Ten years later, the Chinese looms broke

In January 2007, five years after China’s accession to the WTO, Du Fuzhou, president of the China Textile Industry Association, proudly declared: “The facts prove that WTO accession is indeed good for the Chinese textile industry. The textile industry has provided the Chinese government with a satisfactory Answers."

Du Puzhou’s optimism is justified. During this five-year period, the Chinese textile industry has ushered in a spurt-type development. The output value of the textile industry from the 898.3 billion yuan in 2001 was an unprecedented amount of 2.4497776 trillion yuan in 2006.

However, when weaving shuttles passed through the weaving machine in 2010, the Chinese textile industry, which once enjoyed the breeze of accession to the WTO, began to suffer: the international economic situation is turbulent, foreign orders are reduced, and at the same time, costs rise, RMB appreciation, and financing difficulties are multiple. Factors are testing the Chinese textile industry.

China's textile industry has reached a crossroads. Looking back, how did China's textile industry go through? What reflections need to be made during this decade? Looking ahead, how should China's textile industry develop?

Three transformations of a garment company “The best stage for our foreign trade orders development was after joining the WTO until 2007. At that time, we received so many orders that our own factories were not enough to be produced together with more than a dozen factories around us.”

Spring Plumbing Duck Prophet. Before and after 2005, Xiao Guoxin, the director of the uniform factory of Baoding Jihongxing Garment Co., Ltd., suddenly felt that the foreign trade order “has done a lot better”.

There are two things for Xiao Guoxin to feel deeply. One is to go through procedures for clothing exports such as quality inspection and customs clearance without going to Beijing or Tianjin to make a special trip. The local authorities in Baoding can handle this; the other thing is that each During the quarter, the company’s chairman does not need to go to the Foreign Trade Bureau to receive the “quota”.

Prior to joining the WTO, Western countries imposed quota restrictions on China's textile exports. Domestic trading companies must go to the competent authorities to obtain "quotas" before they can handle exports. "At that time, as if the 'grain ticket' and 'oil ticket' in the planned economy era, you can't just order, but you must also have a 'quota,'" Xiao Guoxin recalls from a reporter from the China Business News.

The so-called textile quota system is a rule imposed by European and North American countries in 1974 to limit the scale of international trade. Its purpose is to protect the productivity of the domestic textile industry. For a long time, the textile quota system not only severely suppressed the production capacity and export capacity of some productive countries, but also seriously distort the development of the global textile and apparel trade.

In 1986, the Uruguay Round negotiations negotiated the textile trade on the negotiation agenda and finally reached an agreement to gradually abolish the Multi-Fibre Arrangement (MFT) and incorporate the textile and clothing trade into the textile and apparel agreement (ATC) provisions of the GATT system. According to ATC Article 2, paragraphs 6 and 8, in the transitional period from January 1, 1995 to December 31, 2004, the importing party will gradually phase out all quantitative restrictions in three phases and eventually realize the textile trade. Liberalization means that from 2005 onwards, the textile industry will usher in a "quota-free era."

With China's accession to the WTO, the Chinese textile industry will also enjoy this treatment. This is particularly important for the future development of the Chinese textile industry.

This can be seen from the Baoding set Hongxing Garments Co., Ltd. where Xiao Guoxin is located. Founded in 1981, Baoding Jihongxing is a garment company that mainly produces shirts. The company's products were mainly sold domestically during the 1990s. From 2001 to 2007, domestic sales were almost abandoned to specialize in foreign trade orders. After the financial crisis in 2008, the proportion of domestic sales was gradually increased.

From domestic sales to foreign trade and then back to domestic sales, the three transitions of Hongxing set up a high degree of consistency with the development trend of China's textile industry since its entry into the WTO. “Our foreign trade orders developed at the best stage from the time of accession to 2007. At that time, we received so many orders that our own factories were not enough to use together with more than a dozen factories in the surrounding area.” Xiao Guoxin said, “China’s largest Some apparel companies have had a similar transformation process."

Like Hongxing, most domestic textile and apparel companies have caught up with this wave of bathing in the spring. Wang Qianjin, senior analyst of the textile industry and general manager of Shanghai Shizhiwei Information Consulting Co., Ltd., cited this group of figures: “Before joining the WTO, the annual export value of China’s textile enterprises is approximately 50 to 60 billion U.S. dollars. The figure is 2,060 billion U.S. dollars, which has been quadrupled."

Entangling the "242" clause "Using Europe and Europe to set a limit on Chinese textiles simply based on three or four months of data. This is totally unreasonable and unscientific."

Someone once predicted that since 2005, textile integration will have enabled the global textile trade to enter a spring. However, for the Chinese textile industry, this year is not very calm.

