These risks need to be guarded in textile industry this year

Edited by Zhong Mengxia

Recently, China Wool Textile Association and China Cotton Textile Association successively issued guidelins on the Development of Wool Textile Industry and Cotton Tex—tile Industry during the 14th Five—Year Plan, which provid—ed important guidance for the development of wool textile and cotton industry. The General Office of the State Council recently issued the guideline on Cross—Cycle Adjustment to Further Stabilize Foreign Trade, which mentioned the related contents of export credit insurance in many places. The Regional Economic Partnership Agreement (RCEP) has came into effect for South Korea on February 1, 2022, and the first—year tax rate promised by RCEP was imple—mented for some imported goods originating in South Korea from February 1, 2022. Morocco plans to transform the existing industrial park into a green industrial park. The enterprises in the park are mainly concentrated in leather, textile, agricultural products and other fields.

In terms of market characteristics, in the fourth quar—ter of 2021, the domestic textile and garment production continued its recovery trend, but it was affected by many unfavorable factors, such as restrictions on energy con—sumption, frequent domestic pandemic control, high cost of raw materials, rising shipping prices, and decreasing overseas orders. The growth rate of textile and garment production slowed down. Domestic textile and garment sales continued the recovery trend, but the growth rate of textile and garment sales slowed down due to the lo—cal pandemic situation. South Korea's textile and garment retail sales have shown a recovery growth, and online consumption has increased significantly. In Japan, the recovery of household consumption is weak, resulting in little rebound in clothing consumption demand and little increase in clothing retail sales.

In terms of industry performance, from January to December 2021, domestic textile and garment industry's operating income and profit kept increasing year—on—year, and the profit rate of garment industry's operating income was still lower than that of the same period in 2019. The income of Armenia's textile industry has increased substantially, mainly driven by the output of bedding and fabrics.

In terms of trade data, from January to December, 2021, China's textile and garment exports reached a record high, and the export growth mainly came from clothing, bedding, carpets and curtains under the "stay—at—home economy", returning to the pattern of clothing, textile fabrics, textile yarns, household textiles and other commodities as the leading growth contribu—tion. Due to the decline in the production capacity of textile and garment industry affected by the pandemic in Vietnam in the early stage, China's garment exports to South Korea are on the rise, while textile exports have declined due to the high base in the same period last year, but far exceeded the level in the same period of 2019. Due to the slow recovery of Japan's economy and weak motivation of household consumption, the demand for clothing imports has also dropped significantly. Although the scale of China's clothing exports to Japan has increased compared with the previous year, it still hasn't reached the pre—pandemic level. Textile exports to Japan are affected by the high base in 2020, and the year—on—year decline in 2021 is large. However, due to the shrinkage of Japan's imports from Vietnam, China's share in Japan's textile market is still higher than that of the same period in 2019.

1.The COVID—19 caused by the mutant virus is repeated all over the world, and the blockade measures may be repeatedly activated. The uncer—tainty of the pandemic will have a certain impact on consumer demand.

2.The prices of raw materials and shipping are rising and fluctuating at a high level, which reduces the profit margin of enterprises and makes them less willing to purchase.

3. Anti—dumping investigations have been initiated by many coun—tries in China's textiles, which increases the operational risks of China's textile export enterprises.

Industry Policy

Guidelines on the Development of Wool and Cotton Textile Industry in the 14th Five-Year Plan

Recently, China Wool Textile Association and China Cotton Textile Association successively issued the Guide—lines on the Development of Wool Textile Industry and the Cotton Textile Industry in the 14th Five—Year Plan. The two guidelines respectively summarized the development achievements of the industry during the 13th Five—Year Plan period, defined the development situation, guiding ideology and development goals of the 14th Five—Year Plan period, and determined the key tasks, key projects and technologies during the 14th Five—Year Plan period. The six development goals of wool textile industry include: industry development has entered a new stage; industrial structure adjustment has made new progress; innovation ability has reached new goals; sustainable development level has reached a new height; fashion transformation has achieved new breakthroughs; and intelligent manufactur—ing has made new progress. The five development goals of cotton textile industry include: new achievements in the development of the industry; continuous strengthening of scientific and technological innovation capability; continu—ous improvement of intelligent manufacturing level; con—tinuous optimization and upgrading of product structure; and continuous improvement of the sustainable development system.

