Substantial progress has been achieved by Chinese textile industry in all areas of statistics in the beginning of 2010??thanks to strong domestic demand and global economic recovery. However, an unrelenting rise in the cost of raw materials, yuan appreciation as well as Europe's debt crisis could may pull down the performance of Chinese textile industry in the second half of 2010.
Bullish on domestic market
Demands serve the major factor stimulating the growth of production, sales and exports of the Chinese textile industry. In January and May 2010, China's total retail sales increased by 18.2 percent y/y, 3.2 percentage points higher than the Jan.-May 2009 period. Of which, retail sales for garments, shoes and hats were up 23.1 percent y/y. Meanwhile, statistics-worthy enterprises in China have finished the sales production value CNY1347.636 billion, increasing 29.80% y/y.
Textile industry exports showed significant rise in the beginning of 2010, owing to international market recovery, buyers demand increases as well as some domestic enterprises finishing shipment in advance to avoid losses which brought about by the appreciation of the renminbi. In January and May 2010, China??s textile and garment exports amounted to $72.205 billion, up 19.52 per cent y/y, 30.65 percentage points higher than the Jan.-May 2009 period. Of which, China??s textile exports amounted to $30.552 billion, up 29.53 per cent y/y, 44.93 percentage points higher than the Jan.-May 2009 period; China??s garment exports amounted to $41.653 billion, up 13.12 per cent y/y, 21.27 percentage points higher than the Jan.-May 2009 period.
Production continued recovery
From January to May, the total industrial production value of 53,000 statistics-worthy Chinese textile enterprises increased 26.55 percent y/y to CNY 1686.522 billion, 26.55 percentage points higher than the same period last year.
Looking further, from January to May 2010, chemical fibre production value of statistics-worthy enterprises increased by 15.86 percent y/y, 8.03 percentage points higher than the Jan.-May 2009 period, but 2.75% and 4.14% lower than the Jan.-Apr. 2010 period and the Jan.-Mar. 2010 period; yarn increased by 17.41 percent y/y, 8.39 percentage points higher than the Jan.-May 2009 period, but 1.29% and 2.21% lower than the Jan.-Apr. 2010 period and the Jan.-Mar. 2010 period; fabric increased by 17.38 percent y/y, 18.24 percentage points higher than the Jan.-May 2009 period, but 0.33% and 0.26% lower than the Jan.-Apr. 2010 period and the Jan.-Mar. 2010 period; and garment increased by 22.43 percent y/y, 19.02 percentage points higher than the Jan.-May 2009 period, 6% and 6.4% higher than the Jan.-Apr. 2010 period and the Jan.-Mar. 2010 period;
Investment saw steady growth
In the first five months, the accumulated investment for statistics-worthy textile projects (whose investment beyond five million RMB) reached CNY116.187 billion, up 19.87 percent y/y, 14.17 percentage points higher than the Jan.-May 2009 period.
Profit Surges 61.10%
The total profits reached CNY71.901 billion from Jan. to May 2010, up 61.10 per cent y/y, 61.24 percentage points higher than the Jan.-May 2009 period. The growth was attributed to an increase in domestic sales and the recovery in exports.
Trouble for the industry
It is important to note that, although substantial progress has been achieved in all areas of statistics in the beginning of 2010, the textile industry this year will face more pressure from rising raw material, yuan appreciation as well as Europe's debt crisis and the consequent sovereign credit risk of developed economies.
An unrelenting rise in the cost of raw materials is cutting textile corporate profits, in some cases, pushing up consumer prices. One glaring example is the sky-rocketing cost of cotton. On Jul. 14, China Cotton Index for 328-grade cotton reached CNY 18,403 a ton.
People's Bank of China recently said it was abandoning its peg to the US dollar, a move taken to shelter the China economy during the recent global crisis, and was reinstituting a managed float it first detailed in July 2005. China's currency surged Jul.12 to its highest level yet, with central bank setting the daily official level at 6.7718 yuan to the dollar, acting on a pledge to allow greater flexibility in the exchange rate. The appreciating yuan in China could spell serious trouble for the Chinese textile industry as it will further slash the marginal profitability of China's textile makers.
European debt crisis and the consequent sovereign credit risk of developed economies and a new round of global financial market turmoil have limited direct impact on China, but indirect effects can not be ignored. Now experts are warning companies to brace for a longer term impact.
