Industry Situation Is Grim &Nbsp; Domestic Textile Enterprises Need To Break Through With Adversity (1)

As one of the pillar industries in China, the total output value of textile industry has increased steadily in recent years, and it has accounted for 11.3% of China's gross national product in 2009.

It can be said that the rise and fall of the textile industry not only affects the economic development of our country, but also concerns the employment of about 20 million people.

Although the country has proposed the textile industry pformation and elimination of backward production capacity requirements, but due to various factors, overall progress is slow.

Since 2008, China's textile industry has experienced unprecedented ups and downs.

After the outbreak of the international financial crisis in 2008, the global textile demand slowed down, causing China's textile enterprises to get into trouble. The enterprises had to maintain operations through downtime and staff reduction, but they still could not avoid the breakup of capital chains.

Until the second half of 2009, the revival of domestic economy and the increase of international demand made the textile industry gradually recover.

At present, with the receding of the financial crisis, China's textile industry is gradually showing a thriving scene. With the continuous increase of orders, textile prices are rising all the way, but behind this prosperity, there are many hidden problems, such as the rising price of raw materials and the pressure of RMB appreciation, which pose a great threat to the domestic textile industry.

There are many problems behind the prosperity of textile industry.

Rising cost of raw materials

Since April last year, with the gradual recovery of the global economy, China's textile industry has gradually recovered, and the price of raw materials such as cotton and chemical fiber has risen.

By the beginning of May this year, the average price of the 328 cotton plants increased by 4742 yuan / ton, or 40.4%, and viscose staple fiber increased 7000 yuan / ton, or 54.7%, and polyester staple increased 2650 yuan / ton, or 33.5%.

As we all know, as a labor-intensive industry, the profit of the textile industry has been relatively low, and at present, China's textile industry has not completed the industrial upgrading, production technology is relatively backward, and the utilization rate of the production capacity is relatively low.

For foreign customers, if China's textiles have no price advantage, they will choose Vietnam, Indonesia and other textile products with more price advantage to purchase; for domestic customers, because of the fierce competition in textile industry, substantially raising the price means losing the market.

As a result, the profits of the textile industry will be further compressed.

At present, domestic textile enterprises have to choose between "protecting profits" and "protecting customers". Once a large number of customers are lost, enterprises will eventually go bankrupt, so more enterprises choose to sacrifice profits to keep customers.

Rising labor costs

Since the Spring Festival this year, the Pearl River Delta and the Yangtze River Delta region

This change can be said to be mixed.

The joy is the overall awareness of our workers and the improvement of their ideological level, and gradually realized their own value. The worry is that many domestic enterprises are lagging behind in terms of technology, equipment and management level, and their profit margins have been maintained at a low level, especially in labor-intensive industries. For example, the average net profit margin of textile and garment enterprises is only 3% - 5%, and some even lower than 3%.

On the whole, although China is still a manufacturing factory in the world, it is clear that the era of extremely cheap labor is gone forever.

With the continuous rise of labor costs, domestic textile enterprises will be under tremendous pressure.

RMB appreciation poses a threat to China's textile industry

In recent months, the issue of RMB appreciation has once again become the focus of attention of the international community.

Although China's trade deficit first appeared in March in 6 years, it rebounded again in April and achieved a surplus of US $1 billion 682 million.

Western governments and organizations led by the United States have been putting pressure on our country. Even developing countries such as India and Brazil have thrown support for the appreciation of the renminbi.

Since July 21, 2005, China has begun to implement a regulated and managed floating exchange rate system based on market supply and demand and reference to a basket of currencies. However, the international financial crisis in 2008 made the RMB once again pegged to the US dollar.

In June 21st this year, the people's Bank of China announced that it would accelerate the pace of exchange rate reform and resume the floating exchange rate policy.

Since western countries generally believe that the valuation of the renminbi is too low, the reopening of the exchange rate will undoubtedly enable overseas investors and speculators to buy large amounts of Renminbi to make it appreciate.

Objectively speaking,

On the other hand, in the short term, China's dollar denominated assets will be shrunk.

