Business

It was a display booth that looked different from all the others at a recent textile fair in Fujian province. For, Wang Yanzhu had earmarked about half of the space in his booth to a Taiwanese fabric producer with whom he hoped to forge a close partnership very soon.

Textile firms eye mainland mart [CFP]

“If it were not for the financial crisis, Tex-Ray Industrial Co (the Taiwanese firm which has over 30 years of experience in producing high-end fabric) would not have been so determined to set up strategic partnerships with garment producers on the mainland. We are now one of their largest clients,” said Wang, whose company, Gaiqi Group, is one of the largest producers of T-shirts on the mainland.

Tex-Ray had just sent several of its staff members to join Gaiqi’s management team and the two companies also planned to hold stakes in each other in the near future, Wang, who is Gaiqi’s president, said.

“This year, our focus will be on the mainland-market oriented clothing producers,” said Mason Ma, director at Tex-Ray’s Shanghai office.

“As mainlanders’ pockets get deeper, the market here promises huge demand for more sophisticated clothing. There are lots of opportunities for Taiwan companies, which have an advantage in producing mid- to high-end fabrics. You cannot just dump cheap products here,” Ma said.

Prospect for China’s textile and apparel exports are generally seen as bright despite the current economic downturn but the industry needs to shift from cut-throat price competition to a segmented market focusing on high quality, industry insiders said.

Textile firms told to focus on quality [CFP]

Confidence in a bright export future is derived from optimism seen at the China International Textile and Apparel Trade which recorded significant increases in terms of visitors, exhibitors and order-filling intentions, organizers of the annual exhibition said.

The fair, which will run from Thursday through Saturday, attracted about 670 exhibitors this year, more than double the nearly 300 last year. The number of professional buyers more than doubled to 1,500 from 658 in 2007, with 1,000 of them being international purchasers. The major United States and Korean buyers expressed intentions to order, the organizers said.

“The fact that China is the ‘World Factory’ will not change in a short period,” said Lucas Fu, executive vice president of Shanghai World Trade City Co. “While most textile and apparel makers have been hurt by vicious price wars, manufactures which target segmented markets and sell at reasonably high prices will stand out and lead the industry to a new era.”

China’s textile and garment exports for the first quarter continued to fall by 9.03 percent on an annual basis to US$34.06 billion. But the drop was slower than the 14.54-percent decline in the first two months. Tax rebates for textile and garment exports have been raised to 16 percent to help the ailing industry.

(Shanghai Daily April 20, 2009)

Textile exports are set to languish this year with no signs of a quick pick up, notwithstanding the increase in tax rebates.

China on Wednesday raised the tax rebate rates on exports of certain textile and apparel products from 15 percent to 16 percent. It is the fourth time the government has raised the rebate rate since last August.

However, the new policy is likely to have limited effect on exports, experts said, as demand from foreign countries decreased since last year.

Longyang Textile in Changshu, Jiangsu province, saw its orders from the European and US markets, which used to contribute about 40 percent of the company’s business, decline this year, according to General Manager Pan Chunhua.

“The two markets now account for just 20 percent of our sales,” she said. “So the increased tax rebate only has a limited effect on our exports due to weakening orders.”

Zhang Xi’an, secretary general with China Chamber of Commerce for Import and Export of Textiles, said the country’s textile exports are due to decrease in the first half of this year.

“The key obstacle facing exporters is the weakening orders,” he said. China’s textile and garment exports dropped to US$6.68 billion in February, a decrease of 35.1 percent compared with last year, according to the General Administration of Customs.

Exports to some major markets are also predicted to slow down.

“China’s textile and apparel trade this year will probably see one of the lowest growth rates in a decade. The gloomy prospect of the US economy sinking deeper into recession is the main cause for the import demand shrinkage,” said Sheng Lu, independent analyst.

He cited the figures from the 104th Canton Fair last autumn saying textile and apparel export contracts from US customers dropped by almost 30 percent compared to the previous year, suggesting a pessimistic outlook for 2009. In a bid to survive the recession, many textile exporters are striving to diversify their markets or adjust products to satisfy buyers.

Pan from Longyang Textile said her company had decided to turn to the home market

“Now what we can do is to participate in more relevant exhibitions and visit more buyers,” she said.

Guo Min, product manager of the Shanghai-based Texhong (China) Investment Co Ltd said his company would pour more money into research and development to retain its market share.

“Direct exports account for only 20 percent of our business, while indirect exports account for 70 percent. But we are also facing pressure from indirect exports,” he said.

