Sun Ruizhe Talking About The Current Situation Of China'S Textile Industry And The Prospect Of Industrial Convergence

In July 6th, the Confederation of Chinese textile and apparel companies will be held in Beijing in 2020. At the meeting, Sun Ruizhe, President of China Textile Industry Federation, delivered a keynote speech entitled "the status quo of China's textile industry and the prospect of integration of production and development". Here is the original speech.

Ladies and gentlemen, ladies and gentlemen,

Hello everyone!

2020 is destined to be an extraordinary year. With the deepening of the hundred years' change and the spread of the new crown contagion, the world economic development is under unprecedented pressure. The latest outlook, released by the world bank in June 8th, shows that the global economy will shrink by 5.2% this year, the worst recession since World War II, and the proportion of economies with declining per capita output will reach the highest level since 1870. We are experiencing the first economic contraction of emerging market and developing economies for at least 60 years. The latest June report of the United Nations Conference on Trade and development UNCTAD also pointed out that the epidemic will reduce global FDI flows in 2020 by nearly 40% on 2019 basis. The development of the industry is facing enormous systemic risks, and many enterprises are facing the pressure of survival.

What brings us deep thinking is that several major factors in this century are profoundly changing the track of social and economic development, namely: Geopolitics, digital economy, terrorism, epidemic situation, social responsibility and climate change. We need to be prepared and respond positively.

Under the new situation, the CPC Central Committee has made an important decision to do a solid job of "six stability" and implement the "six guarantees" task, and promulgated policies to ensure the smooth operation of the economy and help enterprises tide over difficulties. One of the important directions is to strengthen financial support for the real economy. 1~5 months, China's RMB loans for the real economy increased by more than 10 billion yuan, an increase of more than 2 billion yuan over the same period last year. As an important sector of people's livelihood, the textile industry is the main body of the private economy and small and medium enterprises.

Here, we share four views on the industry and finance cooperation of the textile industry.

First, the industry's pressure to pick up and deepen the industrial and financial cooperation is the realistic need to achieve sustainable development.

The global spread of the new crown disease has endured unprecedented impact on both ends of the textile industry. With the effective prevention and control of the epidemic, the industry's production and business activities have basically recovered and the domestic demand market has gradually recovered. However, the global epidemic situation is still grim, and the smooth operation of the industry faces many challenges.

Production growth has slowed down. The capacity utilization rate of textile industry is below normal level, but the rate of decline in production continues to narrow. According to the National Bureau of statistics, 1~5 months, the industrial added value of textile industry above Designated Size Enterprises decreased by 8.2% compared with the same period last year, the decline narrowed by 3.1 percentage points compared with 1~4 months, and the growth rate in May was negative. Among them, the industry, chemical fiber and filament weaving industry has become the main driving force for growth. In May, driven by centralized production of masks, protective clothing and other anti epidemic materials, the industrial textile manufacturing industry showed a 88.3% high growth rate. The chemical fiber weaving and dyeing and finishing industry showed a 6.7% increase in the consumption of domestic demand, with a cumulative decline of 2.9%. Driven by the downstream market and rising crude oil prices, the chemical fiber industry showed a 4.3% growth and the cumulative decline narrowed to 2.9%. The clothing and apparel industry and household textile industry were affected by the shrinkage of terminal demand. The industrial added value in 1~5 months decreased by 12.8% and 10.6% respectively. Textile machinery manufacturing industry added value decreased by 20.8% compared to the same period last year. The major categories of textile products, except for non-woven fabrics, have decreased compared with the same period last year. In 1~5 months, the output of chemical fiber, yarn, cloth and clothing decreased by 3.2%, 18.1%, 27.6% and 17.9% respectively.

Market demand is insufficient, but the decline continues to narrow. Affected by the epidemic, domestic consumption of textile and clothing commodities is still weak, online and offline sales have declined sharply compared with the same period last year, but the decline has narrowed. According to the National Bureau of statistics, in 1~5 months, the retail sales of clothing, shoes and hats and needle textiles decreased by 23.5% compared with the same period last year, and the decline was narrowed by 5.5 percentage points compared with that in 1~4 months. To compensate for offline losses, textile companies generally strengthen online channel construction, and online retail sales continue to narrow. In 1~5 months, the online retail sales volume decreased by 6.8% over the same period last year, a decrease of 5.2 percentage points from 1~4 months. With the export of anti epidemic materials, the decline of trade exports has gradually narrowed. According to China Customs express, 1~5 textile and apparel exports in China decreased by US $96 billion 160 million in the month of 1~5, representing a decrease of 1.2% over the previous 4 months, narrowing by 0.7 percentage points compared with the same period last year. Among them, the export volume of textiles increased by 21.3% over the same period last year, and the proportion of exports increased to 60.3%. Clothing exports continued to decline, and exports dropped by 22.8% over the same period last year.