On May 13th, the U.S. Department of Commerce announced that the U.S. Textiles Agreement Executive Committee had made a decision on special restrictions on textiles for cotton knit shirts, cotton trousers, cotton and chemical fiber underwear from China.

On May 18, the U.S. Department of Commerce announced that the U.S. Textiles Agreement Executive Committee had made chemical fiber knitted shirts, chemical fiber pants, cotton and chemical fiber woven men's shirts and combing on the grounds of "market disruption threats." Cotton yarns take a decision on special restrictions on textiles.

On May 23, the EU Textile Commission approved the proposal of the EU Trade Commissioner Mandelson on the 17th, agreeing to initiate the “emergency protection” program for T-shirts and hemp yarn imported from China, requesting that the Chinese side import the two types of textiles. Questions are formally discussed.

On May 23, the textile agreement executive committee of the U.S. Department of Commerce announced that it would once again impose import quota restrictions on four types of Chinese textiles.

“U.S. and Europe’s limitation of my textiles is based on article 242 of China’s accession to the WTO, but the quoting of article 242 should be conditional, that is, to prove that Chinese textiles do exist in the United States and Europe to disrupt the market and threaten to hinder trade. There must be a causal relationship between the two, and the United States and Europe not only did not provide detailed data to the Chinese side, but also had a large gap with China’s views and analysis on these issues. It is totally unreasonable and unscientific for the data to limit the use of Chinese textiles," said Bo Xilai, the then Minister of Commerce.

The crossroads of the Chinese textile industry are constrained by many factors such as rising labor costs, shrinking foreign trade orders, weak domestic demand, and financing difficulties. Domestic textile companies are facing severe challenges.

After the financial crisis in 2008, the Chinese textile industry once again ushered in a brief spring. At that time, the international economy gradually recovered, and domestic loose monetary policy prompted China's textile industry to grow swiftly. According to Wen Hao, the deputy general manager of Jiangsu Hengli Chemical Fiber Co., Ltd., the investment sentiment of the Chinese textile industry rose at that time.

"From 2009 to 2010, textile companies frantically increased their investment in equipment, especially when last year's cotton price rose to 20,000 yuan and a ton, and some people were lining up to buy cotton spinning machines. At that time, it was only half a year after the deposit was paid and the machines could be obtained. The degree." Wen Hao told reporters.

While the textile enterprises increase investment, the external environment has undergone subtle changes. The rising costs have gradually become the "bearable weight of life."

Bear the brunt of rising raw material prices. Take cotton cloth as an example. "In July last year, the price of cotton was 1.2 yuan/m. In November, it reached a peak of 1.9 yuan/m. Now it has dropped back to 1.7 yuan/m. Compared to the same period, it still rose a lot." Xiao Guoxin told this reporter.

In addition, the cost of chemical fiber raw materials is also rising. The data shows that as of the end of May this year, raw materials for chemical fiber such as PTA and ethylene glycol rose faster than the same period of last year, with increases of 35% and 50% respectively.

The increase in labor costs is also one of the main factors for rising costs. The secretary general of the Wujiang Textile Association, Cai Yanhua, told reporters that the labor costs of textile companies are rising at 20%. At present, the monthly salary of textile workers in the Wujiang area is between 3,500 yuan and 5,800 yuan. Before and after the Spring Festival, Xiao Guoxin adjusted salary for the workers of the factory twice, and labor costs rose by as much as 40%.

Under the dual constraints of high costs and declining sales volume, the profits of textile companies have been further compressed. "The average net profit of the textile industry is around 6 points. According to the current situation, profits may also drop by 30%."

In fact, textile companies face not only domestic competitors. Due to the appreciation of the renminbi and rising labor costs in China, China’s advantage as a factory in the world no longer exists. Vietnam, Indonesia, and some countries in Africa will become new competitors for Chinese textile companies. "There are many cases where some large foreign companies purchase cotton yarn in China and get other countries to weave cloth," said Xiao Guoxin. Due to rising labor costs, shrinking foreign trade orders, weak domestic demand, and difficulties in financing, domestic textile companies are facing severe challenges. The reporter learned that since the Spring Festival, the difficulties of foreign trade in China's textile enterprises have begun to appear, and the situation has further deteriorated in the second half of the year.

The Chinese textile industry once again reached a crossroads. However, Du Yuzhou stated that although China's textile industry has always faced various unfavorable conditions both internally and externally in recent years, textile companies still have enormous room for development and transformation in both domestic demand and trade. To cope with changes in the new situation, the textile industry must continue to integrate itself into globalization and participate more actively in international market competition. On the one hand, it must open up new markets and make good use of the opportunities of the new technological revolution. At the same time, in the aspect of enterprise transformation and development, the textile industry needs to actively promote the reform of institutional mechanisms.