Economic operation of China’s textile industry in H1 2020

by Zhao Xinhua

Since 2020， facing the severe test brought by the COVID-19 pandemic and the complex domestic and foreign environment， China has effectively overcome the adverse effects of the pandemic and achieved a steady recovery in the macro economy. During the fight against the pandemic， the textile industry steadily promoted the resumption of work and production， and made due contributions to ensuring the production and supply of domestic pandemic prevention materials and meeting the needs of international pandemic prevention and control. In the second quarter， driven by the production of anti-pandemic materials and the recovery of domestic market demand， the economic operation of the textile industry has recovered under pressure， and the decline in major operating indicators such as production， investment， and quality and efficiency has been significantly narrower than that in the first quarter. However， the losses caused by the impact of the pandemic have not been completely repaired， the production and operation pressure of textile enterprises is still outstanding， the investment and development confidence are obviously insufficient， the negative growth of the industry has not been reversed， and the stable operation throughout the year is facing greater challenges.

The industrys prosperity has rebounded significantly， and the decline in production has steadily narrowed

In the second quarter， the textile industrys prosperity improved significantly， and the recovery of production capacity utilization was accelerated. According to the survey data of the China National Textile and Apparel Council and the statistics of the National Bureau of Statistics， the prosperity index of the textile industry reached 51.0 in the second quarter of 2020， returning to the expansion range. In the same period， the capacity utilization rate of the textile and chemical fiber industries reached 70.3% and 77.1%，respectively， up 3.1 and 2.7 percentage points from the first quarter， but slowed down by 7.9 and 6.1 percentage points from the same period last year.

The decline in industry production has narrowed month by month. From January to June， the added value of the textile industry above designated size fell by 6.7% year-on-year， and the growth rate was 10.3 percentage points lower than the same period last year， and 9.8 percentage points lower than the first quarter of this year. Among the main links of the industrial chain， the industrial added value of the industrial textile industry， driven by the production of pandemic prevention materials， increased by 57.8% year-on-year， which is the main driving force for the steady recovery of the industrys production growth. Affected by the shrinking demand， the industrial added value of the apparel， home textile and textile equipment manufacturing industries from January to June decreased by 12.2%， 8.5% and 17.6% year-on-year respectively.

The output of major products generally declined. According to data from the National Bureau of Statistics， from January to June， the output of chemical fiber， yarn， cloth and clothing of enterprises above designated size decreased by 1.0%， 15.8%， 25.9% and 13.7% respectively year-onyear， and the growth rate was lower than the same period of last year by 13.0， 15.5， 25.8， and 12.6 percentage points. The output of nonwovens has grown， with a year-on-year increase of 6.6% from January to June.

The domestic demand market continues to recover， and the export growth rate turns from negative to positive

Since the second quarter， with the liberalization of residents travel and consumption activities， the domestic textile and apparel market has gradually recovered. According to data from the National Bureau of Statistics， in the first half of 2020， the national retail sales of clothing， footwear， and knitting textiles above designated size decreased by 19.6% year-on-year， and the rate of decline narrowed by 12.6 percentage points from the first quarter. A series of national policies such as “protecting peoples livelihood”and “promoting consumption” have promoted the acceleration of online consumption. The retail sales of online clothing products nationwide in June have basically returned to the same period of the previous year. The cumulative retail sales from January to June decreased by 2.9% year-on-year. The decline narrowed by 12.2 percentage points compared with the first quarter.

The pressure on the exports has eased. According to China Customs data， in the first half of the year， Chinas textile and apparel exports amounted to USD 130.8 billion， a year-on-year increase of 1.9%， achieving the first export growth rate since 2020 from negative to positive. Due to the severe international pandemic prevention and control situation， Chinas export of masks and other pandemic prevention materials to Europe and the United States has expanded. From January to June， the export value of textiles increased by 24.8% year-on-year， reaching USD 77.16 billion， accounting for 59% of total textile and apparel exports. The pressure on apparel exports is still outstanding. The export value from January to June was USD 53.64 billion， a year-on-year decrease of 19.4%. The export market of the textile industry has differentiated， and exports to the three traditional markets of the United States， Japan and the European Union have improved significantly. From January to June， the export value of textiles and apparel increased by 4.2%， 15.1% and 41.1% year-on-year， and the growth rate was 4.9%， 19.8 and 45.3 percentage points higher than the same period last year； due to sluggish consumption in the international terminal market， emerging export markets such as Southeast Asia and Africa have reduced demand for intermediate products in the industrial chain. From January to June， Chinas textile and apparel exports to countries along the “Belt and Road” fell 12.2% year-on-year.

