Cost increase orders shrink the long-term transformation and upgrading of the textile industry

Countries such as Pakistan and Bangladesh are consuming the export cakes of Chinese textiles at a far lower cost advantage than China. Coupled with the current weak demand in Europe and the United States, next year, the textile industry may be trapped again in the export dilemma.

The cost advantage of China's textile industry in maintaining a strong global competitiveness is being greatly weakened, and the global pattern of the textile industry is undergoing subtle changes. Sun Rigui introduced that Pakistan, Bangladesh, Turkey and other countries are consuming the “cake” of Chinese textile exports with a far lower cost advantage than China. “Some of these countries’ offers may be 10% lower than China, and our net profit is less than 10%. We can only give up such orders.”

The data from the US Department of Commerce confirms this. From January to August 2011, the volume of cotton products imported from Bangladesh, Vietnam, and Indonesia increased by 3.35%, 0.97%, and 2.45% year-on-year, respectively, while the number of cotton products imported from China decreased by 16.61% year-on-year.

Industry experts generally believe that the labor shortages that have emerged in recent years have exposed the issue of labor costs in the textile industry. With the declining population growth, especially young people are willing to do the decline in the number of textile workers, the future textile companies will face great pressure on cost expenditure.

Sun Rigui said that the rising trend in labor costs has been unable to reverse. He has promised all employees that he will raise his salary again from January 1st next year.

In addition to orders being eroded, the shrinking of orders caused by weak demand in the European and US markets is also a major challenge for the textile industry because of the weak global economic recovery. Many people in the industry are concerned that next year the textile industry will again fall into export difficulties.

The financial staff of a listed company in the textile industry stated that from the perspective of the first three quarters of the listed companies in the textile industry, revenue and profit maintained a good momentum of growth, but considering the factors that promote cotton prices to increase product prices, even the company’s gross profit margin Both sales and sales have a certain degree of decline, and may also be temporarily covered. “I am worried that with the fall of cotton prices in the first half of next year, it may cause some textile companies, especially export-oriented listed companies, to have a ugly year-on-year performance. This worst possibility will even occur in the fourth quarter of this year. As a general rule, textile export orders are generally advanced three months in advance, and the impact of the decline in cotton prices since July will be reflected in the textile contract for delivery in the fourth quarter."

Li Jian believes that after the outbreak of the financial crisis, various countries have actively adopted different stimulus policies to stabilize the economy and temporarily stabilized the export and consumer markets. As a result, many companies in the textile industry have only felt pain and survived. There have been large-scale production shutdowns and closures. However, two years after the crisis, western countries began to gradually adjust the consumption structure and reduce the import of Chinese products. In the past two years, the surplus capacity of China's textile industry still remains. Therefore, excess production capacity in the textile industry chain is bound to be squeezed.

Wang Qiang, editor-in-chief of First Textile Network, said that the collapse of the enterprise is the inevitable result of industrial upgrading of the textile industry. This will be a long-term, gradual process. It will be the process of the survival of the fittest in the industry and will help the long-term development of the Chinese textile industry. He stressed that to solve the difficulties facing the textile industry, transformation and upgrading are the fundamental way out. The key to transformation and upgrading is that textile companies must constantly increase the added value of their products.

“But the transition is not something that companies can turn around. Some small businesses have the ability to make 20,000 tons of spindles. How can you transform and upgrade them? You can only accept the fate of elimination.” said a person in charge of a large textile company.

Even if it is a large company, the transition is not always smooth. In the past few years, many textile companies have entered the new energy fields such as solar energy and lithium batteries, among which are many large companies such as Shanshan, Huafang Textile and Vosges. However, Sun Rigui said with emotion: "Transition is not so easy, and now the photovoltaic industry is also very difficult."

Turning to the domestic market, expanding domestic demand, creating marketing channels and brands is also a way out. “The domestic market’s growth in demand for textiles is indeed very fast, but for our long-term foreign trade companies, operating the domestic market is a completely new issue. It does not mean that we can turn back and we need a learning process. In the past year, we have been doing this thing. At present, less than a quarter of our sales revenue comes from China," Sun Rigui said.

Fortunately, in the past ten years since the accession to the WTO, the Chinese textile industry has made great progress. Liu Xin said that labor productivity, which reflects the level of scientific and technological application of the industry and the quality of the workforce, has increased dramatically over the past 10 years. In 2001, the labor productivity of the industry (calculated according to the total industrial output value) was 124,500 yuan/person. By 2010, the labor productivity of the industry was 416,500 yuan/person, an increase of 234.54% compared with the beginning of the WTO.

However, she also stressed that the industry concentration is still low. The chemical fiber industry has the highest level of concentration. It is estimated that the top 5 companies in the industry can account for about 25% of the profits; while the clothing industry has the lowest level of concentration, and the top 5 companies in the industry account for about 9% of the profits. China's textile industry has a long way to go to improve its independent innovation capabilities, the emergence of international brands, and the upgrading of industry quality.