Exchange Reform Promotes The Survival Of The Fittest In The Textile Industry

According to statistics from the General Administration of customs, the export growth of traditional bulk commodities in June was generally faster than that in the first 5 months, including clothing exports of US $53 billion 230 million, an increase of 16%, an increase of 2.9 percentage points over the first 5 months, and export of textiles, yarns, fabrics and products 35 billion 650 million US dollars, an increase of 32.3%, an acceleration of 2.6 percentage points.

As orders continue to warm up, Chinese textile and garment enterprises

The appreciation of the renminbi is one of the export cost factors that Zhong Hao Sen has to consider.

In 2005, there was no experience in dealing with foreign exchange reform, which resulted in the sudden loss of profits in some of the orders at hand.

In the past five years, he has always taken it as a mirror. When many textiles and garments around him competed at a price cut to get orders, Zhong Hao Sen kept trying to keep some profit margins.

Cost pressures go hand in hand.

Before 2005, foreign customers would have more than ten thousand or even hundreds of thousands of clothing orders from time to time.

And after the exchange rate has fluctuated, the risk of large single and long list is becoming increasingly prominent. Meager profits will be eroded by RMB appreciation. Chinese textile and garment enterprises are more likely to take short lists and small bills, digest the appreciation pressure of RMB through the settlement of foreign exchange as soon as possible, and continuously increase the quotations of products.

However, the pressure on RMB appreciation has not been fully resolved. Especially in the first half of 2008, the textile and garment industry is facing unprecedented pressure due to the superposition of multiple factors such as the appreciation of the renminbi and the rise in labor costs, the adjustment of the national macroeconomic policy and the downturn in the overseas market.

Before the outbreak of the financial crisis, only thousands of textile and garment enterprises in the Pearl River Delta could not afford to fall down.

According to the statistics of China Textile Industry Association, under the combined influence of various factors, the actual profit margin of 2/3 enterprises in the whole industry was only 0.62%.

Many garment exporters say that the profits of a garment are usually only tens of cents, and some are even negative.

And Chung ho Sen's enterprises, because of the accelerated appreciation of the renminbi, on average, each export garment profits have shrunk by 50 cents, almost half of the profits earned.

In addition to hard price increases, Zhong Hao Sen's enterprises also use bank financial instruments to lock in one year's exchange rate and expand imports to hedge the pressure of RMB appreciation. The enterprise's import business accounts for 20% of the total turnover and alleviates some exchange rate pressure.

In 2009, the cost of labor and raw materials decreased, and the RMB exchange rate remained basically stable, to a certain extent, to alleviate the cost pressure of enterprises.

But this is only temporary.

Since the beginning of this year, labor costs have risen sharply, raw materials such as cotton and cotton yarns have risen fiercely, and fabric prices have also risen sharply. For example, the price of elastic denim rose rapidly from 12.3 yuan per yard to 13.8 yuan in January this year. The cost of a pair of jeans is calculated by 1.5 yards, and the cost of fabric is only about 2 yuan.

After the reopening of the foreign exchange market this year, the textile and garment industry is facing heavy pressure again.

At that moment, Zhong Hao Sen was more calm, and he was confident that he would win the cost war.

"The price increase is very difficult. Many years in Europe and the United States, many clothing stores have not changed their clothing prices for many years, for example, they are set at 19.9 US dollars and 29.9 dollars. Once the exporters of Chinese clothing (6.16,0.14,2.33%) raise their prices, they will be paid from the buyers in Europe and the United States, and these foreign buyers are in a strong position, so they can not be easily carried out."

Zhong Haosen said, "we must pay attention to the strategy of bargaining. For many years of cooperation with our old customers, if we need tens of thousands of basic funds, we can raise them a little bit according to the original price or moderate, and if we only need one thousand or two thousand pieces, we will raise the price by 5%.

The more important thing to raise the price is to introduce new products continuously. For example, the most important thing about jeans is the function of water absorption. We aim at the new jeans with water marking technology, which is about 2 dollars higher than the ordinary ones, and the customers can still accept them.

The continuous introduction of new products is a secret weapon to raise prices.

In addition, Zhong Hao Sen's business signed a one year forward lock rate contract with the bank shortly before.

In the last few years, the expansion of domestic sales has also helped many garment enterprises to relieve the pressure of export.

Sunrise group's garment exports continued to decline this year, but retail sales in mainland China maintained rapid growth.

Li Zhongan, deputy general manager of sunrise enterprise affiliate Dasheng Investment Co., Ltd., in an interview with our reporter recently, said that at present, JEANSWEST's clothing brands such as rising sun have increased over 15% in mainland China's retail sales. The growth rate is faster than the cost increase, which is largely offset by cost pressures, and the scale of domestic sales has expanded so that enterprises can maintain good profit growth.

International market share will not drop or rise.

In a clothing store in Canada, there are a number of similar jeans. One made in Canada sells for 250 Canadian dollars. Bangladesh sells only 50 Canadian dollars, while the Chinese made is 80 Canadian dollars.

The price is much lower than that made in Canada, and the quality and manual level are much higher than that in Bangladesh. Chinese clothing still has obvious advantages.

In recent years, China's cost increase has prompted some buyers to reorganize their procurement strategy, and began to buy some basic and labor-intensive products in lower cost Asian countries.

Vietnam, for example, exports its products to the United States in clothing, furniture and footwear, which accounted for 63% of the country's exports to the United States in 2009.

In Kampuchea and Bangladesh, more than 90% of the products exported to the United States are garments.

However, although the export growth of these countries has accelerated in recent years, their market share still lags behind China.

For example, Vietnam's exports to the United States and the European Union increased by 18.8% and 9.3% respectively from 2006~2009, but only 0.9% of the US and EU markets.

The overall competitiveness of China's textile and apparel industry is on the rise in the international market. Despite many pressures, the market share of Chinese textile and apparel in the international market has increased over the past few years. The market share in Europe and the United States has increased by a few percentage points, for example, in the first export market, the EU's market share has reached 40% from 30%.

Exchange reform promotes the survival of the fittest in the textile industry

Wang Qianjin, President of the first textile network and senior analyst of textile industry, told reporters in the first financial daily newspaper that in the past five years, the net profit of China's textile and garment industry basically remained at 3%~5%, which is the result of many enterprises' efforts.

The reform did not weaken the status of China's textile and apparel in the international market, but forced the pformation and upgrading of the industry to accelerate, and the overall development trend was good.

Compared with electronic products, the technical content and added value of textile and garment industry are relatively low, and the impact of RMB exchange rate is more obvious.

Wang Qianjin believes that under the impetus of exchange rate and other factors, the textile and garment industry is polarizing after a round of fierce survival of the fittest. The development opportunities are uneven. The advantages of textile and garment enterprises with independent innovation and self created brands are more and more obvious, while the pressure of textile enterprises in the middle and lower reaches is increasing, and some of them will be pferred to countries or regions with lower labor force.