How To Break Through The Global Industrial Chain And China'S Textile And Garment Industry

"This year is a very tough year. What is even more frightening is that when the global epidemic will end, it seems hard to say at the moment. This means that the downturn in the textile and garment industry may not be over this year, and the probability will continue until next year." Xu Qi said.

Xu Qi owns a garment processing factory close to 1000 in Kampuchea. It is a representative of Zara, UNIQLO and other brands. When the factory basically has no mobility, he is blunt. "The Kampuchea government stipulates that workers still have to pay 70% of their wages during the rest period, of which the government pays 40%, the enterprises pay 30%, and the workers' wages in Kampuchea are about 190 dollars a month, and the factories are close to 1000, which means I owe thousands of dollars every day."

China has the most complete supply chain of textile and apparel industry in the world. The textile and garment industry is also the first business card that China made to the world. Its foreign trade also affects a large number of foundry enterprises in Southeast Asia. Xu Qi's business is one of them.

The global textile and apparel industry chain is almost closed.

The upper reaches of the textile and garment industry chain involve natural fiber (such as cotton, linen, wool) and chemical fiber production. The middle reaches include spinning, weaving, printing and dyeing, and downstream products including garments, home textiles, industrial textiles and so on.

Annie, who has 30 years of supervision and observation in the textile and garment industry, told the first financial reporter that China is the most sound country in the global textile and apparel industry chain. Especially after China joined the WTO in 2001, the export quota was abolished, which greatly promoted the development of China's textile and garment industry. China has gradually become the global textile and garment manufacturing center.

According to Wind information and statistics of Jingdong Research Institute, from 2001 to 2010, China's cloth production increased from 29 billion meters to 90 billion 700 million meters, yarn production increased from 7 million 610 thousand tons to 37 million 330 thousand tons, and chemical fiber production increased from 8 million 410 thousand tons to 48 million 860 thousand tons, all of which are the world's first.

"But in the second ten years of this century, because of the rising labor costs, the downstream of the textile and garment industry chain has gradually shifted to the lower cost labor economy. In the Sino US trade friction, textile and clothing products were accelerated by the threat of tariffs imposed by the United States. Said Ann.

It was during this time that Xu Qi went to Kampuchea to run factories. His factory adopts the mode of foundry production, takes orders from domestic foreign trade companies, imports raw materials from the country, makes use of Kampuchea's low price labor force to make garment foundry, and sells abroad.

Although processing plants are moving towards Southeast Asia, China is still the most important exporter of chemical fibers and fabrics. According to statistics from UN Comtrade and Jingdong Institute of statistics, by 2018, yarn fabric exports accounted for 30% of Global trade, and chemical fiber exports accounted for 40% of Global trade. Downstream producers, such as Vietnam and Kampuchea, all rely on imported fabrics.

At present, the main buyers of the global garment industry are concentrated in the United States, the European Union and Japan. Under the gloom of the global new crown, the demand for Europe, America and Japan has dropped sharply, making the whole textile and garment chain enterprises in danger.

Apparel foreign trade enterprises and processing enterprises are in a passive state. According to Xu Qi, there are many ways of dealing with commercial credit between garment factories and buyers. Buyers have much room and uncertainty.

The way of payment of textile enterprises also causes the upstream suppliers to be in a state of "dared not to produce" in a special period. "Textile and garment enterprises purchase first and then pay to suppliers after they are sold. Weaving mills should use their own money to buy raw materials and pay wages. If there is a return, it will be lost. Some small weaving factories are afraid to do more because they are afraid of customers' temporary cancellation of orders. Even to avoid risks, they prefer not to start. Xu Qi said.

Apparel foreign trade enterprises "change risks"

China is the center of the global textile and garment industry. How to resist the impact of the epidemic is attracting global attention.

At the Forum on stable foreign trade work in June 28th, Orient International, as one of the 6 invited participants, held a dialogue with the premier through video links.

Orient International is a textile group located in Shanghai. It is also China's largest textile and Garment Group and the largest exporters of textile and clothing. Shanghai used to be the base of China's textile and garment industry.

"In the 80s and 90s of last century, Shanghai was the most prosperous city in China's textile industry. At the most time in Shanghai, there were nearly 500 textile enterprises, 550 thousand industrial workers, and 13 textile sub sectors. At that time, China needed a large amount of foreign exchange to purchase advanced international machinery and equipment, and the textile and garment industry in Shanghai made great contributions to China's export earning foreign exchange. Now, Shanghai has completed the transformation from production to trade. Anxi told the first financial reporter.