The General Office of the State Council issued the Opinions on Making Cross-cycle Adjustment to Further Stabilize Foreign Trade

The General Office of the State Council recently issued the Opinions on Making Cross—Cycle Adjustment to Further Stabilize Foreign Trade (hereinafter referred to as the Opinions), implemented the decision—making arrangements of the CPC Central Committee and the State Council, further expanded the opening up, made cross—cycle adjust—ment, especially supported small and medium—sized foreign trade enterprises, and made efforts to keep orders, stabilize expectations and promote the steady development of foreign trade. It is pointed out that for export enterprises of labor—intensive products such as textiles, clothing, shoes and boots, bags, toys, etc., All local government should implement various policies and measures to reduce burdens, stabilize posts and expand employment, and increase policy support such as export credit and export credit guarantee in a way consistent with WTO rules. Support local human resources, social security and commerce authorities to strengthen cooperation, and study and establish a fixed—point regular monitoring mechanism for employment in foreign trade. The Opinions specifically mentioned "encouraging financial institutions with cross—border financial service capabilities to increase financial support for the construction and use of overseas warehouses by tra—ditional foreign trade enterprises, cross—border e—com—merce and logistics enterprises on the premise of com—pliance with laws and regulations and controllable risks", "consolidating and enhancing the role of export credit insurance", "continuously cultivating and developing the policy financing business under short—term insurance", "doing a good job in foreign trade credit supply" and "in—creasing policy support such as export credit and export credit insurance in a way consistent with WTO rules".

China implemented RCEP agreement tax rate to South Korea

The Regional Economic Partnership Agreement (RCEP) came into effect for South Korea on February 1, 2022. In order to strictly fulfill the commitments of the agreement and actively promote the full implementa—tion of RCEP, the Customs Tariff Commission of the State Council issued an announcement to implement the first—year tax rate promised in the RCEP agreement on some imported goods originating in South Korea from February 1, 2022. According to the agreement, the subsequent annual tax rate will be implemented from January 1st of next year.

Morocco transforms industrial park into a green industrial park

According to Moroccan media, the Moroccan Min—ister of Industry and Trade plans to gradually transform the current industrial park in Morocco into a green in—dustrial park, and meet the international certification standards. Recently, the first model park was unveiled, which is the AinCheggg (PIAC) Industrial Park in Sefrou, with a total investment of 146.5 million dirhams and an area of 81 hectares. Enterprises in the park are mainly concentrated in leather, textile, agricultural products and other fields. The park will use solar panels to gener—ate electricity, and a wastewater treatment station will be built to deal with high pollutants from leather pro—duction. The concept of the park is to reduce pollution and greenhouse gas emissions in industrial production, and at the same time strengthen garbage collection and establish circular economy.

Market characteristics

National textile and garment industry continues to narrow

The growth rate of textile and garment production slowed down, which led the year—on—year growth rate of textile and garment industry from January to December 2021 to narrow obviously, and it was still lower than the level before the pandemic in 2019. According to the data of the National Bureau of Statistics, from January to December 2021, the output of yarn, cloth and clothing products increased by 8.4%, 7.5% and 8.4% year—on—year, respectively, and the year—on—year growth rate was significantly narrower than that of the first three quarters. The production of domestic textile and garment industry has gradually improved, but it has not reached the level of the same period in 2019. According to the data of the National Bureau of Statistics, in the fourth quarter, the capacity utilization rate of the textile industry has reached 79.2%, which is higher than that of the same period in 2019 (74.70%), but lower than that of the second and third quarters.

Online consumption is expected to continue

From January to December, 2021, the sales of yarn, cloth and clothing and online clothing of enterprises above designated size still achieved a recovery and high growth. Online consumption is expected to continue, but the year—on—year growth rate continues to narrow. According to the data of the National Bureau of Statistics, from Janu—ary to December 2021, the cumulative sales of yarn products above designated size increased by 8.8% year—on—year, the cumulative sales of cloth products increased by 7.2% year—on—year, and the retail sales of clothing products totaled 997.46 billion yuan, up by 14.2% year—on—year, exceeding the level of the same period in 2019. The cumulative sales of online clothing increased by 8.3% year—on—year.

Foreign market

Due to the impact of the COVID—19 pandemic, Ko—rean families' spending on semi—durable goods such as clothing was greatly reduced in 2020. Especially due to the fear of virus infection and strict pandemic pre—vention policies, offline consumption continued to be negative, while online consumption increased. On this basis, in 2021, Korean clothing retail showed a recovery rebound, while online consumption increased substan—tially. According to the data of the National Bureau of Statistics of Korea, in December 2021, the retail sales of Korean clothing reached 5,643.12 billion won, a year—on—year increase of 32.5%. From January to Decem—ber, the retail sales of clothing in South Korea reached 57,440.54 billion won, a year—on—year increase of 15.3%. The transaction volume of online clothing stores reached 16,902.77 billion won, a year—on—year increase of 12.6%.