The scale of investment has been greatly reduced. Under the influence of the epidemic, industry enterprises generally lack investment confidence and ability, and the scale of investment has shrunk dramatically. According to the data of the National Bureau of statistics, the fixed assets investment in textile industry decreased by 30.5% compared with the same period last month in 1~5 months. In terms of industry, investment in textile, chemical fiber and garment industries decreased by 26.2%, 23.2% and 39.2% respectively. From the regional perspective, the total investment in the five eastern coastal provinces has shrunk significantly except Zhejiang province. The investment in clothing and apparel industry in Jiangsu, Fujian, Shandong and Guangdong has decreased by 68%, 44.9%, 50.4%, 80% respectively. In the central region, Hubei was seriously affected by the epidemic. The investment in textile industry, clothing industry and chemical fiber industry decreased by 75.2%, 69.8% and 62.4% respectively. The investment in clothing industry in Anhui and Henan provinces decreased by 47.9% and 31.4% respectively. In the western region, the investment amount of three sub sectors in Xinjiang is negative growth, and the investment in Sichuan chemical fiber industry has dropped by 70.5%. Due to the small base, the investment growth rate of Shaanxi and Gansu provinces is relatively high.

The benefit situation has deteriorated significantly. With the serious shortage of demand and the sharp decline in production and sales, textile enterprises' income has been greatly reduced and profits have shrunk. According to the National Bureau of statistics, in 1~5 months, 33 thousand Textile Enterprises above Designated Size reached 1552106 yuan in business revenue, 17.23% lower than the same period last year. The total profit in the 1-5 months was 54 billion 603 million yuan, a decrease of 24.54% compared with the same period last year. The profit margin of enterprises in 1-4 months was 3.2%, less than 0.5 percentage points in the same period last year. In the 12 sub sectors of textile industry, except for the positive growth in the profits of silk and industrial sectors, the other sectors are under pressure. Among them, the deteriorating situation of chemical fiber, textile machinery and cotton textile industry is more prominent. Specifically, the total profit of chemical fiber industry decreased by 60% compared with the same period last year; the total profit of textile machinery industry decreased by 56% compared with the same period last year; the total profit of cotton spinning industry dropped by 49.2% compared with the same period last year. In 1~5 months, the loss of textile enterprises above Designated Size reached 32%, and the deficit of loss making enterprises increased by 52.08% over the same period last year. The cost burden of enterprises is heavy.

On the whole, the global epidemic has not yet reached the peak, and domestic consumption recovery rate is not as fast as expected, and the shortage of enterprise orders is still grim. Overstock, intensified competition, shrinking profits, tight cash flow and other problems are perplexing industry enterprises. Many small and medium enterprises are facing a survival crisis. The overdue and default phenomenon of enterprise loans has increased, making the capital risk of the whole industry chain increasing. The industry is in urgent need of deep docking through industry and finance, effectively relieving the pressure of enterprise funds and reducing the impact of the epidemic on the production and operation of enterprises.

Two, the profound adjustment of the industrial environment and the deepening of industrial and financial cooperation are the objective requirements to adapt to the changing circumstances.

At present, the world structure has undergone profound adjustment. The uncertainty and instability of global political and economic development are increasingly prominent, and trade protectionism and unilateralism continue to rise. Geopolitical risks such as the Sino Indian border conflict, the Sino Japanese Island conflict continue to heat up. Recently, the United States signed the so-called "Uyghur human rights policy act 2020" into law, trying to stigmatise Xinjiang's anti-terrorism, anti secession and anti extremism measures, and used this as an excuse to interfere with the brand's international procurement and industrial chain layout. This has a great impact on the industry. Facing the unprecedented complex industrial environment, we must discern the trend from the confusion and open up a new situation in the changing situation.

