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Textile Industry: Export Rebound From Strong To Robust

2010/8/16 17:32:00 233

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Brief description of events and background:

China Customs General Administration issued import and export bulletin on August 10th: China in July 2010

Textile and clothing

Total exports amounted to US $20 billion 795 million, an increase of 27.01% over the same period last year, of which total textile exports amounted to US $7 billion 191 million, an increase of 35.09% over the same period last year, and clothing exports totaled US $13 billion 604 million, up 23.12% over the same period last year.

In 1-7 months, the total export volume of China's textile and clothing increased by 22.94%, of which 32.74% of textile exports increased and 17.33% of clothing grew by a cumulative increase.

Comment on events:

Industrial exports increased substantially in July, but

Rebound dynamics

Somewhat weakened.

The strong rebound in exports has pushed the total export volume to the highest level in 2008, and the value of exports in the 1-7 months has reached the highest level in recent years.

Industry exports continued to expand significantly in the early stage, while the rebound intensity weakened. In July, the export growth rate of industry decreased by 6.8 percentage points compared to June, and the growth rate of textile and clothing decreased by 9.34 and 4.96 percentage points respectively.

The data of textile and clothing excluding seasonal factors were -4.48% and -2.24% respectively, lower than 3.37% and 2.95% in June, which means that the impact of driving export rebound was weakened in July.

The driving force of the recent strong export rebound is the demand for replenishment abroad.

RMB

Appreciation and rising costs are expected to prompt orders to move forward.

Although the existence of low base in the same period in 2009 has a certain impact on the recent export trend of industry, the revival of foreign demand and lower inventory are the fundamental reasons for the rebound in exports.

Since 2010, the recovery of apparel retail in the US, Europe and Japan and the low inventory level have increased the country's demand for textile raw materials and clothing, and the expectation of appreciation of the renminbi and the rising cost has prompted the advance of export orders to add to the icing on the cake.

Strong rebound is not sustainable.

In the near future, the demand for replenishment of foreign stocks is a fundamental reason for the promotion of industrial exports. Under the condition of constant growth in foreign consumption, low inventory level will encourage foreign enterprises to have a continuous replenishment demand.

However, the price trend of cotton both at home and abroad shows that the gap between Chinese and foreign cotton prices has expanded dramatically since April. The rise of raw material costs has weakened the price advantage of Chinese textile and clothing products, and prompted foreign orders to shift to major competitors such as India and Pakistan. On the other hand, China's exporters have been attacked by compressing profit margins.

At the same time, the existence of RMB expectation factor only changes the time distribution of orders and does not change the total amount of orders. Therefore, as time goes on and the expectation of RMB appreciation is realized, the total amount of orders will decline year by year.

The strong rebound in the export season laid the foundation for export growth throughout the year, and the uncertainty behind the expected data increased.

Behind the recent expected export figures, the twists and turns of the external economic recovery, the improvement of the export base in the fourth quarter of 2009, the price trend of new cotton listed in 9-10 and the fluctuation of the RMB exchange rate will become an unstable factor affecting the export of the industry.

We believe that the pressure of industrial exports in the fourth quarter of 2010 will increase, and the growth rate of industrial exports is expected to remain within 15%-20% in 2010.