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| Issue date:01/08/2009 |
| ATA Journal for Asia on Textile & Apparel - Aug 2009 Issue |
| Source:Journal for Asia on Textile & Apparel |
| Staff Reporters |
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| Early this year, Adsale Publishing Limited, in cooperation with renowned market research firm Synovate, conducted a two-part market survey to find out how the textile enterprises in China are coping with the economic crisis; to what extent their businesses have been affected; what they are planning to do in the next two years; and how they will market their products in a changed environment. |
Being the second joint effort between Adsale and Synovate on such a survey project following the one successfully concluded in 2007, the 2009 survey has also gathered the opinions of industry players about the different government measures to stimulate demands, as well as potential of the Chinese domestic market and industry outlook.
The latest survey, conducted between April and June 2009, collected 800 valid questionnaires from industry players participating in the Shanghaitex 2009 exhibition and from readers of CTA Journal (print and online).
The first part of the survey findings reported in this issue focused on the impacts of the global financial crisis, while the second part examined the development trends of the Chinese textile industry and the business strategies of the enterprises within it.
A bilingual booklet of the entire survey report will be published in mid-September.
今年初，雅式出版有限公司與著名的思緯市場資訊有限公司再次攜手，進行“2009中國紡織市場調查” 的活動，以瞭解經濟危機對中國紡織服裝業界造成的影響。調查內容亦包括企業對未來兩年的經營策略的看法，以及探測行業的發展前景。
Survey background
The global economic downturn that followed the credit crunch crisis has affected most Chinese textile enterprises, especially after consumers in North America and Europe, who used to buy a lot of China-exported textile and apparel goods, lost much of their interest to spend as household expenditure tightened.
For instance, the Chinese textile and apparel exports to the US last year, following a long period of fast growth, have slowed down significantly. The total export value of US$25.37 billion represents an increase of 1.8% from the previous year, but it was the first single-digit growth rate recorded in 10 years. During the first five months of this year, textile and apparel exports from China dropped 11.04% compared to the previous year to US$55.852 billion, according to the customs office of China. Such exports to the US market, in particular, dropped to US$22.029 billion (-15.5%) and US$36.823 billion (-8.1%) respectively.
The Ministry of Commerce mentioned this July that China’s total export value slid 21.7% during the same period, indicating that Chinese textile and garment enterprises are facing critical situations, and it is unclear when the downturn will hit bottom.
To alleviate the suffering of the textile industry, the Chinese government authorities have introduced a series of supportive measures, including a RMB4-trillion stimulus package to increase investment activities, and raising the tax rebate rate for textile and apparel exports to 16%.
Under a governmental plan on the textile industry’s development up to 2011, sizable textile enterprises (with a registered capital over RMB5 million) are estimated to achieve RMB1.2 trillion in industrial added value, with an annual growth rate of 10%. They will also export a total value of US$240 billion in the next two years, attaining an annual growth rate of 8% on average.
It is estimated that, under the plan, the proportion of fiber consumption in the three sectors of apparel, home textiles and industrial textiles will be adjusted to 49:32:19 by 2011 from 53:33:14 in 2007, indicating that more emphasis was shifted to industrial textiles from garment manufacture.
Demographics of respondents
The 2009 survey primarily targeted Chinese textile and apparel enterprises (including mainland, Hong Kong, and Taiwanese). A total of 800 valid questionnaires were received in the two-part survey – 246 from the first phase of the survey conducted with CTA readers (print and online) this April, and 554 from the second phase conducted at the Shanghaitex 2009 fair in June.
In the first-phase survey, about 84% of the 246 respondents came from mainland China, 11% from Hong Kong and the rest Taiwan.
Close to 30% of all respondents were working in a textile enterprise founded for a period between 11 and 20 years. A quarter belonged to textile enterprises established over two decades ago. Overall, over 55% of respondents were highly experienced in the textile field and their opinions were representative.
The respondents represented various segments of the Chinese textile industry. Of which, 67.34% were manufacturers, whereas 25.81% were traders. About 88% of them came from the private sector. 39.02% were domestic private companies, 35.37% foreign-invested enterprises and 14.23% Sino-foreign joint-venture firms.
Over 64% of the respondents worked in enterprises of below 500 employees. About one-tenth (10.16%) worked in listed companies.
Key products made by enterprises of respondents |
Job nature of respondents |
Highlights of survey findings
Nearly 80% enterprises feel the impacts
Most Chinese textile and apparel enterprises were affected negatively by the global financial crisis.
About 77% of all respondents reported that their enterprises were impacted adversely by the global financial crisis, around 18% being impacted positively, and about 5% no impact.
Those from the sales department were most susceptible to the global financial crisis, as over 85% of responding salespersons considered that big negative impact was felt. A similar view was shared by nearly 80% of responding high-ranking executives (including the owner of a corporation, chairman, general manager, factory manager and chief engineer).
Their views were in line with the performance of Chinese textile and apparel enterprises since late last year. Sizable textile enterprises (with a registered capital over RMB5 million) in China accomplished a total industrial output value of RMB3478 billion in 2008, an increase of 13.73% from the previous year, but the growth rate was 8.84 percentage points lower from that of last year. Profits of these enterprises dropped 1.77% to RMB104.2 billion in the first 11 months of 2008. Meanwhile, about two-thirds of all textile and apparel enterprises in China were on the verge of a loss last year.
Notably, about 9% of respondents from state-owned enterprises reported a positive impact of the global financial crisis, partly because of their strong emphasis on domestic market of China.
