Local Data: Analysis On Economic Operation Of Wuxi Textile Industry

Analysis on economic operation of Wuxi Textile Industry

1、 Situation and general situation

Since June this year, the epidemic situation in Shanghai, Beijing and other places has entered the final stage, and the full resumption of work and production has brought the national economic prosperity back to the expansion range. Recently, the National Bureau of Statistics announced that in the first half of the year, after overcoming the most sluggish economic activity in April, it achieved a positive growth of 2.5%. In June, the PMI of manufacturing industry recorded 50.2, up 0.6 percentage points; The supply index, 54.7% of the expected economic recovery, and the service industry index are gradually recovering to 54.2% and 54.7% respectively. In addition, a package of policies to stabilize the economy and foreign trade were implemented in April. In May and June, China's foreign trade situation improved significantly, driving the export growth to 13.2% in the first half of the year.

In the first half of the year, textile enterprises in our city were not only affected by the repeated epidemic situation, the conflict between Russia and Ukraine and other regional political conflicts, the price fluctuation of bulk commodities and raw materials, the weakness of domestic demand, the sluggish logistics, the rise of labor costs, the shrinkage of working capital and the drastic changes in the international trade market, but also faced new problems such as the outflow of orders and the transfer of supply chain industrial chain, All kinds of difficulties faced by enterprises have never stopped. However, with the support of a series of policies and measures for steady growth and employment protection issued by the state and our city, under the guidance of the spirit of "dual planning", adhering to the "two hands", striving to strive for the "double victory" of epidemic prevention and control and economic and social development, Efforts have been made to minimize the impact of the epidemic on production and sales operations, thus stabilizing the economic development of the industry and enterprises.

According to a person from the Municipal Finance Bureau, in the first half of the year, the city has implemented various policies, such as VAT rebate, deferred payment of taxes and fees for small and medium-sized enterprises in the manufacturing industry, and the reduction and exemption of "six taxes and two fees", which reduced the burden of enterprises by more than 28 billion yuan, and achieved actual results and enhanced confidence in helping enterprises; According to the general public budget revenue released, the growth rate in June rose by 8.1 percentage points compared with that in May, and the cumulative growth rate in the first half of the year rose by 0.4 percentage points compared with that from January to may, ranking first in the province, highlighting the resilience and vitality of Wuxi's local economy.

According to the data analysis released by the Municipal Bureau of statistics, most of the major economic indicators of the textile industry in our city maintained a stable growth in the first half of the year, but some of the indicators were still under pressure. In the first half of 2022, the total industrial output value of the city's textile industry reached 88.483 billion yuan, a year-on-year increase of 8.95%, and a decrease of 7.18 percentage points compared with the growth rate of the first quarter; The value of export delivery was 11.965 billion yuan, an increase of 5.36% year-on-year, and 11.13 percentage points lower than the growth rate in the first quarter; The loss of loss making enterprises was 1.383 billion yuan, a year-on-year decrease of 32.24%; The profit was 1.708 billion yuan, an increase of 8.65% year on year. The operating revenue was 102.846 billion yuan, a year-on-year decrease of 1.06%; The inventory of finished products was 23.725 billion yuan, up 14.74% year on year; Employee compensation payable was 5.884 billion yuan, up 4.72% year on year.

The main economic indicators in the first half of the year are as follows:

　　 2、 Analysis of production and operation of various textile products

According to the statistics of the General Administration of customs, in the first half of this year, China's textile and clothing exports continued to maintain a steady growth on the basis of the high base in 2021, especially the rapid growth of clothing exports. In terms of RMB, China's textile and clothing exports reached 210.47 billion yuan in June, up 18.1% year-on-year and 12.4% month on month. Among them, textile export was 90.01 billion yuan, up 11.6% year-on-year and 0.2% month on month; Clothing export was 120.46 billion yuan, up 23.5% year-on-year and 23.7% month on month. From January to June 2022, China's textile and clothing exports totaled 1007.15 billion yuan, an increase of 10.8% year-on-year. Textile exports increased by 1.495 billion yuan, including 1.056 billion yuan in exports.

In the first half of the year, the growth of wool woven fabric (woolen fabric) was still the largest, followed by clothing and printed and dyed fabrics. The growth of the above three main indicators benefited from the overall prosperity of the clothing export market. No matter in the domestic and foreign market, the current consumption concept of clothing is turning to sports, fashion and light style. Since January to June, the growth rate of knitting clothing output in our city has always been higher than that of woven clothing, which is in line with the logic. On the other hand, the output of chemical fiber, nonwoven fabric (non-woven fabric), linen fabric and cord fabric still maintained a significant decline after the first quarter due to the continuous weakness of domestic demand market and foreign individual consumer goods. The growth rate of yarn and cloth output has changed from positive growth of 6.84% and 6.74% in the first quarter to negative growth.

