Since the beginning of this year, due to the spread of the epidemic at multiple points, rising raw material costs, sluggish demand, restricted cotton in Xinjiang, and the characteristics of the industry itself, the development of the textile and apparel industry has been facing tremendous pressure. However, according to the latest export data released by the General Administration of Customs, from January to July this year, the country’s textile and apparel exports were US$189.35 billion, a year-on-year increase of 12.4%, and the growth rate increased by 0.7 percentage points from the first half of the year. In the month of July, my country’s textile and apparel exports to the world were US$33.22 billion, a year-on-year increase of 17.6% and a month-on-month increase of 5.31%. The month-on-month growth trend remained unchanged, and the export volume in July was the highest in recent years. The overall performance was better than expected. This It is different from the actual experience of receiving orders in the downstream market. Why is there a mismatch between the actual downstream experience and the customs data?
▎Orders from small and medium-sized enterprises have declined, and more than half of textile companies said that orders have not improved.
Since the second quarter of this year, many textile and garment factories have encountered the problem of declining export orders, especially small and medium-sized enterprises. But from a macro data perspective, China’s textile and apparel exports performed well in the first half of 2022. According to data released by the General Administration of Customs on July 13, the cumulative exports of textiles and clothing in the first half of 2022 were US$156.49 billion, a year-on-year increase of 11.7%.
The main reason is the “time difference” of orders. Usually, Party A places orders half a year or more in advance, so the goods exported in the first half of this year are basically those ordered last year. At this stage, companies are unable to receive orders, which will affect export data in the second half of the year.
On July 26, survey data released by the National Cotton Market Monitoring System showed that compared with before May, more than half of textile companies said that orders had not improved. The survey involved 65 company samples. In terms of textile foreign orders, nearly 80% of companies said that orders had decreased, about 18% of companies said that foreign orders were basically stable, and only about 3% of companies reported an increase in orders.
▎Zhejiang’s exports have fully exceeded pre-epidemic levels
We can feel the boom in textile and clothing exports from the data of Zhejiang, a major textile and clothing export province. Except for the impact of the Spring Festival in February this year, Zhejiang Province’s textile and apparel exports have maintained double-digit growth for eight consecutive months year-on-year. The export scale has continued to expand since March this year. In June, the province’s textile and clothing exports were 59.51 billion yuan, an increase of 20.2%, of which textile exports were 33.94 billion yuan, an increase of 11.7%, and clothing exports were 25.57 billion yuan, an increase of 33.5%. Compared with the same period in 2019, the province’s textile and clothing exports increased by 28.9% in the first half of the year, of which textiles increased by 33.0% and clothing increased by 22.3%. In the first half of this year, Zhejiang Province’s textile and clothing exports ranked first in the country, accounting for 28.7% of the country’s total textile and clothing exports, a share that increased 2.5 percentage points from the same period last year; its contribution to the growth of national textile and clothing exports was as high as 51.0%, ranking first in the country. First place in every province and city.
▎RMB depreciation and industrial chain recovery
The fact that exports can still maintain strong growth has a lot to do with the depreciation of the RMB. From the perspective of the RMB exchange rate, the average exchange rate of my country’s exports (USD to RMB) in July was 6.74, which was a further depreciation of about 1.1% compared with June. The RMB exchange rate depreciated by 6% from May to July this year, which is one of the important factors supporting the high export growth rate.
At the same time, overseas prices have skyrocketed, while domestic raw materials have seen relatively low growth rates. Whether it is cotton or chemical fiber, both have certain price advantages. After June, the domestic epidemic situation continued to improve, supply chains and logistics recovered, and the resumption of work and production in Shanghai and other places accelerated. At the same time, some Southeast Asian countries Still facing strikes and rising electricity bills, my country’s export advantages and resilience still exist.
Overall, my country’s textile and clothing exports performed better than expected in July year-on-year. Although cotton textile and apparel exports in July were greatly affected by traceability orders and non-Xinjiang cotton orders, export orders for chemical fiber, woolen and blended products have increased.