Under the continuous influence of the global sup—ply chain crisis, Japan World, TSI Holdings and other garment enterprises plan to transfer some of their pro—duction back to China and increase the local production ratio from the current 10—20% to 30—50% within 3—5 years, but it is difficult to reverse the declining trend of Japanese textile industry production index in the short term. According to the commercial dynamic survey data released by the Ministry of Economy, Trade and Industry of Japan, the wholesale sales of textiles, clothing and accessories in the Japanese market still keep a down—ward trend compared with the previous year, among which, the wholesale sales of textiles are about 2.07 tril—lion yen, down 0.8% year—on—year (22.4% year—on—year in 2020), and the wholesale sales of clothing and ac—cessories are 3.99 trillion yen, down 4.5% year—on—year (20.7% year—on—year in 2020). At the same time, due to the repeated impact of the pandemic, although the Japanese economy has been shrinking for two consecu—tive years, its economic recovery is obviously slow, its motivation is insufficient, and its household consump—tion recovery is weak, resulting in no obvious rebound in the demand for clothing consumption. In 2021, the retail sales of fabric clothing and accessories in Japan were 8.61 trillion yen, with a year—on—year growth rate of only 0.9%, compared with 8.64 trillion yen in the same period of 2020, a decrease of 16.8% compared with 2019.

Market performance

The textile industry's operating income and profit kept growing year—on—year, and its operating income profit margin was still lower than that of the same period in 2019. According to the data of the National Bureau of Statistics, from January to December 2021, enterprises above designated size in the tex—tile industry realized a cumulative operating income of 2,571.42 billion yuan, a substantial increase of 10.0% over the same period of last year; The total profit was 120.31 billion yuan, up 4.1% year—on—year; The profit margin of operating income was 4.7%, exceeding the level of the same period in 2019. Enterprises above designated size in the garment industry have achieved a cumulative op—erating income of 1,482.34 billion yuan, a year—on—year increase of 6.5%; The total profit was 76.78 billion yuan, a year—on—year increase of 14.4%; The profit margin of operating income is 5.2%, which still has a certain gap compared with the same period in 2019.

Armenia's textile industry revenue increased significantly. According to the data of the National Bureau of Statistics of the Republic of Armenia, the income of Armenia's textile industry from January to November 2021 increased by 2.2 times compared with the same period in 2020, exceeding 1.7 billion drams, which was mainly caused by the increase in the output of bedding and fabrics. During the reporting period, Armenian factories produced 21.3 tons of fabrics, a year—on—year increase of 59%. At the same time, the output of bedding increased by 2.2 times to 121,600 pieces. In addition, the output of tights, leg—gings, socks and other socks products increased by 1% to 19,003,700 pairs. The output of jackets, vests and other similar products (knitted/crocheted) decreased by 65.2% to 2,700,200 pieces, and the output of carpets and rugs decreased by 56.7% to 2.9 tons.

Trade data

From January to December, 2021, China's textile and garment exports amounted to USD 315.466 billion, an increase of 8.38% over the same period of last year, and its exports reached a record high. Among them, the cumulative export volume of textile yarns, fabrics and products was USD 145.203 billion, down 5.58% year—on—year, exceeding the level of the same period in 2019. However, compared with the same period in 2020, the demand for pandemic prevention materials, especially masks, decreased, resulting in a decline in textile exports, but the decline has gradually nar—rowed since the third quarter; The cumulative export volume of clothing ac—cessories and clothing accessories was USD 170.263 billion, up by 24.01% year—on—year, mainly due to the recovery of external de—mand and the return of some orders. However, at the same time, the exports of Vietnam, Cambodia, Bangladesh and other major garment industry countries have rebounded significantly recently, and the growth rate of China's cloth—ing exports has also declined slightly, but it is still far higher than that of the same period in 2019 and 2020. Generally speaking, unlike the sharp increase of textile yarns, fabrics and products driven by pandemic prevention materials in 2020, the export growth of textile industry in 2021 mainly comes from clothing, and household textiles, bedding, carpets and curtains under the "stay—at—home economy". China's textile and garment exports have returned to the pattern of clothing, textile fabrics, textile yarns, household textiles and other commodities as the leading growth con—tribution.