1, profound adjustment of production pattern: Global Value Chain Cooperation pressure

In recent years, with the rising of emerging market countries and developing countries, the global division of labor and the pattern of interests in the core of global value chain cooperation have changed, and some countries have been in a mood of conflict. Unilateralism and trade protectionism have continued to heat up. The continuous evolution of Sino US trade frictions is directly reflected. The outbreak of the outbreak has further strengthened the atmosphere of trade protectionism. The shortage of important materials such as masks and medical protective clothing has led more countries to think about how to achieve a new balance between efficiency and safety. The localization and diversification of supply chain will become an important direction. In the early days of the spread of the epidemic, the United States, Japan and other countries have introduced policies to encourage enterprises to move back. Recently, the British government is also developing "security projects" in order to reduce dependence on China and other major importing countries, and achieve diversification of imports of key commodities.

The profound change of the global value chain cooperation mode makes the industry less and less in the original position of the global value chain. The industry needs to use capital strength to speed up the promotion of total factor productivity and value-added products, and establish a global comparative advantage with higher quality and efficiency. At the same time, the industry should vigorously develop open economy, better realize the global allocation of factor resources, and the global layout of supply chain, so as to ensure the safety and stability of the supply chain of industrial chain.

2, the market structure has been profoundly adjusted: global demand has become a long-standing problem, and the importance of domestic demand has been strengthened.

At present, the world economic growth continues to slow down, still in the deep adjustment period after the international financial crisis, and the market demand continues downward. The global spread of the epidemic has made the situation even more serious. Europe and the United States, as China's important consumer market of textile and clothing, suffered great impact in the epidemic. In April, the retail sales of clothing and apparel in the United States dropped by 89.3% compared with the same period last year, while the retail sales of textile and apparel in Japan and the EU dropped by 53.6% and 62.8% respectively. Many brands and traders have cancelled orders, and the demand for China's industrial chain front-end has been directly impacted. The stoppage of production in India, Vietnam, Bangladesh and other countries also led to a sharp reduction in China's textile exports. As the downward pressure on the world economy continues to increase and market growth lacks stable support, global demand will become a long-term problem. The shrinking demand in the international market will have a huge impact on the export of the industry.

Under the new situation, the domestic demand market is becoming the tenacity of industrial development. China has the most growing consumer market in the world, and the contribution rate of consumption to economic growth reached 57.8% in 2019. The huge domestic demand market provides support for the industry to play a better role in scale economy, scope economy and network effect. Multilevel consumption is becoming an important feature of the domestic market because of the diversity of demand and the asynchronism of development. Relying on the largest middle income group in the world, consumption upgrading is the general trend. With the deepening of urbanization, coordinated regional development and precise poverty alleviation, the potential of the sinking market is also being released, and the mass consumption space is huge.

Facing the major adjustment in the internal and external market, enterprises should accelerate the formation of a new pattern of double circulation at home and abroad.

3, a profound adjustment of factor pattern: technological innovation has become the core variable determining the development of industry.

At present, the fourth industrial revolution has springing up, and global technological innovation has entered a period of intense activity. Disruptive technological innovations have springing up, leading to major adjustments in productivity and production relations. Scientific and technological innovation has gradually become the core variable of reshaping the industrial structure, which has profoundly changed the development mode and the industrial boundary of the global textile industry.

Over the past ten years, digital experience, analytical technology and cloud technology have become the core of effective strategies and new business models for many enterprises. In the next ten years, digital reality, cognitive technology and block chain will become the disruptive driving force of enterprise transformation.

Digital experience is an important driving factor for enterprise transformation in the era of consumer Internet. Enterprises are gradually abandoning the traditional marketing mode of taking customers as the core, instead of working to create more people-oriented interactions, including interaction with their employees and business partners. Data and analysis technology will have a far-reaching impact on business development. Enterprises must use tools and platform dynamic data to support data flow, data intake, data classification, storage and access; Cloud technology has gone deep into the enterprise. Cloud technology enables all IT capabilities to become cloud based services for enterprises to use. Cloud technology drives reshaping old business management and business functions.

Digital reality technology, including AR/VR and mixed reality, helps users break through the confinement of keyboard and screen. The purpose of digital reality is to break the traditional space boundary and let people interact with the underlying technology naturally, instinctively or even subconsciously. Cognitive technology is a more widely used AI technology, which makes human-machine interaction personalized and scene oriented, and drives business processes and unattended through customized language or image information. Block chain takes the lead in the development of financial services, and other areas have begun to implement, including enterprise credit traceability, communication and other fields.