(China Daily April 3, 2009)

Japanese textile retailer Itochu Corp is acquiring a 28 percent stake in Shanshan Co Ltd for around 758 million yuan from the Shanghai-listed company’s parent Shanshan Group.

Itochu Corp will hold 25 percent of the stake in the textile firm and Itochu (China) Holding Co Ltd, the balance 3 percent.

Shanshan chairman Zheng Yonggang said the stake buy would help the Ningbo-based textile manufacturer change into an integrated business conglomerate. The company would also benefit from Itochu’s resource advantages and management skills.

The textile industry in China has slowed since last year as a result of the yuan appreciation in the first half of the year.

Shanshan posted sales of 11.8 billion yuan in 2008, which, according to Zheng was difficult to surpass. “It is possible that the turnover of Shanshan (as a textile manufacturer) will remain the same for a decade, or even longer,” a Xinhua report quoted him as saying.

Zheng said although he had started the enterprise himself, it was time to invite an outside partner to solve problems as the company intends to grow into a true international enterprise.

“Itochu is superior to Shanshan in terms of distribution network and technology, and its over 150 years of experience is not something we can buy with money,” Zheng said. He said he was more interested in the soft power that Itochu can bring, rather than the money it puts in.

According to the agreement, the Japanese retailer will depute four employees to join Shanshan’s management team and participate in its daily operations.

“Itochu has rich experiences in the textile retail business, and these experiences would be very valuable for Shanan as it transforms from manufacturing to retailing and logistics,” said Wang Rong, analyst, United Securities.

“For Itochu, Shanshan is a strong domestic brand and that will be a valuable asset for the Japanese textile retailer to build its portfolio here,” she said.

Zheng added that the cooperation between the two sides is not limited to textiles and garments.

Shanshan has also expanded beyond textiles, according to Wang. She noted that the company is now China’s biggest lithium battery producer. In 2007, 61.5 percent of its revenues were from garments and 32.2 percent from battery materials.

The agreement also requires that Shanshan would be able to buy back the shares at the price Itochu paid for them if the Japanese company fails to reach the set performance goals in three years. Likewise, Itochu can transfer the shares if it believes it has problems with the Chinese company.

Itochu entered China in 1993 and has invested in over 300 projects. Last year, it started cooperation with several Chinese food companies including State-owned COFCO and also had a US$710 million investment in Ting Hsin, a major food processing company.

But Wang from United Securities cautioned that this move could be risky for Shanshan. “With Itochu’s strong experiences in brand operation, it is possible that it would finally absorb the Shanshan brand, and it may finally disappear,” she said.

Shanshan shares closed at 12.16 yuan per share on the Shanghai Stock Exchange yesterday, down 2.72 percent. Its share price has stayed at higher than 10 yuan a share in the last two months after reaching a record low of 3.91 yuan in December 2008.

(China Daily February 26, 2009)

On Wednesday, the State Council, China’s Cabinet, approved a stimulus plan for the textile business, one of the country’s pillar industries most seriously affected by the global financial crisis. Experts say that, while the plan may accelerate the modernization of the industry in the long term, in terms of an immediate boost it is much less than the industry hoped for. As for the overall effectiveness of the package, experts are taking a wait and see attitude.

The government has raised the tax refund rate for exported textiles and clothing to 15 percent, 2 percent below the expected 17 percent. The move will be welcomed as boost to manufacturers’ confidence and will lift some businesses out of immediate difficulties. But industry insiders say the move will not turn the troubled industry around because it does not address the key problem of the fall in demand.

The stimulus plan includes measures to encourage exports, foster domestic brands and provide technical support for textile enterprises. Guosen Securities says these three aspects are the centerpiece of the plan, but warns they will not meet industry expectations. Guosen says the measures are aimed at sharpening the textile industry’s international competitive edge over the long term.

The government has said it will offer loans to medium and small textile ventures with sound credit ratings. But Kong Jun of China Jianyin Investment Securities pointed out that companies most urgently in need of financial help are precisely those with poor credit ratings so the measure is unlikely to rescue them.

Industry experts say the plan, though ostensibly aimed at assisting the industry as a whole, will actually strengthen larger companies who will be given access to finance to fund modernization and acquisitions. Kong Jun said large companies, with advanced technology, boosted by the tax refund, should weather the storm.

China’s textile industry remains dominated by small, low value-added manufacturers. The stimulus plan will mainly benefit large companies, Kong Jun said, adding that it remains unclear whether the current plan for the industry will prove more effective than its predecessors.

