Where Should The Textile Industry Go Under The Financial Crisis?

The US subprime bubble burst caused the financial tsunami to wreak havoc all over the world. In order to ease the pressure of credit crunch, in October 9th, after unprecedented injection of capital in scale, all countries began to jointly reduce the interest rate sharply, ending the largest period of false prosperity in the United States since the 1929 economic slash, exposing the loopholes of modern financial derivatives such as subprime mortgage and leveraged investment, and also witnessed the drawbacks of venture capital technology.

Six factors triggered the financial tsunami, which caused the current financial tsunami to wreak havoc on the world. The main factors were investors' failure in credit rating, the slow reaction of the Federal Reserve, the serious loopholes in the asset appraisal system, the poor supervision of financial leverage, the error in the rescue decisions of the US financial departments and the domino effect of the credit crunch crisis in six aspects.

1.. Since the outbreak of the subprime mortgage crisis last year, rating agencies such as S & P and Fitch have been accused of making mistakes, giving high ratings to high risk sub assets. However, the response to the credit crisis has been slow, and investors' confidence in credit rating has been lost.

(2.) until the outbreak of the financial tsunami in September, the Federal Reserve has also focused on curbing inflation as a top priority. It is totally unaware of the serious consequences of losing credibility.

3.. In the United States, asset appraisal requires that financial institutions need to assess assets at market value. But when the financial crisis appears, asset market capitalization is rapidly frothing, forcing financial institutions to sell assets and finance to fill up the insufficient assets. The sale of assets and financing makes financial institutions continue to make huge losses, and then accelerates the need to raise funds continuously. When financial institutions' liquidity and mutual confidence fall to a critical point, credit pactions become more and more difficult, which turns into a vicious circle of financial institutions' collapse due to credit crunch.

(4.) in 2004, the securities and Exchange Commission (SEC) loosed the provisions on the net capital (net capital) of large investment institutions, but did not design appropriate financing and flow management mechanisms. Only financial institutions were allowed to issue commercial bills or create financial derivatives to the market by raising the ratio of debt to net capital, thus causing financial crisis.

Before Bell Sten broke out of the turnaround in March this year, financial institutions were almost unable to move their positions to the fed through the discount window, so that the operating leverage rose much higher than that of the general commercial banks.

But when people are too shy, the commercial paper market will inevitably be paralyzed, with a shortage of positions and turnover failure.

5.. The US financial department was forced to take over the takeover of Freddie Mac and two Fannie Mae government subsidized mortgage Finance Companies, which made the sniper speculators easy to get huge profits. At the same time, they refused to lend a helping hand to Lehman brothers, which made the market unable to make decisions, which would not help solve the financial crisis, but at the same time, investors would become a wrong gambling on the government.

6.. Under the background of financial globalization, the more pparent information, accelerating the domino effect of the credit crunch crisis, and now only reflects the process of rapid disintegration of the chain banking system.

The weaker part of the global system will accelerate the collapse of this wave of financial ravages.

The assets and exports of the mainland textile industry will be affected. Although China's financial system is limited in openness, the global financial tsunami will still have a considerable impact on China's textile industry.

Direct impact: Chinese government, and Chinese textile enterprises and enterprises at all levels with us dollar assets, including capital loss of bonds and equity.

China holds US $1 trillion and 60 billion, including US $about five hundred billion treasury bonds and US $about four hundred billion government backed institutional bonds.

In addition, if the US dollar continues to weaken due to the confidence crisis, the total value of US dollar assets held by the Chinese government, textile institutions and enterprises will also decrease correspondingly.

Indirectly, in the case of continued credit crunch, unemployment and bankruptcies in the US have surged, making the economy continue to languish.

The latest US labor department employment report shows that in September, the unemployment rate climbed to 6.1%, and the total loss of 159 thousand jobs in the United States increased by more than double that of August. It is the second largest monthly decline since the 9/11 terrorist attacks in 2001, and the cumulative number of work losses has reached 760 thousand in the first 9 months of the year.

On the other hand, the number of us filing for bankruptcy in September has reached 88663, an increase of 29% over the same period last year.

According to the consumer confidence survey in 9 months, the US consumer confidence index has dropped by 38% from the peak in January 2007. 57% of the respondents said their financial situation deteriorated. 2/3 of the US people expected the economic weakness to last for several years since the 1946 survey began.

China is the main trading partner of the United States, and its trade with the United States accounts for about 20% of the total trade volume, reaching 37.5% of its gross domestic product. Among them, the textile and garment export to the United States is the main source of income for many Chinese textile enterprises. In August, the United States imported 17 billion 147 million yuan of Chinese textile garments.

Statistics show that the US economy is going into recession and the employment market will continue to deteriorate. The estimated half a year will be the most frequent period of layoffs. And under the pressure of layoffs and lack of confidence, consumers will be hard pressed for the Chinese textile industry, which focuses on exports to the US.

To guard against the revival of trade protectionism, apart from the financial and economic problems, the US general election will, to a certain extent, affect the trend of the textile trade policy. While China's textile industry strives to maintain market share under the environment of economic downturn, the quotation must be very careful, and it should not be on the low side for a long time, so as to avoid the revival of trade protectionism.

At present, the major textile organizations in the United States have put forward various schemes such as countervailing investigations, anti-dumping investigations, and product safeguards. If the textile industry in the United States is able to make large-scale restricted enterprises succeed by the political and economic environment of the global financial tsunami, the export business of China's textile industry will be more difficult.

At present, the export of China's textile industry must face the problem of the continued depreciation of the US dollar, the rising cost of labor, and the sharp reduction of profit margins.

But since the globalization of the financial tsunami, the business environment is bound to be even more difficult. What we should guard against is to fall into the Liquidity trap easily in case of lack of confidence, so that the looser monetary policy can not change the market interest rate, so that monetary policy fails and the economy falls into a long-term recession.

To expand domestic sales, we must be prudent. In discussing the possibility of fully expanding domestic demand to offset the possibility of export weakness, the National Bureau of statistics shows that retail sales of clothing and textile products increased by 25.77% over the same period from 1 to July this year, but the CPI index of clothing commodities has slightly stagnated, indicating that the change in clothing sales prices is not clear.

Therefore, the textile industry wants to offset the possibility of export weakness by expanding domestic demand. We need to further observe the actual consumption ability of the domestic market, and confirm that after the real demand of the domestic demand market, we will start to expand the domestic demand.

Although moderate market turbulence often helps enterprises to carry out structural high speed, thereby enhancing long-term competitiveness.

However, if the enterprise system is bad, or the speed is too fast, it will easily lead to a business crisis. If there is no support for a suitable industrial policy, it will inevitably lead to business contraction or closing up.

How can China's textile industry take advantage of this global financial tsunami and rely on the wisdom, professionalism and determination of the industry?