The Traditional Trade Advantages Of Textile And Garment Industry Still Have Room For Development.

Moderator: Mr. Zhang

Guest: chief analyst Li Xin, textile industry, CITIC Securities Research Department

Wang Weigang, manager of Dacheng innovation and Growth Fund

Mr. Zhang: what is the current situation of China's textile and garment industry?

Li Xin: with the gradual growth of domestic demand, the proportion of domestic demand to the entire textile and garment industry has risen to 40% - 50%.

In the first half of this year, industry exports reached 79 billion 410 million US dollars, up 7.97% over the same period last year, but the amount of RMB denominated has decreased by 1.59% compared with the same period last year.

The textile and garment industry's exports to the United States have been declining since April, and negative growth has occurred in June.

Wang Weigang: the continued appreciation of the RMB and the downturn in US consumption do have a huge impact on the export of the industry, especially in the two quarter of 2008.

But it is gratifying to note that China's export growth rate to EU and emerging countries is much better than expected, thereby reducing some of the negative effects.

Mr. Zhang: so what is the domestic demand for the textile and garment industry?

Li Xin: from the data of the first half of 2008, domestic clothing consumption continued to maintain steady growth, achieving wholesale and retail sales of 413 billion 100 million yuan, an increase of 18.4% over the same period, of which retail sales reached 147 billion 500 million yuan, an increase of 25.12% over the same period last year, which is 2.12 percentage points higher than the total retail sales of consumer goods.

Wang Weigang: due to factors such as snowstorm and earthquake, domestic clothing consumption did not show an over expected growth.

We believe that the uncertainty of macroeconomic growth and the high level of CPI will have a certain impact on domestic clothing consumption in the short term. But in the long run, the sustained economic development and the huge population base of China determine that China's clothing consumption still has potential, including sports products, women's clothing, infant consumer goods, business clothing and home textiles, and other consumer hot spots deserve attention.

Mr. Zhang: what will the future government's macro control of the textile and garment industry bring to the development of the industry?

Li Xin: it can be said that 2008 is the year when the textile and garment industry is facing the most internal and external pressures. These pressures have resulted in the narrowing of the industry's revenue and profit growth, and a batch of enterprises shutting down or even shutting down. The labor employment and social stability caused by this pressure have also attracted the attention of the government.

We judge that the current policy is gradually changing from industry regulation to stable industry and supporting industries, so as to give enterprises certain adjustment time to cope with rapidly changing domestic and international situations.

We see that the government has temporarily cut the slip tax on cotton imports from June 5th to October 5th, which is a better policy signal.

Mr. Zhang: from the overall analysis, how should we view the future of the textile and garment industry?

Li Xin: at present, the market is worried about the pfer of the whole industry to Southeast Asia.

But we believe that from a historical point of view, a country's per capita GDP reaches US $6000-10000, which will lead to a large-scale shift in the textile industry. Our current economic development level has not yet reached this stage.

Wang Weigang: the textile and garment industry has always been a traditional dominant industry in China.

In recent years, with the increasing appreciation of RMB, the textile and garment industry has encountered difficulties in weakening export advantages.

Although the textile and garment industry will not become an industry that China will always have sustained trade advantages, it will play an important role in the national economic structure as a large number of traditional industries that absorb large quantities of labor.