RMB Appreciation Weakens Clothing's Low Price Competitive Advantage

Textile and clothing

To some extent, the cost and quoted price have lost the low competitive advantage of our products in the international market, and the export will be restrained.

Part of the bargaining power of enterprises will be able to shift part of the appreciation pressure through price increases, while the uncompetitive enterprises will be the first to be hit.

Prior to this, authoritative estimates have indicated that the net profit margin of the textile industry will decrease by 1% when the value of RMB is increased by 1%, which will further compress its profit margins for the textile industry whose profit margins are already low.

It is also widely expected that the export recovery of textile and garment industry will slow down in the fourth quarter of this year.

Data show that in the first 8 months of this year, textile and garment exports maintained a relatively high growth rate, driven by rising demand and rising prices.

In the first 8 months, textile and apparel exports totaled $129 billion 804 million, an increase of 23.75% over the same period last year.

Among them, the total exports of textiles amounted to 49 billion 515 million US dollars, and clothing exports totaled 80 billion 289 million US dollars, with a growth rate of 32.29% and 19.02% respectively.

But the rapid recovery of exports is not sustainable. CIC securities Kong Jun believes that the growth rate of textile exports has declined in August, indicating that the boom in global textile and garment production has declined due to the shrinking demand in Europe and the United States, which will affect the overall growth of domestic textile and clothing exports in the coming months.

However, as the production orders of export enterprises are already in the three quarter, the export growth of the three quarter will still be guaranteed, but the reduction of orders will affect the export volume in the four quarter.

Due to the large increase in the first half of the year, Kong Jun expects the growth of textile and clothing exports will be around 16% throughout the year.

Kong Jun said that although the export growth rate of textile and clothing is expected to slow down, it will not change the overall recovery trend of the industry.

Guotai Junan Zhang Wei also pointed out that domestic consumption demand for textile and clothing is still strong. In the first half of this year, the retail sales of clothing and textiles have shown a good growth, maintaining a growth rate of over 20% over the same period.

Starting from August, the retail sales of clothing and textiles increased, and reached a peak until December.

It is estimated that the total retail sales of textile and garment will remain about 25% year-on-year in the second half of this year.

According to the Statistics Bureau, in 1-8 months, the retail sales of clothing, shoes and hats and needle textiles in the enterprises above the limit reached 354 billion yuan, an increase of 23.7% over the same period last year. In August, the retail sales of clothing, shoes and hats and needle textiles in the enterprises above designated size amounted to 39 billion 900 million yuan, up 22.1% from the same period last year.

The year-on-year growth rate is faster than the total retail sales of consumer goods in China.

However, although the future prosperity of the textile and garment industry is good for the industry, the rising cost of raw materials and labor has made the cost growth of textile and garment enterprises far exceed the income growth rate, especially the profit margins of small and medium-sized enterprises are shrinking.

If the RMB continues to appreciate, more and more enterprises will be eliminated.