Operating Pressure of China's Textile Industry Increased Significantly in Q1


The new coronavirus which was discovered in December 2019 in China and is now causing a global spread. The various restrictive measures adopted by countries around the globe to fight against the pandemic have caused the blocked international economic and trade cycle. And China's macroeconomic downward pressure was significantly increased. In order to alleviate the extreme shortage of anti-epidemic equipment such as surgical masks and protective clothing, relevant textile enterprises have overcome difficulties and resumed production successively during the Spring Festival, and endeavored to protect the supply of key materials, fully reflecting the advanced manufacturing advantages of China's textile industry chain. However, affected by the pandemic, orders for textile companies in China and foreign markets plummeted significantly in the first quarter, and the efficiency situation fell severely. Production and operation encountered unprecedented difficulties, and investment and development confidence were obviously insufficient. Statistics show that in the first quarter, the main operating indicators of the textile industry all showed a negative growth trend, and facing a greater challenge in maintaining a stable operation.

Actively Promote the Resumption of Production

Since the outbreak of the coronavirus pandemic, in the face of shortages of key materials such as surgical masks and protective suits, textile enterprises have overcome difficulties like the insufficient staff and blocked transportation and logistics, and have promoted the orderly resumption of production. According to the survey data from China National Textile and Apparel Council, by the end of February, the proportion of key textile enterprises to resume work has reached 80%. As China's prevention and control situation of the epidemic continues to improve, textile enterprises maintained stable resumption of production. By the end of March, the resumption rate of key enterprises reached more than 90%, and stably stood at 90% at the end of April.

However, due to the coronavirus pandemic, the capacity utilization rate was slightly lower than normal, and the industrial added value fell down compared with the same period of last year. According to data from the National Bureau of Statistics, in the first quarter, the capacity utilization rate of the textile industry and the chemical fiber industry were 67.2% and 74.4%, respectively, which were slightly better than the capacity utilization level of the national manufacturing industry (67.2%), but it was 10.5 and 8.8 percentage points lower than the same period of the previous year. In the first quarter, the added value of the textile industry above designated size decreased by 16.5% year-on-year, and the growth rate decreased by 21.9 percentage points over the same period of the previous year. By sectors, due to the concentrated production of anti-epidemic materials in the technical textile industry, the industrial added value in the first quarter increased by 11.5% year-on-year, the growth rate ranks first in the entire industrial chain; the growth rate of production in other fields of the industrial chain has slowed significantly, of which apparel and the home textile industry is particularly affected by the sluggish demand. Their industrial added value decreased by 19.7% and 17.3% year-on-year respectively, and that of the textile machinery industry declined by 31.5% year-on-year, indicating that the insiders of textile industry lack investment confidence at this stage.

Insufficient Market Demand at China and Abroad

During the epidemic prevention and control period, the domestic demand for apparel has reduced significantly by closing physical stores, practicing social distancing, isolating at home. Both online and offline sales declined at that time. According to the National Bureau of Statistics, in the first quarter, the retail sales of clothing, foot & head wear and knitted goods above designated size in China decreased by 32.2% year-on-year, and the retail sales of online wearing goods declined by 15.1% year-on-year, 35.5 and 34.2 percentage points lower than the same period last year respectively.

For foreign demand, major export markets such as the United States and Europe have been shut down, and consumer demand has been weak. Since late March, the overseas orders of China's textile enterprises have sharply reduced. Because there are even more foreign customers that canceled orders and delayed receipts. The situation of industry exports is grim. According to customs data, the exports of textiles and apparel in the first quarter totaled US$ 47.88 billion, down 17.8% year-on-year. Among them, textiles exports were US$ 24.04 billion, decreased by 15.3% year-on-year; while the exports of apparel reached US$ 23.84 billion, seeing a year-on-year decrease of 20.2%. Exports to traditional markets and emerging markets both showed a downward trend. In the first quarter, China's textile and apparel exports to the United States, Japan and the European Union decreased by 29.2%, 16.8% and 14.3% respectively year-on-year, and exports to countries along the "Belt and Road" religion decreased by 13.6% year-on-year.

Operation Quality and Investment Showed a Downward Trend

According to data from the National Bureau of Statistics, in the first quarter, 33,000 textile enterprises above designated size in China achieved CNY 831.88 billion of operating revenue, down 25.4% year-on-year. Their total profit reached CNY 21.81 billion, nosedived by 44.2% year-on-year. The profit margin of enterprises above the designated size was only 2.6%. The turnover rate of finished products and total asset turnover slowed down by 35.5% and 28.3% year-on-year, respectively.

Due to the impact of the epidemic, textile enterprises faced severe capital turnover pressure. And the scale of industry investment has been significantly reduced. According to data from the National Bureau of Statistics, in the first quarter, the fixed asset investment in the textile industry decreased by 38% year-on-year. By sectors, the investment in the textile industry, chemical fiber industry and apparel industry decreased by 37.1%, 45.8% and 19.2% respectively year-on-year. By region, the investment in chemical fiber industry in Jiangsu Province and Shandong Province in the east increased by 13% and 20.6% year-on-year, respectively, the investment in the textile industry in Anhui Province increased by 3.1% year-on-year, and the investment of textile, apparel and chemical fiber industries in Sichuan Province in the west increased by 91.9%, 21.4% and 45.9% respectively.

It is Hard to Maintain Stable and Healthy Development

At present, China's macroeconomic operations are gradually back to normal. However, the global epidemic prevention and control situation is still grim, and the development prospects are still unclear, which makes the development of China's textile industry faced severe difficult and challenging.

From the perspective of the international environment, the downside risks of the world economy have increased, and various uncertainties have increased significantly. And the weakness in overseas demand imposed great pressure on the exports. From the perspective of the domestic environment, the downward pressure of the macro economy and the periodic impact brought by the epidemic are superimposed, and the task of normalizing the prevention and control of the epidemic is still arduous. Affected by insufficient demand and poor economic circulation, a large number of textile enterprises will still face difficulties such as insufficient orders, declining profits, and unstable capital chains. The pressure on small and medium-sized enterprises to survive is extreme obvious. The pressure on the textile industry to ensure stable employment and stable expectations has also increased. However, the basic trend of China's economic stability and long-term improvement has not changed. And the huge domestic market will continue to play an important role to provide core support for the development of China's textile industry. The state has introduced a series of measures to alleviate the difficulties and implement the policy measures, which will help enterprises to overcome difficulties and restore vitality. Under the impact of the epidemic situation, a number of key backbone enterprises have firmly determined to promote high-quality development, and many parties have worked hard to meet the challenges. It will also promote the continuous optimization of the industrial structure and steadily improve the resilience and anti-risk ability.

China's textile industry will implement the deployment of the Party Central Committee, focusing on stability on the six fronts and security in the six areas. By doing so, the industry will be able to keep the fundamentals of the economy stable. Maintaining security will deliver the stability needed to pursue progress, thus laying a solid foundation for accomplishing the goal of building a moderately prosperous society in all respects.