Shrinking Global Market: Leading To Shortage Of Orders In Garment Industry

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According to the survey of China Textile Import chamber of Commerce, in the first half of this year, orders of textile and garment factories were dismal, and the outflow of orders was obvious. About 6 billion US dollars of orders were lost. In the second half of this year, the flow rate of order transfer was faster, and it is estimated that the order loss of textile and garment factories may increase to 10 billion US dollars.

Some garment enterprises said that the orders were at least 40% lower than last year. After the last order was issued at the end of May, the factory had no foreign trade orders to do; In order to retain customers, some textile mills even pay for orders. Upstream factories are also affected. They have to queue up for ten and a half days or one month to ship goods; Nowadays, there are very few orders, sometimes they can be delivered in one day.

In the first half of this year, China's textile and clothing exports totaled 156.49 billion US dollars, an increase of 11.7% year-on-year. From a macro perspective, the export data is good, but the PMI (purchasing manager index of China's cotton textile industry) data is not consistent with it.

Since the second quarter of this year, many textile and garment industries have encountered the problem of declining orders. According to statistics, PMI has been below the 50% Kuo Rong line since August last year. Among them, the new order index has been in a low range of less than 40% since October last year, and the situation of enterprises receiving orders has been in a long-term downturn.

According to the survey of China Textile Import chamber of Commerce, 85% of enterprises' orders have moved out obviously. Among them, 26% of the enterprises' orders moved out, and the proportion was more than 30%; More than 90% of the enterprises have reduced their hand order scheduling compared with the second half of last year and the fourth quarter; 13% of enterprises are seriously short of orders and can only maintain production within one month.

From the national import and export data, the growth rate of clothing and home textile products also showed a more obvious slowdown trend. In the first five months, China's clothing and home textile exports were US $64.7 billion and US $7.43 billion respectively, up 10.9% and 6.9% year-on-year. The export of knitted apparel reached US $28.15 billion, a year-on-year increase of 21.9%, which was significantly lower than the 42% growth rate of the whole year last year. The export of woven clothing was 26.16 billion US dollars, up 17.4% year on year, 6% lower than that in the fourth quarter of last year.

Behind the sharp drop in orders is the current market downturn. Textile and clothing enterprises in the loss of pressure to move forward, then why these orders disappear?

Many factors lead to the loss of orders. For example, in 2020, with the global spread of the epidemic, the overseas manufacturing industry stopped production and a large number of orders poured into China, resulting in the phenomenon of "explosive orders". However, with the recovery of manufacturing industries in various countries, the cancellation and delay of orders in Europe and the United States have become the normal foreign trade since this year. Many domestic textile and garment factories have seen a sharp decline in their orders, and even some stable old customers have cancelled their purchase plans.

At the same time, on the other side of the supply side, the rise of Southeast Asian manufacturing industry accelerated the order transfer. In the past two years, the export data of Vietnam's garment manufacturing industry is very bright, and the orders of many factories have been arranged after October. But this is also a result of the accelerated transfer of China's textile and clothing industry, because many orders are transferred to Vietnam by Chinese enterprises. According to the report of CITIC Securities Research Department, since the outbreak in 2020, there has been a strong counterpart substitution effect between ASEAN and China in the field of labor-intensive products represented by textiles and clothing.

On the other hand, Sino US trade friction accelerates the process of industrial chain transfer to Southeast Asia. According to the data of the US Department of Commerce, in 2021, China's share of US textile and clothing imports decreased from 32.78% in 2019 to 27.74%, of which the share of cotton clothing imports decreased from 21.8% in 2019 to 15.4%, from the first to the second, and Vietnam became the largest supplier.

On June 21 this year, the "Xinjiang related act" of the United States came into effect. Under this bill, Xinjiang cotton, which accounts for about 20% of the world's total output, is facing the risk of being evaded by the global market, and China's cotton clothing export restrictions are upgraded. India, another major cotton producer in the world, has become a major substitute for many downstream manufacturers.

At the same time, the large fluctuation of exchange rate in a short time also brings uncertainty to future orders. As the RMB exchange rate fluctuates from high to low, customers will expect the appreciation of their own currency. The original 40 day accounting period may be delayed for two months, while the domestic textile and garment enterprises will be in a tight financial chain; When it expects the local currency exchange rate to fall, it will choose the region where the exchange rate is relatively stable.

What can not be ignored is the impact of the global market contraction. Europe and the United States, as the two major exporting countries of China, their consumption degradation makes the domestic textile and garment industry face more and more challenges. In July, the U.S. inflation rate was still at a historical high of 8.5%. Under the pressure of inflation, prices soared and the real consumption of residents showed a declining trend; Affected by high inflation, energy shortage and monetary policy tightening, European consumer confidence has dropped to the lowest level since the outbreak of the epidemic.

Vietnam and Southeast Asia are facing a shortage of orders

It is not an individual phenomenon that there is a shortage of orders in China, so is the textile and garment industry in Southeast Asia. Vietnam, for example, is facing a "shortage of orders" since it was full of orders and could not recruit workers.

In addition to the rising oil prices in Vietnam and Ukraine, the rising prices of raw materials have also brought difficulties to enterprises in Vietnam, Europe and the United States. Many customers postpone orders, distributors face a large amount of goods backlog, sales decline, manufacturers are facing the problem of purchasing power decline, raw material prices.

Textile and garment enterprises are unable to sign new orders and lack orders frequently, so they have to shorten production time, stop recruitment, reduce labor force, or directly arrange workers' vacation.

Under the weak growth of global foreign demand, high inventory has become a common phenomenon in the industry. In order to help enterprises to obtain orders, many governments have issued assistance policies. For example, Jiangsu province supports enterprises to participate in 50 overseas international exhibitions in various ways; Organize no less than 100 trade promotion activities of countries along the belt and road. Another example is that Shandong Province took the lead in launching the "pilot project of exchange rate hedging guarantee" to avoid risks for enterprises.

With the help of policy, the textile and garment industry is also taking various measures to help itself. In order to reduce costs, some enterprises choose to start work in the middle of the night; Or shut down the factory temporarily and start live broadcasting with goods; Some enterprises seize the good opportunity of "industry reshuffle", and accelerate merger when some enterprises have to reduce production or close down because of high cost.

Perhaps these enterprises can not grab new orders in the short term, but when the epidemic situation, the conflict between Russia and Ukraine, inflation and other factors ease, and the market demand recovers, they may face a new opportunity of "exploding orders".