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    China's Textile Industry Is Once Again At The Crossroads.

    2011/11/14 17:24:00 17

    The Textile Industry Goes To The Crossroads.

    In January 2007, five years after China joined the WTO, Du Yuzhou, President of the China Textile Industry Association, once proudly declared: "facts have proved that WTO entry is indeed good for China's textile industry. The textile industry has given a satisfactory answer to the Chinese government.


    Du Yuzhou's optimism is reasonable. In the past five years, China's textile industry has been blowout. The sales value of the textile industry has reached 898 billion 300 million yuan in 2001, reaching an unprecedented 2 trillion and 449 billion 776 million yuan in 2006.


    However, when the weaving machine passed through the 2010, the Chinese textile industry, which once enjoyed the spring breeze of the WTO, began to experience cold currents: the international economic turmoil and the reduction of foreign trade orders. At the same time, the multiple factors such as rising costs, appreciation of the renminbi and financing difficulties are testing China's textile industry.


    China's textile industry has come to a crossroads. Looking back at the past, how should China's textile industry go through? What reflections do we need to take in the past ten years?


       The three transformation of a garment enterprise


    "The best stage of our foreign trade order development is after the entry of WTO to 2007. At that time, we received so many orders that our factories were not enough to use, and we also had to produce more than 10 factories around the border."


    The prophet of warm spring duck. Around 2005, Xiao Guoxin, director of the uniform factory of Baoding Hongxing Clothing Co., Ltd. suddenly felt that foreign trade orders were "doing well".


    There are two things that make Xiao Guoxin feel deeply. One is to go through the procedures of quality inspection and customs clearance for garment export, and do not need to make a special trip to Beijing or Tianjin. The relevant local authorities in Baoding can handle it. The other thing is that every quarter, the chairman of the company does not have to run to the foreign trade bureau to receive quotas.


    Before joining the WTO, western countries adopted quota restrictions on China's textile exports. Domestic trade enterprises must receive quotas from competent authorities before they can export. "At that time," food stamps "and" oil tickets ", which were like planned economy times, you still have no orders, but you still have quotas. Xiao Guoxin recalled to reporters.


    The so-called quota system for textiles is a rule which restricts the scale of international trade in Europe and North America in 1974, with the purpose of protecting the productivity of its textile industry. For a long time, the textile quota system has not only seriously suppressed the productive capacity and export capacity of some productive countries, but also seriously distorted the development of global textile and clothing trade.


    In 1986, the Uruguay Round negotiations put the textile trade on the agenda of negotiations, and finally reached an agreement: gradually abolishing the multi fibre agreement (MFT), incorporating the trade in textiles and clothing into the GATT agreement on textiles and clothing (ATC). According to the provisions of ATC second, sixth and eighth, the import side will gradually eliminate all quantitative restrictions in three stages in the transition period from January 1, 1995 to December 31, 2004, and finally achieve the liberalization of textile trade, that is, from 2005 onwards, the textile industry will usher in the "quota free Era".


    With China's accession to the WTO, China's textile industry will also enjoy this treatment. And this is particularly important for the future development of China's textile industry.


    This is a glimpse of Xiao Guoxin's Baoding Hongxing Clothing Co., Ltd. Set up in 1981, Baoding Hongxing is a garment enterprise which mainly produces shirts. The product of this enterprise was mainly sold domestically in the 90s of last century. During the period from 2001 to 2007, it almost abandoned domestic sales and specialized in foreign trade orders. After 2008, the proportion of domestic sales gradually increased.


    From domestic sales to foreign trade and then back to domestic sales, the three transformation of Hongxing has maintained a high degree of consistency with the development trend of China's textile industry since its entry into WTO. "The best stage of our foreign trade order development is after the entry of WTO to 2007. At that time, we received so many orders that our factories were not enough to use, and we also had to produce more than 10 factories around the border." Xiao Guoxin said, "most domestic apparel enterprises have had similar transformation process."


    Like Hongxing, most of the domestic textile and clothing enterprises catch up with the spring breeze. Wang Qian, a senior analyst in textile industry and general manager of Shanghai World Wide Information Consulting Co. Ltd., cited such a group of figures: "before China's accession to the WTO, the total export volume of China's textile enterprises amounted to about 50 billion ~600 billion dollars. In 2010, this figure was 20605 billion US dollars, and it was four times over." {page_break}
     


       Entanglement of "242" clause


    "It is totally unreasonable and unscientific for us and Europe to impose restrictions on Chinese textiles only three or four months."


    It has been predicted that textile integration will bring global textile trade into a spring beginning in 2005. However, for the Chinese textile industry, this year is not too calm.