(China.org.cn by Pang Li, February 13, 2009)

China will increase the tax rebate rate for textile and garment exports from 14 percent to 15 percent, an executive meeting of the State Council (Cabinet) announced on February 4, 2009.

The move would reduce exporters’ costs and support the textile industry, the Council said. The effective date of the new rate wasn’t specified.

In a national plan to invigorate China’s textile industry adopted by the State Council Wednesday, the government would allocate funds for companies that produce textiles or fibers, or operate in the textile printing and dyeing sector, to upgrade technology and develop domestic brands.

Government departments were told to provide financial support and insurance services to small and medium-sized textile plants.

The government would also announce steps intended to phase out obsolete capacity, eliminate energy-intensive, polluting equipment and technology, and encourage textile and garment makers to relocate from southeastern parts of China to central and western areas.

According to the plan, the government will take a proactive attitude to enlarge domestic consumption, innovate new production, expand rural markets and promote the use of textile products in relevant industries, while expanding export destinations to stablize the share in international market.

The textile sector is the country’s traditional pillar industry and enjoys an advantage in international competition.

However, textile industry suffered severe difficulties since last year.

Figures from the country’s customs showed textile and garment export of China was 185.17 billion U.S. dollars in 2008, up 8.2 percent year on year, but the growth rate was 10.7 percentage points lower than in 2007.

Experts from the Commerce Ministry (MOC) attributed the downturn to appreciation of the currency, or yuan, industry liquidity shortage and production material costs surge.

China has raised the export tax rebate rate for textiles three times since last August. The previous increase in November took the rate from 13 percent to 14 percent.

(Xinhua News Agency February 4, 2009)

Chinese textile firms’ profits declined for the first time in ten years as a result of reduced oversea demands. The decline started during the second half of 2008 when the financial crisis began impacting the world economy.

Textile firms took in 104.2 billion yuan (US$15.3 billion) in profits in the first 11 months of last year, a fall of 1.77 percent over the same period in 2007, according to the National Bureau of Statistics (NBS).

“This was the first decline in profits for the country’s textile sector in 10 years,” said Wang Qianjin, chief editor of the country’s leading textile web site webtextiles.com.

The NBS also said losses for textile firms added up to 22.75 billion yuan from January to November last year. That is almost double the figure for the same period in 2007.

Wang said profits for the textile sector for 2008 would remain the same or less than 2007. Textile firm profits surged nearly 38 percent in 2007.

Fan Min, chief editor of a weekly textile magazine under the Ministry of Commerce, said he expected textile exports to fall 30 percent in the first quarter of 2009.

(Xinhua News Agency January 1, 2009)

The sun set Wednesday on a quota and license system that governed China’s textile trade for decades.

As the United States-China and European Union-China agreements on textiles and clothing expired with the old year, the Ministry of Commerce terminated supervision over quotas on 21 categories of textile exports to the United States and licenses on eight categories to the European Union.

Textile companies might see Thursday — the first day of 2009 — as the beginning of an unfettered era of free trade, but the outlook is clouded by weakening demand and rising protectionism amid the financial crisis.

There are few signs that shipments by the world’s largest textile exporter will soar.

“With global demand slumping, the expirations will not bring about a repeat of the sharp increase in textile and clothing imports from China that occurred in early 2005,” said Sun Huaibin, spokesman for the China National Textile and Apparel Council.

He said that worries about such an increase and its damage to the U.S. market were “groundless.”

He said slackening demand resulted in a persistent low rate of quota usage this year.

Quota prices fell from a peak of nearly 20 U.S. dollars to less than 2 U.S. dollars within a year, said Liu Min, a trader with Shanghai Mai Si Ke Te International Trading Co. Ltd.

“Our exports declined more than 60 percent compared with last year. I heard many textile companies cut exports to the lowest level in recent years. Some even failed to use up the quotas acquired before the third quarter,” said Chen Shubin, general manager of Foshan Qiaoli Textile Import and Export Co. Ltd. in Guangdong Province.

Analyst said shrinking orders in the fourth quarter and dim prospects for next year would mean a “tight” year for textile makers. Textile companies’ top challenges would be to secure their market share and tailor production to the domestic market.

Pessimistic forecasters expect exports to continue slumping in the first quarter of 2009. If demand continues to shrink, small and mid-sized companies would barely survive.

Sun said although the financial crisis had diluted the stimulus from the quota expirations, textile makers should not lose confidence because they could retain global market share with cheap, good-quality products.

In November, China’s textile exports dropped 3.8 percent year-on-year to less than 5 billion U.S. dollars. Garment exports rose 6.1 percent to 10.4 billion U.S. dollars.