At present, affected by the negative macroeconomic situation and the sluggish domestic basic consumption, the domestic cotton price is hovering at a low level. Before the inventory of cotton yarn and cloth enterprises is consumed to a certain extent, the downstream enterprises suffer from less orders and the demand for replenishment decreases, and the domestic cotton consumption market is still lack of substantial benefits. Since May this year, the main contract oscillation of Zheng cotton weakened around 14000 yuan / ton, and there has been no decent rebound, mainly due to the shrinkage of the downstream market. Although the spinning enterprises have a little profit at the current cotton price, the sales volume does not go up, which in turn suppresses the output. See the table below for specific data.

　　 3、 Economic operation of textile industry

According to the completion of the total industrial output value of four sub industries of textile industry, namely, textile industry, clothing industry, chemical fiber industry and textile machinery and textile machinery industry, the total industrial output value at current price in the first half of the year was 37.363 billion yuan, 25.498 billion yuan, 21.262 billion yuan and 4.36 billion yuan, respectively, with the exception of textile machinery and textile industry, the other three sub industries recorded positive growth; However, compared with the positive growth of textile industry and clothing industry, the chemical fiber industry and textile machinery and textile machinery industry showed a significant negative growth phenomenon. From the data of enterprise loss, the textile industry, clothing industry, chemical fiber industry are more than 30%, textile machinery and textile machinery industry is also up to about 9%, there are many loss making enterprises. In addition, the proportion of accounts receivable and finished goods inventory increased, and the production and sales rate decreased, indicating that each industry is still facing the same grim market situation. The specific data are shown in the following table:

　　 4、 Several main problems and understanding reflected by enterprises in current situation

　　 1. The impact of the US "Xinjiang cotton ban" on the decline of export market in the second half of the year and even in the future.

On June 21, 2022, the "Xinjiang cotton ban" issued by the United States officially took effect, and the European Parliament recently passed the "resolution on Customs Measures against forced labor", which requires customs of all countries in the European Union to take measures to prohibit the products of forced labor from entering the EU market. This is actually another extension of the Xinjiang related act, There will be a series of problems as follows: enterprises are required to issue a letter of commitment not to use Xinjiang cotton, provide raw material traceability information, and accept on-site inspection. However, some suppliers in the market do not have and do not meet the traceability requirements, and the upstream enterprises can not cooperate, which makes it difficult to trace the source and the order is difficult to complete; Considering the problems of raw materials related to Xinjiang, foreign brands will be likely to carry out strategic purchase transfer, resulting in the reduction of enterprise orders to a certain extent; Enterprises need to purchase imported cotton yarn to replace, import yarn price rise, enterprise costs will rise. Using American cotton yarn imported from Southeast Asian countries, the price of newly imported cotton yarn has generally increased at this stage, which is higher than that of domestic cotton yarn. It is expected that the price of imported cotton yarn will continue to rise, and at the same time, it will weaken the price competitive advantage of Chinese cotton products in the international market; It will accelerate the transfer of the whole industrial chain of export cotton products to overseas production. As a result of the ban on Xinjiang cotton, Chinese enterprises had to purchase large quantities of American cotton, which promoted the rise of international cotton prices, especially American cotton. For example, Bima cotton rose from 120 cents / pound in 2019 to 195 cents / pound in 2021, and now it has risen to 350 cents / pound. From 160 to 90 cents per pound of cotton. Now high cotton prices lead to poor transmission of finished product market prices, and the starting price of American cotton is no different from cutting chives all over the world.

It is suggested to take relevant measures: at present, cotton import is carried out according to quota quantity. Can a green channel be opened up for export enterprises to give certain quota so that clothing export enterprises can import cotton exclusively for export orders, which not only meets the legal requirements of foreign countries, but also avoids losing customers; Government departments actively communicate and negotiate with relevant countries and international organizations to ensure that the legitimate interests of enterprises are not infringed; The entry into force of the U.S. bill has a greater and more serious impact on the textile economy. We hope that the government will introduce corresponding supporting policies for foreign trade export enterprises to resolve the crisis, such as tax relief and bank credit support. We should ensure that the exchange rate remains within a reasonable range and encourage exports. We will strengthen the control of the shipping market and maintain the freight within a reasonable range. We will increase support for interest free and low interest loans for technical transformation projects. Encourage real enterprises to speed up the process of intelligent and digital transformation, give enterprises the necessary financial support, and substantially reduce the burden of enterprises; If the vast majority of enterprises do not understand the operation process and how to deal with similar things, they need to increase the training of relevant contents and case analysis to help enterprises cope with the crisis.