    In May 13th, the US Department of Commerce announced that the US textile agreement Executive Committee had decided to take special restrictions on textiles from cotton knitted shirts, cotton trousers, cotton and chemical fiber underwear from China.


    In May 18th, the US Department of Commerce announced that the US textile agreement Executive Committee, based on the "market disruption threat", decided to take special restrictions on textiles from China made of chemical fiber knitted shirts, chemical fiber trousers, cotton and chemical fiber woven men's shirts and combed cotton yarns.


    In May 23rd, the EU textile Commission approved the proposal of the EU Trade Commissioner Mandelson on 17 th, and agreed to launch the "emergency special safeguard" procedure for T-shirts and ramie yarns imported from China, and asked for formal consultations with the Chinese side on the import of these two categories of textiles.


    In May 23rd, the textile agreement Executive Committee of the US Department of Commerce announced that import quota quotas were again imposed on 4 types of Chinese textiles.


    "The restrictions imposed by the US and Europe on my textiles are based on the 242 provision in China's WTO accession report, but citing the 242 clause should be conditional, that is to say, there is a market disruption and threat to the orderly development of Chinese textiles in the US and Europe. There should be a causal relationship between the two. The United States and Europe have not provided detailed data to China, and there is a big gap between them. It is totally unreasonable and unscientific for us and Europe to impose cursory restrictions on Chinese textiles only on three or four months' data. Bo Xilai, Minister of commerce at that time, said.


       China's textile industry at the crossroads


    Due to many factors, such as rising labor costs, shrinking foreign trade orders, weakening domestic demand and financing difficulties, domestic textile enterprises are facing severe tests.


    After the financial crisis in 2008, China's textile industry once again ushered in a brief spring. At that time, the international economy gradually recovered, and China's loose monetary policy prompted a sharp growth in China's textile industry. According to Wen Hao, deputy general manager of Jiangsu Hengli Chemical Fibre Co., the investment sentiment of Chinese textile industry was soaring.


    "In 2009, ~2010 textile enterprises frantically increased investment in equipment, especially when cotton prices rose to twenty thousand or thirty thousand yuan a tonne last year, and some people were lining up to buy cotton spinning machines. At that time, it was only six months after the deposit was paid to get the machine. Wen Hao told reporters.


    While increasing investment in textile enterprises, the external environment has undergone a subtle change. The rising cost has gradually become the "unbearable weight of life" for enterprises.


    The first is the rising price of raw materials. Take the production of ready-made cotton cloth for example, "in July last year, the price of cotton cloth was 1.2 yuan / meter, and reached the highest point in November, 1.9 yuan / meter, now it has dropped to 1.7 yuan / meter, although it has dropped steadily, it still increased a lot compared with the same period last year." Xiao Guoxin told our reporter.


    In addition, the cost of chemical fiber materials is also rising. Data show that as of the end of May this year, PTA, ethylene glycol and other chemical fiber raw materials compared with the same period last year rose faster, or 35%, 50%.


    The increase in labor costs is also a major factor in the cost increase. Cai Yanhua, Secretary General of Wujiang textile chamber of Commerce, told reporters that the labor costs of textile enterprises rose by 20%. At present, the monthly salary of textile workers in Wujiang is between 3500 yuan and ~5800 yuan. Before the Spring Festival, Xiao Guoxin paid two workers' wages for factory workers, and the cost of labor increased by 40%.


    Under the dual constraints of high cost and declining sales, textile enterprises' profits are further compressed. "The average net profit of the textile industry is around 6 points. According to the present situation, the profit may decrease by 30%."


    In fact, textile enterprises are facing more than just domestic competitors. Thanks to the appreciation of the renminbi and the rise in labor costs in China, China's advantage as a world factory is no longer in existence. Vietnam, Indonesia and some African countries will become new competitors for Chinese textile enterprises. "There are many situations where some large foreign enterprises purchase cotton yarn in China and get them to do weaving in other countries." Xiao Guo Xin said.


    Due to many factors, such as rising labor costs, shrinking foreign trade orders, weakening domestic demand and financing difficulties, domestic textile enterprises are facing severe tests. Reporters learned that since the Spring Festival, China's textile enterprises' foreign trade predicament has begun to show, and the situation has deteriorated in the latter half of the year.


    China's textile industry is once again at the crossroads. However, Du Yuzhou said that despite the fact that China's textile industry has been facing various internal and external disadvantages in recent years, textile enterprises still have huge development and transformation space in the two markets of domestic demand and trade. To cope with the changes in the new situation, the textile industry should continue to integrate into the global market and participate more actively in the international market competition. On the one hand, we should open up new markets and make good use of the opportunities of new technological revolution. At the same time, in the aspect of enterprise transformation and development, the textile industry needs to actively promote the reform of the system and mechanism.
     

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