From January to November, textile exports rose 18.1 percent to 60.4 billion U.S. dollars and garment shipments grew 3.1 percent to 108.7 billion U.S. dollars.

China did not change the export tax rebate rate for textiles and clothing in its latest round of tax rebate adjustment, announced on Tuesday, after it had raised the rate twice to 14 percent.

“It showed the government wanted companies to cope with the crisis by adjustments such as internal industrial upgrades and product structure alteration,” said Zhao Yumin, a researcher with the Commerce Ministry.

She said the recent economic stimulus plans had hardly touched on the textile industry, where profits were being squeezed by several factors: stricter environmental requirements, new labor laws, rising land and power costs and a stronger local currency.

The U.S. textile industry remained unhappy about the expirations and wanted the U.S. government to be prepared to act if there was a surge of imports.

Many domestic companies said they cannot tell what the future holds.

Sun said when the new U.S. president takes office, he might not take action with a view to avoiding trade friction.

However, if the U.S. economy remains weak and protectionism rises, the United States might use quotas or licenses to curb imports from China.

Zhao said governments must guard against rising protectionism amid a global economic downturn. If the U.S. government moves to protect its textile industry, which has been largely transferred to other countries, both Chinese exporters and U.S. consumers will pay.

“It is also possible that the United States will use its status as the world’s largest textile importer to keep China from getting a big market share and thus support other economies,” she said.

In early 2005, a surge in Chinese textile and clothing exports to the United States coincided with the expiration of an international quota system. The United States responded by imposing emergency “safeguard” curbs.

Later in 2005, Washington and Beijing negotiated a broad pact that re-established 21 quotas covering 34 categories of textiles and clothing through the end of 2008. It was that agreement that ended on Wednesday.

(Xinhua News Agency January 1, 2009)

China imported less cotton in the first 10 months of this year as the international financial woes have hit the country’s textile industry and slashed its demand accordingly, the General Administration of Customs said yesterday.

Between January and October, China bought 1.866 million tons of cotton from abroad at a combined value of US$3.11 billion, a decline of 8.3 percent and 10.1 percent, respectively, from the same period of last year.

In October alone, imports plummeted by 29.8 percent to 96,000 tons while the import value dropped by 18.2 percent to US$170 million, the Customs said.

The private sector imported 990,000 tons of cotton in the past 10 months, making up 53.1 percent of the national total, with an annual rise of 1.1 percent. Imports by state-owned enterprises and foreign-funded firms stood at 508,000 tons and 369,000 tons, down 14.5 percent and 18.4 percent on a yearly basis.

According to the Customs, about 83.7 percent of China’s total cotton imports came from the United States, India and Uzbekistan. In the first 10 months this year, China bought 826,000 tons of cotton from the US, down 18.8 percent; 570,000 tons from India, 34.4 percent lower; and 166,000 tons from Uzbekistan, a 15.8 percent drop.

(Shanghai Daily December 29, 2008)

Xinjiang Production and Construction Corps (XPCC), a key producer of quality cotton in northwest China, will reduce the farmland area dedicated to the cash crop in the next three years.

The plan was announced by Nie Weiguo, deputy secretary of Xinjiang Uygur Autonomous Regional Committee of the Communist Party of China (CPC) and also XPCC political commissar, at a meeting held Thursday.

According to the plan, XPCC will lower its present dedicated cotton land of 560,000 hectares to 433,333 hectares by 2011. XPCC is an independent unit under the state plan.

The land will be used to grow grains instead. Presently, the area dedicated to grains production in XPCC is 233,333 hectares. XPCC authorities hope that their grain output will exceed 1.4 million tonnes a year.

The Party official cited factors, including rising costs and falling profits of cotton farming and the need to improve regional grain self-sufficiency as reasons for the adjustment in agricultural production.

He declined to comment on the impact that this plan will have on the national cotton output.

XPCC is expected to produce 1.3 million tonnes of cotton this year, a rise of 4.2 percent over last year. Its grain output will top 1.38 million tonnes this year, up 14.1 percent, according to Nie.

Nationwide, China produced more than seven million tonnes of cotton last year. The country’s output of the same crop will top 7.8 million tonnes this year, according to China Cotton Association.

It is not immediately known whether XPCC’s plan to increase grain areas by reducing cotton farmland is directly related to a decision made by the State Council, China’s Cabinet, to keep the nation’s annual grain output above 500 million tonnes by 2010 or raise production capacity beyond 540 million tonnes a year by 2020.

(Xinhua News Agency December 26, 2008)