After the adjustment of industrial layout in 1994, the processing enterprises moved out of Shanghai gradually to Zhejiang, Jiangsu, Anhui, Shandong and other places. Shanghai retained the function of clothing design and foreign trade, and the sales center of a large number of garment enterprises was still located in Shanghai. As a leader in the import and export of textile and garment industry in the Yangtze River Delta region, Shanghai has also brought together a large number of apparel and textile listed companies such as 600278.SH, 600626.SH and 600630.SH.

"Shanghai is a fortress of foreign trade in the Yangtze River Delta region. Under the condition that textile and clothing exports are blocked, it is the foreign trade enterprises of Shanghai's textile and clothing that will bear the brunt of it, and then spread to the whole industrial chain." Anxi told the first financial reporter.

Xu Qi's cooperation with foreign trade companies in Shanghai, Hongkong, Qingdao, Dalian and other places, he believes that in terms of foreign trade in clothing, Shanghai is the first in China. "Information is the most complete and the fastest way to go. Big brands and buyers almost have offices in Shanghai. The impact of Shanghai's foreign trade is not only on domestic factories, but also on the production of many factories in Southeast Asia. Xu Qi said.

How to transform Shanghai's clothing foreign trade enterprises as a representative of Orient International will become an important aspect to drive the transformation of the whole industrial chain.

In recent years, Anxi has observed that many large garment exporting enterprises in China are doing their own brands. Dongfang International and Shenzhou International are all representatives of the forefront of the industry. Lily, YOUNGOR and Bosideng are successful cases of transformation.

"First of all, we must change our concept, transform from export dependence to develop domestic consumption, develop our own brand, catch up or even replace the big names abroad. For example, in the past few years, Orient International has begun to transform from export to export + domestic sales, and has successfully developed Lily, three guns and other brands, almost completely turning to domestic sales this year. Said Ann.

The throes of transformation

However, transformation is not so easy. Cultivating a brand is not overnight.

In June 22nd, the general office of the State Council issued the "Implementation Opinions on supporting export products to domestic sales" (hereinafter referred to as "opinions"), encouraging enterprises to expand the international market while supporting marketable export products to open up the domestic market.

Shen Jianguang, chief economist and Dean of the Research Institute of Jingdong, believes that every measure in the opinion is good for the textile and garment industry from the emergency situation of the short term epidemic. Tax relief is a timely relief to the enterprises in difficulty. Customs facilitation and cross-border electricity providers will also have a positive impact on exports.

"But in the long run, the future of China's textile and garment industry is still going to the high end. In recent years, we have seen some good signs. The export of textile machinery and chemical fiber with high technical content and added value has begun to go upward. Garment processing by manpower has begun to transfer to Southeast Asia. Trade friction and epidemic situation may accelerate the adjustment of the industry. Shen Jianguang said in an interview with first finance.

Although the transformation of domestic sales, high-end, and making brand is a transformation of Chinese textile and clothing at present, but Xu Qicong's own industry experience analysis, that this road is not easy.

First of all, Chinese consumption habits differ greatly from those in Europe and the United States. "A German male white-collar shirt consumption in a year is 40, while China's top white collar is only 10, and the consumption level is far away. The arrival of the epidemic has also changed people's consumption habits. People tend to save money and make plans for the future. Xu Qi said.

Secondly, making independent brands is a huge investment, for example, the high cost of entry and storage, the large backlog of inventory caused by the brand, the unsalable products of the market, and the increase of the cost of raw materials brought by small batch production.

"A few years ago, I have seen some foreign trade enterprises in transition to make brands, but this is also facing great difficulties. It takes tens of millions of dollars to fight a brand in China, and 10 out of 100 and 20 come out quite well." Xu Qi said.

Shen Jianguang also agrees that transformation will be accompanied by labor pains. "Although the real transformation is very difficult, the competition in the internal market will intensify, and there will surely be enterprises that are not suited to, or even eliminated, but there will be enterprises that may jump out and become leaders. This is the only way out now."

In the case of weak exports, Zhang Yugui, Dean of the school of international finance and trade of Shanghai International Studies University, thinks that designing and producing clothing that is close to the Chinese market, consumers and young people is becoming more and more important.

"Textile and garment enterprises should achieve rapid transformation in market segmentation and personalized product supply, innovate in technology, technology and service concept, and lack enough efforts in developing demand for all age groups. For example, the demand for tailored suits in Shanghai is also very large, but there are few enterprises that can really meet the needs of high quality, and can fully strengthen training, retain teachers and expand the "national treasure" craft master team. Zhang Yugui said.