Secondly, the possible appreciation of the RMB after the reform will lead to some difficulties in China's export dependent industries, especially textile, electronic manufacturing and other labor-intensive industries.

Overall, the RMB exchange rate reform advantage is obviously greater than the disadvantages.

In the long run, the sustainability of relying solely on export driven economy is not strong enough to make our country truly on the road to power.

Once the appreciation of the RMB, the impact on China's textile exports is self-evident.

Although the state put forward the goal of eliminating backward production capacity and upgrading industrial pformation, it needs a relatively long process to achieve it.

For the time being, if the renminbi appreciates, it will put China's textile enterprises in a dilemma. One side is the crazy rise of raw material prices, on the other hand, the main textile importers of Europe and the United States are constantly lowering their quotations due to the appreciation of the renminbi.

If such a situation continues, it will further backlog the low profit margins of textile industry. The choice of textile enterprises will be to stop production or close down or abandon overseas orders.

At the beginning of this year, the pace of global economic recovery is lower than that of governments and economists.

First, the United States quickly introduced a series of aid programs after the financial crisis, and gradually implemented the reform of the financial industry. It quickly got out of the crisis, but the consumer spending that accounted for GDP 2/3 did not improve much.

From the US first quarter economic data this year, GDP grew by 3%, lower than expected 3.4%, and the profit after tax increased by 42.7%, but the decrease in enterprise expenditure indicates that most enterprises are not willing to increase the number of employees in the newly improved operation.

Moreover, in recent months, the non-agricultural unemployment rate in the United States has recurred frequently. In June, it was 9.5%, still hovering high.

Only when the overall unemployment rate in the United States dropped to around 5% before the financial crisis, can we determine that the US economy has really returned to its original track of steady growth, which takes at least 3 years or so.

Therefore, the United States will not substantially increase the volume of China's textile imports in the near future.

Second, the slow recovery of the European economy is indeed worrying.

After the outbreak of the international financial crisis in 2008, Europe was the second most serious disaster area after the United States.

Obviously, compared with the rapid recovery of the United States, the majority of EU member states have stepped out of the crisis in a slow and heavy way, including many factors. The most important point is that the member states are doing their own things.

The subsequent Greek debt crisis is a typical example, because the rescue plan has been unable to reach a consensus, causing panic spread.

When Spain and Portugal reported the sovereign debt crisis, the European Union and the international monetary fund finally issued a total of 750 billion euros of European economic assistance plan, but the details of the implementation of the scheme have not been finalized.

Although this chaotic situation in Europe has eased slightly, it is certain that the euro zone's economic recovery will undergo a very long cycle.

When European governments announced that they would cut their spending and tighten their pockets, what followed was a fall in demand for China's textiles.

As China's largest textile demand, the EU's contribution to China's textile exports can not be replaced by other economies. In 2009 alone, China accounted for 26.5% of the total 107 billion of global exports of clothing, accounting for 26.5%.

Spinning enterprises can hedge risks through futures.

The problems mentioned above will certainly pose a threat to the domestic textile industry in the past two years. How can we deal with these challenges?

In recent years, although China's financial market has made considerable progress and progress, compared with the developed western countries, the western countries are still more conservative and backward. Most of the domestic enterprises involved in the import and export of raw materials and products can not hedge the risk of exchange rate fluctuations by participating in foreign exchange futures hedging.

But for textile enterprises, it is quite possible to hedge the cotton and other raw materials through China's commodity futures market.

Factors restricting the participation of textile enterprises in hedging

Hedging can play an immeasurable role in the production and operation of enterprises, but at present, the whole commodity market in China is not very optimistic about the hedging of enterprises, especially the soft commodities such as cotton and sugar.

According to the latest sampling survey at the China International Textile yarn (Chun Xia) exhibition in March, only 5 of the 32 surveyed textile enterprises are or are involved in futures hedging, and the rest are not involved.

In terms of scale, these 5 enterprises are private enterprises, with a smaller scale and annual sales volume below 50 million yuan.

Large scale joint-stock private enterprises or state-owned enterprises have not been involved in hedging. These enterprises are extremely cautious when they talk about futures.

The reasons for this situation are mainly the following three points: