Under The Crisis, The Textile Industry Takes Self Rescue To Get Rid Of Difficulties.

The dilemma may make the whole industry a blessing in disguise, forcing enterprises to accelerate industrial upgrading and promote industry integration. Only in this way can Chinese textile enterprises save themselves, which is the only way out.

October 31, 2008 may be the most memorable day in the history of Fujian Jia Da cotton mill Co., Ltd.

Since its restructuring 9 years ago, the company has been positioning itself as an export company.

But it did not occur to me that domestic sales had become the lifeline of Jia Da - as of that day, domestic sales had reached more than 60% of the company's sales volume, and officially replaced the export business to become a pillar of the company's profits.

Chen Chun, deputy general manager of Jia Da company, said: "now, the export of Jia Da has been less than that of domestic sales. This is the first time since the restructuring of enterprises.

The recent pformation - opening up the domestic demand market ensures that it will not lose substantially.

By the end of the year, the change in the status of exports and domestic demand will not make the annual profit of Jia Da more than about 20000000 US dollars in the past year, but at least it should be close to about 80% of this figure.

From Chen Chun's remarks, we can see the fact that the competitiveness of China's textile industry has vanished after the exchange rate adjustment, labor force and raw materials rising in the first half of the year.

In the second half of the year, the demand for China's textile exports, such as Europe and the United States, was weak, and export difficulties evolved a veritable test of life and death.

The "zero profit" dilemma, a sharp decline in foreign trade orders, appeared two years ago.

Even if it is not as good as in previous years, the company is still lucky.

In the current China, not all textile enterprises can be as lucky as Jia Da.

"In the three quarter of this year, many good businesses in the industry are still losing money, including the loss of the main business of Huamao textile, which is well-known in the industry.

In previous years, Huamao textile, which maintained a profit of 0.8 to 100 million, has lost about 16000000 this year from the two quarter.

This is not what we used to be. "

Speaking of the plight of the industry, Chen Chun is obviously worried.

In fact, the signs of reduction in foreign trade orders began to appear two years ago.

In 2006 and 2007, the departments concerned lowered the export tax rebate for the two time. The purpose is not only to curb trade surplus, but also to change the mode of enterprise growth and enhance the competitiveness of enterprises.

The two reduction of export tax rebates has been a clear signal for Chinese textile enterprises, which are mainly extensive operations.

"Since then, Jia Da has begun to readjust its product mix, changing from low-end textiles to high value added high-end textiles," Chen Chunwei said.

Unfortunately, it is just a few of the enterprises that have made structural pformation in those years.

At that time, China's textile industry still had a profit margin of about 10% in the international market. Most enterprises did not act in time to upgrade the industry. Instead, they continued to compete in the middle and low grade products with the advantage of low price raw materials and labor.

Soon, Chinese textile enterprises felt more pressure from the international market.

With the rapid appreciation of RMB, exchange rate changes have led to soaring raw material prices and no corresponding increase in corporate profits.

At that time, people in the industry had estimated that the RMB exchange rate increased by 1 percentage points, and China's textile industry would earn less than 7 billion yuan in foreign trade.

The difficulties faced by China's textile industry are more than that.

The high price of oil has increased the pportation cost of the export. The new labor contract law has begun to make the labor cost advantage of China which is not very standardized. The new round of fiscal tightening policy in China has greatly improved the financial operation cost of the enterprise. Under the attack of several unfavorable factors, the profit margin of the original 10% has been gradually decreasing, and has gradually fallen into the predicament of "zero profit".

I do much more.

At that time, China's textile industry began to recognize the positioning of foreign trade orders, and many enterprises reluctantly maintained the operation of enterprises, waiting for opportunities, began to take the initiative to reduce overseas business, and dare not undertake too many overseas orders.

But the test is still upgrading.

Overnight, the financial turmoil in the US Wall Street brought China's textile enterprises to a desperate situation.

Because of the weak demand for major textile exporting countries, the export of Chinese textile enterprises is in a predicament.

Some scholars have statistics: at present, 2/3 of China's textile enterprises are at a loss or loss margins.

Daly, a business manager of Zhejiang silk (Zhejiang) Co. Ltd., admitted that orders for enterprises have dropped by nearly 30% this year.

And compared with the previous dare not take orders, "now more enterprises are unable to receive orders, so that losses are closed."

Wang Jun, Professor of textile School of Donghua University, pointed out.

The policy has little impact on China's textile industry.

So bad environment has made China's textile industry lose its competitive power in the past after being repeatedly attacked.

Statistics show that: (China Textile) exports to the US in the first three quarters increased by 28 percentage points over the same period last year. In the first 8 months, the domestic textile and garment industry profits and exports earned the lowest growth rate in recent years.

China's textile industry has been in such a difficult position that it has attracted the attention of the government.

To alleviate the disadvantages and deal with the recession, the Ministry of Finance and the State Administration of Taxation announced that from November 1, 2008, the export tax rebate rate of some textiles, clothing and toys should be raised to 1 percentage points, to 14%.

This is the second increase in textile export tax rebates in two months after the two increase in textile export tax rebate rate in August this year.

According to statistics: in 2007, the total export volume of domestic textile and apparel was 167 billion 900 million US dollars, of which general trade accounted for 70%. According to the annual export growth of 10%, the total export volume of textiles and clothing could reach 184 billion 700 million in 2008, of which the total export volume of general trade mode could reach about US $130 billion.

The total export tax rebate rate will be raised by 3 percentage points for the two time, and the total profit of the textile industry will increase by 3 billion 900 million US dollars.

The relevant departments have explained the second adjustment: the profits of export enterprises have been greatly reduced. It is necessary to adjust the fiscal policy to help enterprises establish confidence and tide over difficulties and prevent the passive situation that will affect China's economic development due to the sharp decline in exports.

Between the lines of the document, the concern about the reduction of export enterprises' profits is self-evident.

In addition to raising export tax rebates, the Ministry of commerce also announced that the quotas for textile quotas should be abolished from January 1, 2009.

However, the figure of US $3 billion 900 million can not save enterprises from losing or even bankrupt, and more SMEs have fallen before this.

Those textile enterprises still at the edge of life and death generally agree that the government's measures are difficult to solve the immediate predicament of textile enterprises in the short term.

Demand in Europe and the United States has continued to decline, and the weakness of the external demand market has made many enterprises unable to get orders, and tax rebates do not have much significance to these enterprises.

Li Zhixian, deputy director of Guoan Securities Research Institute, asserted that the abolition of quotas had little effect on the current situation.

The way out for industry is to put the "way out" problem before Zhang Weiying. His answer is quite generous: "to die and to live".

In fact, it is unfair to say that enterprises only look at immediate interests.

In those days, when the external demand of the textile industry was shrinking, many enterprises also thought of domestic sales, and the domestic market will undoubtedly be a strong backing for the Chinese textile industry in the predicament.

However, the objective situation of the domestic market was not optimistic at that time.

Take clothing as an example: in 2007, China's clothing inventory was about 12 billion, which could be used by the world population for one year, or an average of 10 Chinese people.

The significance of this figure is more obvious: the domestic market can not digest the capacity of exports to domestic sales - and most of these capacity products are low-grade products, and homogenization competition is fierce.

"The domestic market is harder to do", Wang Qin, general manager of Shenzhen Jiaming Industry Co., Ltd. admitted, "the homogenization of market products is serious, and export enterprises are dumping stocks at low prices in China."

But, in such a deep water, some enterprises still exist.

Through their analysis, we can sum up three industrial outlets.

First, some large enterprises barely survive by virtue of their strength.

By observing the flow of overseas orders, Li Xian finds that foreign businessmen will choose more large enterprises - they are also worried about the closure of small factories.

Secondly, some vigorous textile enterprises rely on pformation to counter the trend and are full of vigor.

For example: in the crisis, the survival of Jia Da is not a case. Wanshi Li group also cut off 8 textile enterprises that were still profitable by keen insight, and concentrated on high value-added silk products before they were reduced to the present difficulties.

Unfortunately, there are not many enterprises that have the same vision as Jia Da and WAN Shi Li, and when it comes to upgrading the industry at a higher level than pformation, it is even less in China's textile enterprises.

Liu Wei, Dean of School of economics, Peking University, has been studying the evolution of China's industrial structure for more than 20 years.

He believes that so far, China's industrial upgrading has only completed 1/3.

According to this view, part of the unfinished industrial upgrading - 2/3 is the proportion of enterprises in the textile industry who are losing money or even on the verge of bankruptcy.

In view of this phenomenon, Wang Jun pointed out that in order to survive, apart from brand marketing, it is more important for enterprises to use scientific and technological innovation to speed up industrial upgrading and increase the added value of products, so that enterprises will have a way out.

When he put the "way out" problem before Zhang Weiying, President of Peking University Guanghua School of management, his answer was generous: "to die and die".

He believes that such a predicament may make the whole industry a blessing in disguise, forcing enterprises to accelerate industrial upgrading, and also promoting industry integration. Only in this way can they save themselves, which is the only way out.

Yang Jing: editor in charge