At the same time, with the gradual recovery of overseas textile supply chains, the international procurement pattern will also accelerate adjustment. my country’s textile industry will face intensified competition and export pressure will increase significantly.
▎Long-term factors and short-term factors
The decrease in orders is caused by a combination of factors, such as the impact of the domestic epidemic in the first half of the year, changes in the RMB exchange rate, and shrinking global markets. However, looking at the long-term trend, the industry generally believes that this is a manifestation of the transfer of overseas orders to Southeast Asian countries.
“European, American and Southeast Asian countries have opened up face-to-face communication and can freely participate in exhibitions, making it easier to reach deals. Domestically, online communication is still needed, and we are at a disadvantage.” said Yang Qingsheng, who has been working in the field of textile production for many years.
The decrease in orders is relative, especially compared to the high base in 2021. In the second and third quarters of 2021, the new coronavirus swept through Vietnam, causing many factories to suspend operations and production. A large number of orders poured into China, which led to the so-called “full order” phenomenon in factories. The decrease in orders in the second half of 2022 is actually a result of the accelerated shift of the textile and apparel industry in recent years.
Sino-US trade friction has accelerated this process. Relevant data shows that China is no longer the largest importer of the United States. For example, the import share of cotton clothing has been surpassed by Vietnam and Bangladesh.China surpassed the country, and the import share of cotton textiles was surpassed by India.
According to the quarterly monitoring report released by the Institute of World Economics and Political Science of the Academy of Social Sciences on July 15, although total consumer spending in the United States maintained rapid growth in the second quarter, it was mainly due to the widespread price rise caused by inflation, and the actual consumption of residents has shown a decline; in Europe, Affected by record inflation and geopolitical uncertainty, consumer confidence fell to its lowest level since the outbreak. These two countries and regions are China’s largest exporters of textiles and apparel.
▎Policy assistance and corporate self-rescue
At present, foreign trade development faces high risks, difficulties, and uncertainties. Many relevant officials said that in the second half of the year, in terms of stabilizing foreign trade, the Ministry of Commerce will focus on three major areas: expanding volume, stabilizing stock, and strengthening guarantees, and actively promote exports and expand imports.
All regions are actively introducing corresponding policies and measures to stabilize foreign trade. The person in charge of a textile foreign trade company in Shandong said that the local town government organized a series of courses, mainly around live broadcast training, to guide factories to participate in the live broadcast of a professional online platform for fabric trading. Many customers come from overseas. He originally didn’t think that the gray fabric business could also be used for live streaming, but he found that the effect was pretty good.
Policies to stabilize foreign trade are being continuously implemented in various places. For example, Jiangsu Province recently proposed 12 specific measures to help foreign trade companies grab orders, expand markets, and stabilize the foreign trade industrial chain and supply chain. For example, it supports companies to participate in 50 overseas international exhibitions in various ways; organize No less than 100 trade promotion activities for countries along the “Belt and Road”; implementation of cross-border e-commerce export tax rebate-related measures, etc.
Shandong Province took the lead in the country in launching the “Exchange Rate Hedging Guarantee Pilot” policy. By establishing a “government + bank + guarantee” operating model, financing guarantee institutions are encouraged to provide guarantee services for small, medium and micro foreign trade enterprises to provide exchange rate hedging services.
Participating in exhibitions is one of the main ways for textile and garment companies to expand markets. Affected by the epidemic, it is difficult for manufacturers to participate in overseas exhibitions. Ningbo City has launched the country’s first charter flight for foreign trade to expand markets.
The decrease in orders is caused by a combination of factors. From a long-term trend, overseas textile orders have been shifting to Southeast Asian countries. To stabilize foreign trade, we need to increase the maintenance and expansion of customer channels, and we can also expand the domestic market in conjunction with consumption upgrades.
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