From the point of view of supply, the cross convergence of technology makes intelligent textiles and multifunctional textiles continuously emerging, and the connotation of products is constantly enriched, and the application scenarios are constantly expanding. The links of the industrial chain are quickened to the direction of digitalization, networking and intellectualization. The level of lean supply, flexibility and service of industrial supply has been continuously improved. The rapid development and industrialization application of green fiber preparation technology, clean production technology, green printing and dyeing technology and fiber recovery technology are also being deepened.

From the perspective of demand, driven by technology, there has been a profound adjustment in the way of resource organization and market connection, and new patterns, new formats and new attempts have been developing rapidly. Especially during the epidemic period, the innovation of live broadcasting, community marketing, network exhibition and other modes effectively made up for the blank of offline channels.

The industry must speed up adapting to the adjustment of industrial structure brought by technological innovation and strive to gain competitive advantage in a rapidly changing world.

Three, constantly optimize production and financing ecology, deepen the industrial and financial cooperation has realistic foundation and development potential.

With the continuous improvement of China's socialist market economic system, a standardized, transparent, open, dynamic and resilient capital market is being established. The ecological development of the coordinated development of industry and finance has accelerated.

1, the capital market is more mature.

The advance of financial reform has greatly enhanced the development level of China's capital market. At present, the competitiveness of China's capital market has risen to the fifth place in the world. The marketization and rule of law of the capital market have been significantly improved, and the basic systems such as information disclosure, issuance and delisting have been continuously improved. With the implementation of the innovation of Chuang Chuang plate system, the reform of the gem, the pilot registration system, and the implementation of the new three board reform, the pace of capital market improvement has accelerated significantly. The channel of capital transmission to the real economy is more smooth. The function of the financial services entity economy has been continuously strengthened. In 2019, the amount of RMB loans extended by the financial institutions to the real economy increased by 16 trillion and 880 billion yuan. Under the epidemic situation, monetary policy tools directly reaching the real economy are continuously enriched. At the same time, the development of technology finance brings new convenience to industry financing. The integration of information technology will greatly improve the information asymmetry between industry and finance, thus greatly improving the scientific nature and possibility of financing.

2, the industrial foundation is more perfect.

China's textile industry has the largest and most complete industrial system in the world, from raw material supply, design and development, to textile dyeing and processing, and operation and retail. The value chain of textile industry itself has strong financial attributes, which is closely related to commodity market, capital market and money market. The textile industry is also one of the few industrial sectors with the capability of independent innovation in the whole industry chain. New technologies and new models have sprung up in the industry. Many practices in the industry are highly matched with the gem after the reform. Cultural and creative attributes make the industry precipitate a lot of resources such as design, creativity, IP and so on. As the underlying assets, the scale and quality of the industry make space for cooperation in industry and finance huge.

3, deepening reform and opening up

In recent years, reform and opening up have entered a new stage based on rules and system opening. Faced with the current situation, the opening up of the financial sector has not slowed down, but has been further accelerated. The restrictions on foreign capital shares in banks, securities, fund management, futures and other fields have been completely abolished, and the qualification restrictions for foreign shareholders are also being relaxed. The accelerated opening up of the financial sector has brought diversified sources of capital to the industry, and has brought us more innovative models and advanced ideas. As an important sector of international capacity cooperation, the textile industry has been actively implementing the "one belt and one way" initiative, and strengthened global value chain cooperation through green investment and capital operation. The pace of going out and importing has been accelerating. Under the background of deepening localization and diversification of supply chain, accelerating the layout of the global industrial chain becomes more and more important. To achieve international cooperation in resource allocation and international capacity, there is an urgent need for capital strength.

Four, the key stage of building a powerful country, and industrial and financial cooperation is an important way to promote the development of high quality.

This year marks the end of the 13th Five-Year plan, and is also the key year for the construction of a textile power. We need to strengthen the power of policy, science and technology, capital, moral strength and solidarity to support the sustainable development of our industry.

Under the great changes of the world, deepening the integration of industry and finance, making full use of the important role of capital in the optimal allocation of elements, and promoting the industry's practice of "technology, fashion, green" industry positioning and achieving high quality development are of great significance.