The pressure to improve quality and efficiency is still great， and the investment decline has significantly narrowed

According to data from the National Bureau of Statistics， in the first half of the year， the total operating income of 33，000 textile enterprises above designated size across the country achieved 1，926.07 billion yuan， a year-on-year decrease of 16.4%， and the decline narrowed by 9 percentage points from the first quarter. The total profit realized was 73.1 billion yuan， a year-on-year decrease of 19%， the decline narrowed by 25.2 percentage points compared with the first quarter. The operating income margin of enterprises above designated size was 3.8%， an increase of 1.2 percentage points from the first quarter. The profitability of the industrial and home textile industries continued to improve. The total profit from January to June increased by 216.3% and 4.1% year-on-year respectively， which was at a relatively high level in the entire industry chain； affected by factors such as raw material price， weak market， and price cuts， the efficiency of the chemical fiber and cotton spinning industries declined significantly， with total profits falling by 41.9% and 41.3% year-on-year respectively. Due to the significant increase in operating pressure， the operating quality of textile enterprises has declined. From January to June， the percentage of loss-making textile enterprises above designated size across the country reached 32.6%， and the loss of loss-making enterprises increased by 50.2% yearon-year； the turnover rate of total assets and the turnover rate of finished products were 1 time/year and 10.6 times/ year respectively， a year-on-year slowdown of 19.9% and 25% respectively； the ratio of three expenses was 7.3%， an increase of 0.3 percentage points compared with the same period last year.

Affected by the pandemic， the development confidence of textile enterprises is obviously insufficient， and the investment scale of the entire industry chain is showing a downward trend. According to data from the National Bureau of Statistics， from January to June 2020， the completion of fixed asset investment in the textile industry decreased by 27.3% year-on-year， and the growth rate slowed by 26 percentage points from the same period last year， but rebounded by 10.8 percentage points from the first quarter. Among them， the investment in the textile industry， chemical fiber industry and apparel industry decreased by 22.4%， 16.9% and 37.9% year-on-year， respectively， and the growth rate was 22.1， 6.3 and 38.7 percentage points lower than the same period last year. In terms of different regions， investment growth in the central and western regions was sluggish. From January to June， investment in the apparel industry in Hubei， Anhui， and Henan provinces， decreased by 64.6%， 45.5%， and 31% year-on-year； investment in the eastern region was differentiated， and the investment in the apparel industry and chemical fiber industry in Zhejiang province increased by 11.4% and 18.5% respectively year-on-year， but the investment in the apparel industry in Jiangsu， Shandong and Guangdong provinces fell by 63.0%， 49.7% and 79.9% year-on-year.

Positive factors continue to accumulate， and the pressure to maintain stable operation remains high

In the first half of the year， the textile industry focused on resolving the adverse effects of the pandemic， continuously improving development resilience and anti-risk capabilities， and some economic performance indicators showed signs of recovery. However， the current global pandemic is still spreading， and the prospects are highly uncertain. The impact on the operation of the global supply chain and economic operation will continue to develop. In the second half of the year， the textile industry still faces many external risks and challenges， and the pressure to maintain stable operations throughout the year is still relatively high.

Under difficult circumstances， the textile industry still has positive factors to achieve a steady recovery. The steady recovery of Chinas macro economy has demonstrated its strong resilience to the impact of the pandemic， and its advantages in terms of complete industrial system， complete infrastructure， and a strong domestic demand market have become more prominent. During the pandemic， continuous innovation in manufacturing， industrial chain operation， and business formats promoted the steady recovery of production and the improvement of the consumer market， providing a new foothold for the steady recovery of various industries. On the other hand， the state will continue to exert its efforts on the effects of various macro-policies to help companies relieve difficulties， ensure employment， and protect basic peoples livelihood， providing important guarantees for the return of the economy to normal tracks.

The textile industry will implement the decisions and deployments of the Party Central Committee and the State Council， fully recognize the universality， complexity and continuity of the impact of the pandemic， continue to deepen the supply-side structural reform， accelerate the transformation and upgrading of the industry， and continue to play the role of the textile industry in ensuring the stability of the industrial chain supply chain， ensuring the employment of residents and maintaining social stability， and strives to overcome downward risk pressure， maintains basic economic operation. We should make due contributions to the implementation of the “six priorities” and stability in six areas for steady economic momentum， complete the task of national economic development in 2020， achieve decisive victory in building a well-off society in an all-round way， and to fight poverty decisively.