　　 2. RMB cross-border settlement and export goods domestic freight, third-party inspection fees and other VAT refund issues.

The government actively promotes the implementation of various policies of "stabilizing foreign trade and promoting development" and encourages export enterprises to use RMB for settlement, which can not only expand the influence of China's foreign trade in the world, but also effectively guard against the restrictions and sanctions imposed by European and American countries on China's exports. However, in the actual settlement process, the operation process is complex and safe has no clear operation guide, which makes it difficult for export enterprises to settle RMB.

In order to strengthen the competitiveness of China's export commodities in the international market, the tax corresponding to the cost of export commodities in China can be refunded after export. However, in the actual operation process, the value-added tax on the domestic freight (i.e. the domestic freight from the finished product factory to the port) and the third-party inspection service fee can not be deducted from the domestic sales or retained for tax refund according to the tax regulations, resulting in the increase of tax cost. This is a long-term problem for foreign trade export enterprises after replacing business tax with value-added tax in 2013.

Enterprises suggest that RMB cross-border settlement should be convenient and clear and convenient operation guide for settlement process should be formulated. In view of the value-added tax on domestic freight and third-party inspection and other service fees of export goods after replacing business tax with VAT, the government can issue relevant policies of tax refund or deduction of domestic sales.

　　 3. The amount of export credit insurance and premium subsidies to the United States.

China's largest textile export market is in Europe and the United States. Due to the influence of Sino US trade relations, SINOSURE's willingness to underwrite export to the United States is not very strong, and the premium subsidy is not high. The government's subsidy proportion of insurance premium for export credit insurance to Europe and the United States is far lower than that to emerging markets, which has a negative impact on the long-term stable development of Israel's export to Europe and the United States. It is hoped that the government will coordinate with SINOSURE to increase the insurance amount and insurance premium support for US exports, and include the Xinjiang related bill into the insurance coverage.

　　 5、 Analysis of several main factors affecting enterprises in the second half of the year

　　 1. We should continue to renew our confidence on the basis of expectations.

During the epidemic period, although the vast number of textile enterprises in our city tried their best to adapt to and cope with the new challenges and problems brought about by the epidemic, they also found that a set of business processes and business relations that were used to be common were broken, and the previously stable up and down chain sales channels were also loosened. The overall pressure and complex situation of the supply chain test the business toughness and confidence of every enterprise. In this process, what we need to realize is that on the one hand, the epidemic has brought us troubles and troubles, which has subverted our way of success, but on the other hand, it has also brought us a new way of thinking and development. From the development to the present situation, the market competition is no longer between the simple competition between enterprises, but into the competition between the supply chains, and also the competition between the security and diversification of the supply chain. Is the construction of an industry chain and supply chain that is more secure, reliable, efficient and diversified, and can span the profound impact of the epidemic situation, represent the requirements of the development of the next new era! In this regard, we call on enterprises themselves to update their understanding and ideas, keep pace with the pace of changes in the times, and gradually restore expectations and boost confidence in the process of adapting to the environment and innovating and developing under the premise of the package of relief and boosting policies implemented by governments at all levels for sustainable economic development.

　　 2. Export data in the first half of the year and the order outflow situation to be prevented.

In the first half of this year, China's foreign trade withstood multiple pressures at home and abroad and achieved overall stable operation. According to the data released by the General Administration of customs, in June, China's total import and export value was 3.77 trillion yuan, an increase of 14.3%. Among them, exports reached 2.21 trillion yuan, an increase of 22%; Imports were 1.56 trillion yuan, up 4.8%. In the first six months of this year, China's total import and export value was 19.8 trillion yuan, an increase of 9.4% over the same period last year. Among them, exports reached 11.14 trillion yuan, an increase of 13.2%; Imports were 8.66 trillion yuan, up 4.8%.