1, to strengthen industrial chain security through industrial and financial cooperation.

Under the epidemic situation, the safety and stability of the industrial chain is the core concern. Enterprises should continue to expand financing channels, use a variety of financial instruments, from passive prevention to active management of market risks, solve resource problems, strive to connect "breakpoints" and dredge "blocking points". In particular, it is necessary to strengthen the financing capacity building of four small and medium enterprises, such as small and medium enterprises with weak ability to resist the impact of the epidemic, the deep integration of products into the international supply chain, enterprises in key epidemic areas and poverty-stricken areas, leading enterprises in the supply chain, but short-term capital pressure leading enterprises, so as to prevent large enterprises from going bankrupt and enable them to survive better. Continue to ensure the integrity and safety of the industrial chain.

2, promote industrial transformation through the integration of industry and finance.

Digital economy is the main trend of economic and technological transformation. The digital transformation has given the industry the opportunity to restructure its comparative advantages and realize the "asymmetric" catching up. On the one hand, the industry needs to accelerate the construction of new digital infrastructures and foster the new dynamic energy that will expand the development of digital economy. But relying solely on a single enterprise and self accumulation is difficult to meet the capital needs of the new infrastructure in the industry. We need to explore the use of a new "national system" to effectively link all forces with financial instruments and support the construction of new infrastructure in the industry. On the other hand, industry enterprises need to use capital strength to balance innovation risk and income, and steadily promote the popularization of information technology and intelligent technology in production, R & D, operation and other links, so as to enhance the lean, flexible and service-oriented level of industry supply. Under the background of the official registration of the gem registration system, industry enterprises should seize the opportunity to speed up their deep integration with new technologies, new industries, new formats and new models.

3, industrial and financial cooperation to boost industry innovation.

China's textile industry has the largest volume in the world, but there is still a weak strategic and fundamental innovation capability. It is urgent to enhance the basic innovation capability. Industry based innovation has a long time to develop and invest, and there are huge uncertainties. Enterprises rely on short-term financing. We need to establish and improve the long-term mechanism of enterprise financing as soon as possible, and guide the long-term stability of funds to invest in the basic, strategic and leading fields of the industry, so as to help enterprises speed up the substantive breakthrough in core technology. At the same time, the development of key common technologies and leading technologies involves coordination of multiple resources and coordination of multiple lines. Enterprises should be good at using financial capital strength, cooperate with all parties' resources, and promote the accelerating accumulation of innovative resources such as technology and talents to the industry.

4, cultivate industrial entities through industrial and financial cooperation.

As China's textile industry has entered a critical period of building a strong country, it has become increasingly urgent to enhance the concentration and competitiveness of the industry and form a group of enterprises with global influence. And the empowerment of capital enables enterprises to expand and grow in a shorter time. Industry enterprises should strengthen their capital operation capability, and continuously enhance their competitive power by means of listing, financing, joint investment, cross shareholding, merger and reorganization, and so on. At the same time, with the help of capital strength, enterprises can achieve rapid development across fields and across industries. If we invest in growth enterprises through CVC, we can promote the linkage development between the main industry and the investment industry, realize the "external monitoring" of the channel and mode innovation, the "external research and development" of the frontier technology, and improve our own development ecology.

5, guided by industry and financial cooperation to promote sustainable development of the industry.

At present, corporate social responsibility has become an important commercial norm. It is an effective way to manage business strategy and enhance competitiveness. We should make full use of the perfect system of capital market and guide enterprises to standardize their development. The trust crisis in the front end, represented by lucky event, shows us that at any time, integrity and standardized management are all the foundation for enterprises to settle down. Industrial and financial cooperation, especially listing financing, requires real, accurate, complete and timely information disclosure. This will help bankrupt enterprises to enhance the compliance and normalization of Finance and operation, thereby boosting the long-term development of the industry. More and more investors will introduce ESG factors into investment decisions, which will bring new opportunities for the green transformation of enterprises. For example, with the help of green financial instruments, enterprises can achieve better and faster structural adjustment of production capacity, eliminate backward production capacity and build green supply chain.

"A false horse is not a good foot, but a thousand li." In the crisis, we need to build up a new position in the crisis, and we need to "self reliant", and we need to "be good at things." Let us explore together, accelerate the construction of textile power with industrial and financial cooperation, and make greater contributions to the success of building a well-off society in an all-round way.