Financial Crisis, Is The Good Day Of Tie Industry In Shengzhou Still?

In the winter of November 7th, cold rain suddenly hit Shengzhou.

The sudden drop of temperature is like a financial crisis without any sign. It also affects the mountain city, which is famous for its export ties. In the past few months, the industry has predicted that Shengzhou, which is at the bottom of the global tie chain, may enter the "cold winter" because of the economic turmoil.

On the day of the "Shengzhou necktie clothing industry development planning demonstration conference", more than 30 participants, including experts and scholars, only 8 local officials, private entrepreneurs and so on.

All this seems to imply that the best time of the tie industry has passed.

Data show that in the 1 quarter of this year, Shengzhou necktie exports amounted to US $55 million 150 thousand, an increase of only 12% over the same period last year, an increase of more than half of that of the previous year, and did not decline in the following two quarters.

Sheng Qiuping, deputy secretary and mayor of Shengzhou Municipal Committee, said at the meeting that "(tie industry) is facing unprecedented difficulties."

Collective price increases imply lack of pricing power.

Only half a year ago, Shengzhou's industrial clusters, which accounted for at least 70% of the world's ties, launched the "collective price increase" incident. Local policymakers expressed optimism about this.

In April 2nd, the signal of collective price increase of Shengzhou ties came from the market.

Despite the fact that the previous 3 increases in the international market ended in no disease, this did not affect the decision maker's determination.

One detail is that several previous collective price increases "abortions". The reasons for the failure also include local enterprises' views of "uniting the group to raise prices".

In the face of crisis in the survival of small and medium-sized enterprises, this decision was carried out. The active promoter behind it was Jin Yao, President of the Shengzhou necktie Industry Association, who was elected this year. His other status is the chairman of BABEI group, the biggest tie enterprise in the region.

When Kim Yao came to power, he did a piece of work and gave the members a detailed account.

One is the exchange rate adjustment. At present, the appreciation of the renminbi is nearly 5%. In April 15th last year, the middle price of the US dollar was 7.724 yuan against the RMB, which is 6.996 yuan on the same date this year, followed by the 2% reduction in the export tax rebate, the 0.3% increase in the land tax; the implementation of the labor contract law; the 1.5% increase in the cost of sales; the third is that the raw material prices of raw silk are unstable, and at the beginning of the year, the white factory silk is 167 thousand yuan per ton, and now it is 185 thousand and 800 to 190 thousand yuan per ton, increasing by 12.5%.

Kim believes that the above factors, which are on the neckline of the export average price of about 2.35 US dollars, will directly lead the whole industry into a small profit or loss.

If each tie is raised by 5 cents, the tie industry in Shengzhou can earn more than 20 million yuan.

This statement was unanimously recognized by the participants.

After holding a group, the negotiations between Shengzhou tie enterprises and some American companies took the lead. In April 30th, after nearly 20 days of competition, 7 tie enterprises including BABEI group received notice from the US company, and agreed that the price of each Silk Dyed Silk Necktie would be raised by 0.1 US dollars from May 1st.

In May 9th, the city of Shengzhou reported the role of the association to strengthen the discipline of industry -- the practice and Inspiration of the Shengzhou tie Association's collective raising price to deal with the export predicament. It was adopted by the Zhejiang provincial government general office's "special information". "This collective successful price increase is closely related to the existing 8 tie enterprises in Shengzhou, represented by BABEI group.

This seemingly perfect sample of price increase was again mentioned by the research group of Zhejiang Sci-Tech University on the "Shengzhou necktie garment industry development planning demonstration conference". The report said: "the neckline industry in Shengzhou is faced with a monopolistic monopoly. A foreign order will attract many enterprises, and Shengzhou enterprises have no pricing power. In the sales chain, only through the cooperation of Baotuan will affect the terminal market. This is also one of the plight of Shengzhou."

80% of the market is still constrained by cocoons.

According to the data of the Shengzhou necktie Association, there are more than 1100 existing tie enterprises in Shengzhou, of which 11 are sales of over 100 billion necktie enterprises, and 350 million tie ties each year, accounting for 80% of the total market value, and the output value exceeds 10 billion yuan.

In the course of over 20 years in Shengzhou tie, although the national tie market has been captured by 80% rivers, the industrial chain has not yet been fully integrated, and Shengzhou tie has also been constrained.

Data from the Shengzhou Statistical Yearbook 2007 show that in 2001, Shengzhou's locally produced silkworm cocoons were 2517 tons, reeling 335 tons, the highest in the past years, and then decreasing year by year. But for the Shengzhou tie industry that needs 7000 tons of silk every year, more raw material orders will go to the surrounding areas or the mainland.

One industry insider said that since 2005, the raw materials used for neckties have always been "roller coaster" quotes, prices swing between about 100000 / ton to about 300000 / ton, which leads to the difficulty of controlling the tie cost of enterprises, and sales must rely on buyers, both of whom are restrained by people, and profits are naturally not going to go.

Zhou Qingyu, vice president of Shengzhou necktie Association, said that the silk used in Shengzhou necktie mainly came from the Jiaxing market, and profit margins were affected by silk supply. At present, several large necktie enterprises are planning to build a silkworm base in Guangxi and Yunnan to ease the pressure of rising prices of raw materials.

Single tie industry cluster turns hard

According to the insiders, the other meaning of Shengzhou tie's "collective price increase" is that it provides a sample for Zhejiang's "industrial clusters" to get out of the predicament under the pressure of external environment.

The sample of industrial upgrading is still expanding.

At present, we need to upgrade our Chinese ties.