposed epidemic situation of trade war.

Restricted by raw materials

Based on the fact that the raw material cost accounts for about 70% of the spinning cost, it is not difficult to see that the restriction of the raw material market makes the yarn market price change more from "cotton". By comparing the price trend of yarn market with that of cotton market, the two maintain a high degree of consistency. Years later, the epidemic has created a different trend. Cotton since the end of March, embarked on the road to restore its own valuation, but yarn prices have all the way down. The original two parallel up and down market, with the demand side of the limit outbreak, the price difference between the two gradually close, spinning profits can not be guaranteed, loss is common. Due to the continuous dependence of raw materials is the direct cause of the industry's difficulties.

Labor cost advantage no longer exists, competitiveness is weakening

Compared with Southeast Asian countries, in the early years, many enterprises rushed to Southeast Asia because the domestic labor cost advantage no longer exists. When they went to Southeast Asia, they had to save costs. As a result, they became expensive in a few years. Take the minimum wage of China and Vietnam as a comparison, the same is that the minimum wage of both China and Vietnam has been rising continuously, but in terms of the rising momentum, the growth rate of Vietnam has gradually overtaken that of China. The minimum wage in Vietnam is three times lower than that in China, to less than two times.

But from the textile sector, China's textile workers' wages are still more than three times that of Vietnamese textile workers. With the convenience of water and electricity, land and tariff, the cost of raw materials is only about 80% of that in China, which has attracted many large domestic enterprises to invest and build factories. Although Vietnam used to call itself Nantian little China, its attitude and action towards work are quite different from ours. Vietnam's work efficiency is too low. Those who can grind can grind and those who can paddle can paddle. If China can do it alone, Vietnam needs one and a half or even two, and it is possible to have more. The production efficiency is low, but even so, the comprehensive cost of investment in Vietnam is still about 15% lower than that in China. The continuous rise of production and financial costs is the basic reason for the loss of industry advantages.

Capital restriction is like a trapped animal fighting

The problem of fund shortage in textile industry is particularly prominent. The problem of fund gap is too large and the operation of enterprises can not be guaranteed. The lack of funds in the whole country has led to the shortage of funds for the textile industry.

Under the pressure of risk aversion and payment collection, the raw material stock decreased and the capital status deteriorated, which led to chain default on debt and production decline.

By observing the total amount of interest expenditure and loss of Industrial Enterprises above the scale of textile industry, we can see that although the interest expenditure has gradually contracted after 14 years, the total loss of Industrial Enterprises above the scale is increasing year by year. The more deficit, the more tense the capital, the more large-scale enterprises have been. How can small and medium-sized enterprises break out of the encirclement?

When can the Demand Dilemma return to the pre epidemic level

From the perspective of overseas demand environment, the epidemic situation has continued to ferment. In terms of unemployment rate, overseas countries have made great changes from the early resumption of work affecting epidemic prevention, non return to work affecting the economy, and now actively recovering the economy. The United States, however, has long stood in line, saying that the economy is more important than epidemic prevention. During the period when the epidemic situation is still unclear, that is, since the signal of economic recovery was issued in the middle of April, the work began to resume in the last ten days. The resumption of work combined with large-scale demonstrations and other factors, the epidemic continued to recur. The unemployment rate has soared from 4.4% to 14.7%, although it has turned around for the better, the unemployment rate has picked up. In addition, the unemployment rate of India and the European Union is still high.

In the international market, Europe and the United States are the most important foreign trade markets in China. Since April, the package of stimulus policies has been effective since the resumption of work and production, which is judged by the confidence of European and American consumers. Although the unemployment rate in the U.S. has not recovered since June, the unemployment rate is still lower than the normal level. The situation in the EU is the same, but there is still a long way to go before it is fully recovered.

In addition, from the perspective of industrial production index, may can be said to be the most addicted trough. In June, the industrial production index of Europe and the United States rebounded rapidly. This benefited from the fact that the United States attaches great importance to the economy, but the epidemic situation is still severe. This is not a joke, nor is it a gamble. There is a long distance from the establishment of consumer confidence to the return of demand.

Economy: extensive vs. fine

The domestic textile industry is on the road of extensive economic system. The domestic products are of average quality, but they are large in size, good in quality and cheap in price, and finally flow to the wholesale market. That is to say, during the epidemic period, after more enterprises export to domestic market, the products produced will be reduced in order to enhance their core competitiveness.

Export products of high quality, with environmental certification, exported to Europe and the United States. European and American countries carry out processing with supplied materials, and the brands and luxury goods created by them have entered the chain stores' supermarkets, and some of them have returned to China and have high-end customized products.

On the whole, the fine economy can create more profits, but we are only in a basic processing link, lack of international big brand certification, so more profits have been taken away. It is the current economic situation that China has come to the critical moment of refined development from the outside to the inside. It is a necessary process to upgrade the fine textile industry from extensive to fine. The emergence of trade war and epidemic situation accelerated the industrial upgrading, which is bound to be accompanied by the difficult choice of survival.

Overall, the textile industry is in urgent need of transformation, but this transformation can not be done overnight, and needs to be improved step by step. The road at the foot is the distance; the road in the heart is the pursuit.