Textile Industry Into China's Economic Growth Point

A large number of data in the summer of 2013 made the skeptics pessimistic about China's economic prospects. The gross domestic product (GDP) and corporate profit growth of the world's second largest economies have slowed down. The order for manufactures tends to weaken. Worries about bad credit have been quite common recently due to overcapacity. China's major stock index has dropped to a new low of four years, becoming an ominous sign for the future.

Such a slowdown in the Chinese economy has pushed Asian and other emerging economies to a gradual downturn, as the easing financing environment that helped them develop rapidly has begun to tighten.

But in fact, China's economic growth prospects remain strong in some industries with relatively few government concerns. In these industries, private enterprises have gained an important foothold. The textile and garment industry can reflect this situation, which has been a pillar industry of China's economy for a long time. However, many manufacturing enterprises are scattered. After China's accession to the World Trade Organization in 2001, it was cancelled. textile The export quota system, which began to grow in the first place during the global financial crisis (during which China also lost some labor cost advantages), has declined, but now the industry has rebounded.

According to the National Industry Association report, in the first half of 2013, the output value of China's textile enterprises above Designated Size (annual sales volume of 20 million yuan and above) increased by 13.3% compared with the same period last year, reaching 488 billion US dollars. Despite rising domestic wages and global consumption, China's textiles and clothing Exports grew by 12% over the same period last year, to $127 billion. However, domestic demand and production also continue to increase vitality: once occupied in 2002. Fabric And yarn sales of 37% of the sea going out volume, now only 16%.

Tianhong Textile Group is a medium-sized model of the industry. The Shanghai company's net profit in the first half of this year has increased two times, reaching 447 million yuan (75 million US dollars), helping the company's listed shares in Hongkong increase four times in the past 12 months. At the moment, the company has no obvious credit problems: the company with a revenue of 1 billion 200 million US dollars (it is "the list of top 200 listed companies in the Asian version of Forbes") has issued a six year senior note with a total principal value of 200 million dollars at a low 6.5% year interest rate, which will be partly invested in new investment.

Tianhong is currently stepping into the cotton textile industry. The power of the state-owned enterprises that used to occupy a large share of the market in the industry has weakened, but the Hongkong family that has established multinational enterprises before China's economic reform still has influence. According to the ranking of China's largest cotton textile company in 2012, two of the top four, Lu Tai and Yida, came from Hongkong, a former British colony. Tianhong ranked tenth.

In China, where the hidden bosses may face various risk management risks, the annual report of rainbow 2012 is printed with a full page photo of Hong Tianzhu, 45 years old and optimistic and cheerful, who is dressed in a sky blue suit with a bright orange background behind him. Why should we be shy? After Tianhong stock's recent rise, Hong Tianzhu's stock is worth 800 million US dollars at present.

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In view of the fact that Tianhong bought a smaller domestic producer this year for 56 million US dollars, Hong Tianzhu has seen more potential in China through integration. When he talked about the 10000 existing yarn and fabric manufacturers in China, he said: "excellent enterprises will survive, and inferior enterprises will be eliminated." As for China's overall textile industry, "the lack of large enterprises in this industry is an opportunity." Hong Tianzhu estimated that the market share of rainbow is currently only 1%.

However, he also looks abroad, and this is producing benefits. Tianhong is a relatively continental investment enterprise in Vietnam. It started a factory there in 2006. In addition to cheaper wages than China, there is another key advantage: Tianhong can purchase cotton at international prices. The current international price of cotton is 45% cheaper than the current price of the protected cotton market in China, which makes Hong Tianzhu an advantage in selling yarn to the country. Tianhong will also benefit from a series of actions supported by the US Trans-Pacific Partnership trade agreement and ASEAN countries aimed at reducing trade barriers between them.

In a June report, Credit Suisse said China's policy of maintaining high cotton prices for the benefit of local growers may not continue. "In the long run, we doubt the sustainability of the Chinese government's policy because it clearly distorts the supply and demand of the market," the report cautioned.

But Tianhong did not plan to wait for the end of this policy. There has also been a history of Vietnam in the history of the state textile mill, which now occupies 40% of the total output value of rainbow. Hong Tianzhu said: "we are producing Vietnam on the devaluation of the local currency and selling it in China with continued appreciation of the local currency. "

Tianhong, which has 20000 employees around the world, is now eyeing its development outside Vietnam. The company is also investing in Turkey and Uruguay, trying to double its overall capacity by 2014. The United States is also in the calculations of Hong Tianzhu.

The globalization of Tianhong manufacturing business will not only enable the company to enter the market that has not yet been developed, but also speed up its response to the local market and make full use of preferential tariffs outside Asia. Larry Cho, an analyst at CIMB, recently wrote in a report by the securities company, Larry.

Tianhong was founded in 1997. At that time, hongtianzhu, a small trader, rented a state-owned factory factory in Jiangsu Province, which was in trouble, and began to engage in production. He subsequently acquired the assets of the factory and three other state-owned enterprises that were winding up. Hong Tianzhu said: "at that time, everyone thought that receiving these employees was a burden." In fact, "there are many experienced employees among them. The reason why these state-owned enterprises fail is the system of state-owned enterprises. Today, three of the four executive directors of Tianhong are executives of these state-owned enterprises.

As for many government backed companies, Hong Tianzhu said: "it is hard to believe that they are still in operation." today, the largest company in the industry is Shandong de cotton group. " But the new tycoon is also willing to annex private enterprises. He recently acquired a private enterprise. "There should not be so many small businesses in this industry," he said. This is not conducive to resource integration.

If he and his competitors have to continue to shoulder the rising labor costs in China, Hong Tianzhu said he will compete with the international production layout and enjoy the continued purchasing power of consumers in China's local market.

This may not only be the secret of success in the next round of growth of the industry in which he is located, but also the secret of a new round of development for other industries in China.