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Textile industry has become the worst hit area

- Jun 01, 2018 -

Textile industry has become the "worst hit area": exports of textile yarn, fabrics and clothing fell sharply in March.

According to the latest statistical data from the General Administration of China Customs, China's export in March fell 2.7% in March 2018 and 14.4% compared to the same year, and the trade deficit of 4 billion 980 million US dollars was recorded in the month. It was the first time the trade deficit was recorded in 13 months. Imports, soybean, iron ore fell to 20% and 7% respectively, but the import of aircraft increased dramatically; exports, the largest textile industry in China's export, the textile industry (including textile yarns, fabrics and products) exports of $6 billion 980 million, a year-on-year decline of 23.28%; clothing (including clothing) Clothing and accessories) exports amounted to US $7 billion 184 million, down 34.21% compared to the same period last year.

In the early morning of April 4th, the United States announced details of the plan to impose tariffs on US $50 billion of Chinese goods: the list contained 58 pages, covering about 1300 tariff entries. Most goods are not directly oriented to everyday consumers. The emphasis of tariffs is on the "made in China 2025" industry. Textile and clothing are not included in the list of taxes, but part of the textile products are involved, so the impact of the "301 survey" on the export of our textile and clothing is not very short; the United States Trade Representative Office made clear in the statement that written comments were submitted to the Trade Representative Office on the contents and tax rates before May 11th. In addition, the "301 investigation" committee will hold a hearing on the list in May 15th and accept the public opinion again before May 22nd, so the author believes that the list of the "301 investigation" tax proposals is not an important factor in the March export and export deficit and the export of textiles and clothing.

So what causes the "big slide" of China's textile and clothing exports in March?

The author simply summed up as follows:

First, the influence of the Spring Festival in February is more significant, and the difference in rhythm results in a sharp narrowing of the trade balance. With the rapid development of textile and garment industry in India, Pakistan, Vietnam, Indonesia and other countries in recent years, the number of Chinese textile, clothing and foreign trade companies can receive a decline in the number of middle and long orders. During the Spring Festival, Chinese textile enterprises and trading companies are in the state of holiday or half rest, so the whole industrial chain is mostly in the first 5-10 days, and the order of domestic and foreign sale is not received for the next 5-10 days.

Second, in March, the cost of cotton yarn, grey cloth and clothing was greatly reduced, and foreign orders were reduced or even postponed. Considering the reserve of cotton wheel and the strong substitution effect on cotton in 2017/18, the transaction price is lower than 1000 yuan / ton of new cotton, not only on the outside, but also by foreign trade companies and textile enterprises.

Third, the fluctuation of RMB exchange rate is widened, and the risk of low profit textile and clothing export has been increasing steadily. In the past year, the exchange rate of the RMB has been significantly stronger. In March 28, 2018, the intermediate price of RMB to the US dollar was 6.2785, which set a new high since August 11, 2015. While the trade war between China and the United States was warming up, some banks and investment institutions thought it would be debatable whether the escalation of trade friction made the RMB overappreciation or not, and the relevant departments of China guided the exchange rate to degrade the exchange rate. The possibility of a value;

Fourthly, concerns about the continued warming or even uncontrollable trade war between China and the United States have intensified. Some of the export-oriented spinning and weaving enterprises have begun to shrink their positions and dig deeper into the domestic market. Although 50 billion Chinese commodity tariffs do not contain textiles and clothing, President Trump has instructed the United States Trade Representative Office to consider the appropriateness of the tariff imposed on 100 billion dollars of Chinese goods under "clause 301". Once the Sino US trade frictions are aggravated, the impact on the quantity and profit of the exports will be very prominent. Therefore, Chinese enterprises take the "brake and deceleration" process to avoid uncertainty risks as far as possible.

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