China's exports to South Korea are mainly clothing and clothing accessories. In recent years, the bilateral trade be—tween China and South Korea has been fluctuating under the influence of political economy. The main importing countries of South Korea's textiles and clothing are China and Vietnam. However, Vietnam's textile and clothing industry was affected by the pandemic in the early stage, and China's exports to South Korea were on the rise. Textile exports declined due to the high base in the same period last year, but far exceeded the level of the same period in 2019. From January to Decem—ber 2021, China's clothing and clothing accessories exports to Vietnam amounted to USD 6.772 billion, a year—on—year increase of 22.84% and an increase of 18.22% compared with the same period in 2019; The export of yarns, fabrics and products was USD 3.301 billion, down by 8.30% com—pared with the same period of last year and up by 22.95% compared with the same period of 2019. However, Vietnam's production capacity has gradually recovered, while the pandemic situation in South Korea has deteriorated. In the short term, China's textile and garment exports to South Korea are uncertain.

China's exports to Japan are mainly clothing and clothing accessories. In 2021, due to repeated pandemics in Japan, slow economic recovery and weak recovery of household consumption, the demand for clothing consumption did not rebound significantly, and the import demand for clothing also dropped significantly. Although the scale of China's clothing exports to Japan increased compared with the previous year, it still did not reach the pre—pandemic level. However, although due to the high base in 2020, China's textile exports to Japan dropped significantly year—on—year, the scale of Japan's imports from Vietnam has shrunk significantly, which is still much higher than that of the same period in 2019. From January to December 2021, China's textile yarns, fabrics and products exported to Japan amounted to USD 5.376 billion, a sharp decrease of 31.11% year on year and an increase of 21.22% compared with the same period in 2019; The export value of clothing accessories to Japan was USD 14.662 billion, a year—on—year increase of 6.46% and a decrease of 2.91% compared with the same period of 2019.

Various risks

Since the beginning of the year, the domestic cotton price has main—tained a fluctuating growth trend. At the same time, although the futures price of Zhengzhou cotton dropped significantly after enter—ing February, it showed signs of rising again. The spot price of domestic cotton continues to fluctuate at a high level. Especially in January, the spot price of domestic cotton continued to rise. Although the downstream orders have improved slightly, the enterprises have not accepted the high—priced cotton. Their willingness to stock up is not as good as that of the same period of last year, and the overall stock of raw materials has steadily declined. As of Janu—ary 31st, the stock of cotton industry in textile enterprises was 776,300 tons, a decrease of 39,300 tons compared with the end of last month and a decrease of 154,200 tons compared with the same period of last year. Among them, 35% enterprises reduce cotton inventory, 23% increase inventory, and 42% remain basically unchanged. A survey of more than 90 designated textile enterprises in China by China's cotton early warning system shows that in January, the raw material inventory of textile enterprises decreased, the textile output decreased month by month, and the yarn inventory and cloth inventory increased.

Since the second half of 2020, the global shipping capacity has been insufficient, freight rates have contin—ued to rise, and the phenomenon of insufficient empty containers and declining turnover rate has not been significantly improved. Since 2021, except for Japan and South Korea routes, the freight rates of export contain—ers of other major routes have all been rising. During the Spring Festival holiday in 2022, as most of China's factories are in a state of shutdown, the shipping price has dropped somewhat compared with that before the holiday. However, considering the backlog of orders that can't be shipped before the holiday and the wait—and—see mood of customers, it remains to be seen whether the freight rate will resume rising.

On January 6, 2022, Korea issued Announcement No. 2022—22, it officially imposed anti—dumping duties on polyester filament fully drawn yarn (FDY) originating in China, with tax rates ranging from 3.95% to 10.91%. The measures came into effect from January 6, 2022, with a valid period of 5 years. On January 26, 2022, Pakistan's State Customs Committee issued a notice saying that at the request of Pakistan's Court of Appeal, it had re—launched an anti—dumping investigation on Polyester Fila—ment Yarn originating in or imported from China and Malaysia, revised the original final ruling and adjusted the C&F anti—dumping duty on the products involved. After the adjustment, China's anti—dumping duty was 2.78% ～ 6.82%, and the effective period of the measures was up to August 25, 2022.

On February 21, 2022, the Indian Ministry of Commerce and In—dustry issued a notice saying, Make an affirmative final anti—dump—ing ruling on polyurethane which includes any kind of textile coated one sided or both sided with polyurethane originating in or imported from China, It is suggested that the anti—dumping duty of 0 — 0.46 USD/m should be imposed on the products involved in China. In addition, the European Union initiated the second anti—dumping sunset review investigation on China's polyester high—strength yarn; Brazil initiated the second anti—dumping sunset review investiga—tion on China's synthetic fiber knitted fabric; Peru initiated the anti—dumping investigation on China's polyester fiber fabric; and Turkey initiated the first safeguard measure sunset review investigation on imported nylon yarn.