China Cotton Textile Industry Association has investigated the market operation of cotton textile industry cluster. According to the pure cotton yarn cluster enterprises, due to the "Xinjiang related act" issued by the United States in June and the lack of downstream demand and other factors, the price of domestic cotton fell sharply. Some enterprises purchase raw materials with high inventory price in the early stage, and are reluctant to sell. Small and medium-sized enterprises that are short of funds sell at a loss and recover funds. Enterprises generally take measures to limit production, in order to stabilize the staff at the same time to maintain a low level of production. It is expected that the survival pressure of enterprises will be further increased. Since March, due to the US Federal Reserve's aggressive interest rate hike and the central banks' tightening monetary policies, worries about the economic recession of the United States and other major economies in the world have been increased. The International Monetary Fund has lowered its forecast of economic growth rate from 4.4% to 0.8% to 3.6%. Global economic growth is expected to further slow down, and there is a greater pressure to boost consumption in the domestic demand market. According to the recent survey, only 85% of the textile enterprises and enterprises with high orders from China have been subject to export and import orders. In the first half of the year, China's textile and garment orders were transferred to the outside world for about 6 billion US dollars, including cotton textile orders for 1 billion US dollars and clothing transfer scale for about 5 billion US dollars. Cotton textile orders are mainly transferred to India, while garment orders are mainly transferred to Bangladesh, Vietnam, India, Indonesia and Cambodia. It is estimated that in the second half of the year, China's textile and clothing order transfer may continue the outflow trend, with the transfer scale of about 10 billion US dollars. Among them, the order transfer of cotton textile is about 2 billion US dollars, and the scale of clothing transfer is about 8 billion US dollars. The textile and garment enterprises in Jiangsu, Anhui, Guangdong, Shenzhen and other places, which are important textile areas in China, will be affected. It is still the top priority for textile enterprises to guarantee orders, production and de inventory in the second half of the year.

In the next step, the Ministry of Commerce will work with local governments and relevant departments to implement policies and measures to stabilize foreign trade. It will continue to support enterprises to make full use of relevant policies and measures and help foreign trade enterprises develop steadily and healthily from the aspects of promoting the smooth development of foreign trade field, increasing financial and tax support, helping enterprises grasp orders and expand the market, and stabilizing the supply chain of foreign trade industry chain.

　　 3. The effectiveness of RCEP and the impact of the Fed's interest rate increase.

In the first half of the year, China's import and export to RCEP trading partners increased by 5.6%. On June 30, the regional comprehensive economic partnership agreement (RCEP) was formally implemented and entered into force for half a year. At present, the number of effective RCEP members from 15 member states has reached 13. According to the data of China Council for the promotion of international trade, in the first five months of this year, the total amount of certificate of origin visa of the national system for the promotion of trade totaled 155.34 billion US dollars, an increase of 23.95% over the same period of last year. For five consecutive months, the amount of certificate of origin visa for Japan ranked first in the RCEP of the national trade promotion system, accounting for more than 90% of the total amount. With the deregulation of market access and the removal of tariff barriers, the prices of more high-quality commodities flowing across the border have fallen, and enterprises and consumers in various countries can share the RCEP dividend. However, on the other hand, the US Federal Reserve's decision to raise interest rates and reduce the expected scale will have a rapid impact on other major countries and economies in the world, and at the same time, it will also have an impact on regional trade of countries in the RCEP region. Wei Hongxu, a researcher at Anbang think tank, said, "The US Federal Reserve's interest rate hike will lead to exchange rate changes in developing countries, which will, to a certain extent, have an impact on foreign trade denominated in US dollars. At present, although RMB is in the trend of devaluation against the US dollar, the depreciation rate is lower than that of Southeast Asian countries, which will lead to some domestic and foreign trade enterprises facing competition from Southeast Asian manufacturers, and bring certain pressure on Chinese enterprises' exports, including RCEP countries The export of industrial products. "

In general, since the end of April, the national and local governments have intensively introduced a package of policies and measures to stabilize the economy, maintain growth and promote development. The policy effect gradually appeared in May. With the improvement of the domestic epidemic prevention and control situation, the national logistics transportation and supply chain connection were gradually repaired, and the positive factors for the economic operation of the textile industry were accumulating. But at the same time, the stable and healthy development of the industry in the second half of the year is still facing many tests. On the one hand, the international situation is turbulent, the conflict between Russia and Ukraine is not over, the global economic growth is slowing down, the stagflation risk is obviously rising, and the international trade environment such as supply chain transfer is still complex and severe; On the other hand, under the repeated impact of the epidemic, the domestic demand market consumption demand is still weak, and the lack of terminal demand leads to the shortage of upstream enterprises' orders. How to effectively activate the consumer market and improve the market consumption demand has become the primary concern of the industry development.

(source: Wuxi Textile Industry Association)