Exchange Reform To Speed Up Integration Of Textile And Garment Industry

"Textile companies are crying hard now."

Appreciation increases pressure on textile mills

The factory director of the foreign trade garment, who is interviewed, is in the middle scale of the local private textile mill and has about 100 workers.

The main way of processing products is to sell it to Japan.

"The appreciation of the renminbi will definitely have an impact on us, and now it can't bear it."

She said.

Zhang Wei, a textile analyst at Guotai Junan [99.28 0.00%], said that the export of textile and clothing commodities is usually 2~3 months from signing orders to delivery. During this period, exchange rate fluctuations between the currencies of export countries and the settlement currencies (most of which are US dollars) will lead to an increase or decrease in the income of the exporters in the local currency.

This risk is easily hedged by signing a forward exchange agreement because of the determination of the contract amount.

But at present, there are not many textile and garment enterprises that have the ability to carry forward foreign exchange business in China.

In addition, when the contract is signed, for exporters, the cost is measured in local currency, assuming that the currency of the exporting country is higher than that of the importing country, while the prices of the products priced in the importing country remain unchanged, which means that the exporters' income in local currency decreases and the profit rate declines.

Fortunately, the export of garment and textile industry is still strong.

In May 2010, domestic textile and garment exports amounted to 16 billion 422 million US dollars, up 33.45% over the same period last year.

In 1~5 months, the industry exported 131 billion 760 million US dollars, an increase of 19.3% over the same period last year.

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Cost pressures are hard to shift

"Raw materials were mainly cotton, but the average price of one ton cotton now increased by about 15 thousand yuan compared with the beginning of the year."

The director of the above interview said that the cost pressure of the foreign trade plant now comes from two aspects: raw materials and labor. "The wages of the workers have kept rising, and many factories have not even been able to recruit workers.

Some factories used to have 50~60 individuals, but now only 20~30 individuals are generally there, and they do not dare to work overtime because of their high overtime pay.

According to a research report of CITIC Securities [12.01 -6.39%], as of May 2010, domestic and foreign cotton prices were basically at the level of 17400 yuan / ton, up more than 15% from the beginning of the year, up 30% over the same period.

At the same time, the labor cost increased by more than 10%.

However, the cost is soaring, and small foreign trade clothing and textile enterprises are unable to shift the pressure by raising product prices.

"Now wages and raw materials have risen in price, but processing fees are not up.

If the price is raised with the guests, the order volume may be reduced.

If the cost is pferred to the price of clothes, it is also necessary to consider whether clothes can be sold.

Exchange reform to speed up industry integration

Although foreign exchange reform will put pressure on many small businesses, it will stimulate the survival of the fittest and achieve industry integration for the whole industry.

Hongyuan Securities believes that the cost of export enterprises is mainly raw material costs and labor costs, large export enterprises often have bargaining power, labor stability is also higher than small and medium-sized enterprises, in the industry integration advantage is obvious.

In the period of industry integration, resources will be concentrated on large and dominant enterprises.

Therefore, the large textile and garment export enterprises with full orders and bargaining power will not change significantly this year because of the exchange rate reform.

But the appreciation of the renminbi will further weaken the competitiveness of the entire textile and garment export industry, and will accelerate the pfer of foreign orders to low-cost countries such as India, Bangladesh and Vietnam.

Despite the revival of textile and garment exports in 1~5 months this year, many textile and garment exporting enterprises above Designated Size will have little profit. The appreciation of the renminbi will further reduce the profit margins of export enterprises and speed up the integration of industries.