20% did not face negative impact
The Chinese textile industry has developed a complete and internationally competitive supply chain over these decades. Though the US market was crucial to Chinese textile and apparel enterprises, the rapidly growing domestic demand has gained importance. Many enterprises in China have actively developed the domestic market, instead of relying heavily on exports.
Up to 76.83% of respondents, especially those working in foreign-invested, Sino-foreign joint-venture and privately owned enterprises, felt the negative impacts of the global financial crisis. However, about 18% (17.89%) of them reported a positive impact, especially small and medium-sized enterprises.
Weak market outlook in the short run
Most textile enterprises interviewed are expected to be more restraint in the next one to two years due to a weaker global economy predicted.
More than half of the respondents (52.65%) were inclined to lower sales targets, regardless of the size of the enterprises.
Moreover, 54.32% of respondents had no plan to build up capacity or recruit more staff, but 24.28% did not rule out these two options, depending on the production needs.
About 46.09% of all respondents predicted that production would be below full capacity during this and next years, and 23.04% reported under-capacity production already happening at their enterprises. Hence, close to 70% of all of them experienced negative impact of the global economic downturn, but the rest of respondents (30.87%) reported no impact on the output level.
About 41.32% of respondents expected their enterprises to lower the output level this and next years, and another 33.47% said their enterprises would not do so. In addition, 52.32% of respondents stated that their companies did not dismiss employees under this economic downturn and 57.32% said wages had not been cut. The proportions of those who said that their companies might consider layoff and salary reduction were 27.2% and 24.27% respectively.
Higher prices for high-end products
On prices of textile goods, two blocs of opinions were observed.
About 30% of fabric makers who are expecting downward prices believe that the prices of their fabrics would drop by 41-51% within two years, and another quarter of them thought a price cut by half was possible.
In contrast, those producing higher end fabrics saw opportunities in the current economy and projected a growing business. About a quarter of them looked forward to raising more than 50% of the price level in two years, while another quarter also reported to target a price increase of 41-51%.
Differentiated and higher end fabric products seemed to have a brighter prospect than general commodities in the market, whereas producers of general fabrics saw intense competition ahead.
A similar phenomenon was also seen in the knitwear segment. Among those expecting lower prices, about 65% said their estimated price cut ranged between 11-30%, whereas up to 56% of optimist knitters planned to increase prices by 5-20%.
Four hindering factors
Shrinking export demand, rising costs, currency fluctuations and financing constraints are four factors to retard the progress of Chinese textile and apparel enterprises. Approximately 71.95% of the respondents considered the loss of foreign demand as the most significant impact of the global financial crisis.
The Chinese Customs reported that the total Chinese textile and garment imports and exports reached US$203.75 billion in 2008, up 7.3% from last year. An export value of US$185.22 billion (+8.2%) was recorded and an import value of US$18.54 billion (-0.6%) registered. Notably, the international textile and garment trade of China performed less dynamically since last August, following the financial crisis. Exports to the US, the largest buyer of Chinese textile and garment goods, also slowed down.
Other significant unfavorable factors were rising production costs, increasing wages, currency fluctuations and financing constraints. It was noted in the survey that Chinese textile and apparel enterprises, especially listed companies, attached a higher importance to the domestic market and they usually had developed extensive distribution channels across the vast country. Financing was a critical issue, particularly to non-listed firms of small and medium sizes (SMEs) employing less than 1,000 workers. Transaction and credit risks were seen as a big challenge to textile enterprises, among non-listed SMEs and to a lesser extent listed firms.
More government support wanted
A quarter of respondents believe “Apparel” would be the biggest beneficiary of the Chinese government’s measures to stimulate domestic demands |
Surviving the economic downturn was regarded as “essential” by most respondents (91.36%); 83.19% considered it crucial to intensify R&D and build up the brand; 71.5% reported that their enterprises might recruit more talent and skilled workers.
About half of respondents (50.85%) held the opinion that the Chinese policy of expanding domestic demand would most benefit producers selling low to middle end apparel products to rural areas.
Climbing per-capita income level of Chinese people was expected to help the growth of higher end products and related product developments. Shown in the chart above, mounting hopes were given to the apparel segment of China.
Confidence in recovery
Majority of respondents were eager to make themselves more competitive in the market. About 42.34% of them said they would not give up exports and would target a more diverse market. Another 41.39% said they would focus more on Chinese domestic sales; 61.63% expected an economic recovery in two years, while about 22.04% believe it would take three to five years.
More than 20% of repondents would strengthen the sales network, intensify product research, and step up brand-building effort. About 12.34% would continue to upgrade production technologies.
Some of the measures suggested by respondents to lower corporate burden during a downturn:
Reduction in raw material prices
Layoff or lowering production capacity
Supportive policy that encourages exports
Legal support of independent innovation
More flexible labor system
More corporate-friendly taxation rates
Raising cotton value-added tax (VAT) to 17%
Subsidies to energy-saving projects
Supportive policy to foster technological upgrade
Funding to build brands in the country
Collective government-led purchases of foreign goods and more channels to obtain credit risk evaluation
More loose financial support by the government to facilitate corporate financing |
Disclaimer
This article aims to reflect the respondents’ general views, which may be used as reference by fellow industrialists. However, we will not assume any responsibility in the event that the report is used as the basis for any investment decisions or market activities.
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| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "ATA Journal for Asia on Textile & Apparel", Adsale Textile English Website - www.AdsaleATA.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
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| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "ATA Journal for Asia on Textile & Apparel", Adsale Textile English Website - www.AdsaleATA.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
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