One third of China's cotton-spinning enterprises revealed 96.7 percent of total profits for the whole industry, indicating that most cotton-spinning companies are currently unprofitable, said Xu Wenying, deputy director of China National Textile and Apparel Council.
The rapid development of China's cotton-spinning industry in the previous decade resulted in fast-expanding capacity, said Xu. After the breakout of the global financial crisis, overseas demand contracted significantly and competition in the domestic market became fierce.
Overcapacity led to falling profits, Xu explained. Chinese cotton-spinning enterprises have very few products that have high added-value and their out-of-date technology and equipment could not meet high-end market demand. Eliminating out-of-date capacity and implementing industry upgrade have become top issues for China's cotton-spinning industry.
In addition, China's cotton-spinning enterprises now face high taxation as well as financing difficulties, Xu noted. Banks are very prudent in issuing loans to small and medium sized enterprises, while private financing lacks policy support and leads to a high cost.
