Sun Ruizhe: The Current Status of China's Textile Industry and the Future Development of Industrial and Financial Cooperation
On July 6, the 2020 annual meeting of the Listed Company Secretary Alliance of China's textile and apparel industry was held in Beijing, with Sun Ruizhe, president of the China National Textile and Apparel Council, in attendance and delivering a speech.
Fellow colleagues, distinguished guests:
Hello everyone!
2020 is destined to be an extraordinary year. The changes of a century are deepening, the COVID-19 epidemic is spreading, and the world economy is under unprecedented pressure. The World Bank's latest "outlook" released on June 8 shows that, affected by the COVID-19 epidemic, the global economy is predicted to shrink by 5.2% this year, falling into the worst recession since World War II, and the proportion of economies with declining per capita output will reach the highest level since 1870. We are experiencing the first collective economic contraction of emerging market economies and developing economies in at least 60 years. The UNCTAD's latest report in June also pointed out that the epidemic will cause a nearly 40% decrease in global foreign direct investment flows in 2020 compared to 2019. The industry faces huge systemic risks, and many enterprises face survival pressure.
What gives us profound thought is that several major factors since the beginning of this century are profoundly changing the trajectory of socio-economic development, namely: geopolitics, digital economy, terrorism, epidemics, social responsibility and climate change. We need to be prepared and actively respond.
Under the new situation, the Party Central Committee has made the important decision to steadily advance the "six stability" work and implement the "six guarantees" tasks, introducing various policies to ensure stable economic operation and help enterprises overcome difficulties. One of the important directions is to strengthen financial support for the real economy. From January to May, China's RMB loans to the real economy increased by more than 10 trillion yuan, an increase of more than 2 trillion yuan compared to the same period last year. The textile industry, as an important livelihood sector in China, with private economy and small and micro enterprises as its main body, has important practical significance in doing a good job in the industry's financial cooperation.
Here, I would like to share four viewpoints on the financial cooperation of the textile industry:
First, the industry is recovering from pressure, and deepening financial cooperation is a realistic need for sustainable development.
The global spread of the COVID-19 epidemic has caused unprecedented shocks to both the supply and demand sides of the textile industry. With the effective control of the epidemic by the state, the industry's production and operation activities have basically resumed, and the domestic market has gradually warmed up. However, the global epidemic situation remains severe, and the stable operation of the industry faces many challenges.
Production growth has slowed down. The capacity utilization rate of the textile industry is below normal levels, but the decline in production growth is continuously narrowing. According to data from the National Bureau of Statistics, from January to May, the added value of industrial enterprises above designated size in the textile industry decreased by 8.2% year-on-year, a narrowing of 3.1 percentage points compared to January to April, and the growth rate turned positive in May. Among them, industrial, chemical fiber, and filament weaving industries became the main driving forces for growth. In May, the manufacturing of industrial textile products showed a high growth rate of 88.3% driven by the concentrated production of epidemic prevention materials such as masks and protective clothing; chemical fiber filament weaving and dyeing and finishing industries showed a growth of 6.7% due to the gradual recovery of domestic consumption, and the cumulative decline narrowed to 2.9%; the chemical fiber industry showed a growth of 4.3% driven by downstream market demand and rising crude oil prices, and the cumulative decline narrowed to 2.9%. The apparel and household textile industries were affected by the shrinking end-market demand, and the added value of industrial enterprises decreased by 12.8% and 10.6% year-on-year from January to May respectively. The added value of textile machinery manufacturing industry decreased by 20.8% year-on-year. Among the major categories of textile products, except for non-woven fabrics, the output decreased compared with the same period last year. From January to May, the output of chemical fiber, yarn, cloth, and garments of enterprises above designated size decreased by 3.2%, 18.1%, 27.6%, and 17.9% year-on-year, respectively.
Insufficient market demand, but the decline is continuously narrowing. Affected by the epidemic, domestic consumption of textile and apparel products remains weak, and online and offline sales have fallen sharply compared to the same period last year, but the decline has narrowed. According to data from the National Bureau of Statistics, from January to May, the retail sales of clothing, shoes, hats, and textiles in units above designated size nationwide decreased by 23.5% year-on-year, a narrowing of 5.5 percentage points compared to January to April. In order to compensate for offline losses, textile enterprises have generally strengthened the construction of online channels, and the decline in online retail sales has continuously narrowed. From January to May, the retail sales of clothing goods online nationwide decreased by 6.8% year-on-year, a narrowing of 5.2 percentage points compared to January to April. Driven by the export of epidemic prevention materials, the decline in industry exports has gradually narrowed. According to data from China Customs, from January to May, China's textile and apparel exports totaled US$961.6 billion, a decrease of 1.2% year-on-year, a further narrowing of 8.8 percentage points compared to the first four months, and a narrowing of 0.7 percentage points compared to the same period last year. Among them, textile exports increased significantly by 21.3% year-on-year, and the proportion in export value increased to 60.3%; clothing exports continued to decline, with a year-on-year decrease of 22.8%.
Investment scale has significantly decreased. Under the influence of the epidemic, enterprises in the industry generally lack investment confidence and ability, and the investment scale has significantly shrunk. According to estimates from the National Bureau of Statistics, from January to May, the completion value of fixed asset investment in the textile industry decreased by 30.5% year-on-year. By industry, investment in the textile, chemical fiber, and apparel industries decreased by 26.2%, 23.2%, and 39.2% year-on-year, respectively. By region, among the five eastern coastal provinces, except for Zhejiang Province, the total investment amount has significantly shrunk. The year-on-year investment in the apparel industry in Jiangsu, Fujian, Shandong, and Guangdong provinces decreased sharply by 68%, 44.9%, 50.4%, and 80% respectively. In the central region, Hubei was severely affected by the epidemic, and the year-on-year investment in the textile, apparel, and chemical fiber industries decreased by 75.2%, 69.8%, and 62.4% respectively; the investment in the apparel industry in Anhui and Henan provinces decreased by 47.9% and 31.4% year-on-year respectively. In the western region, the investment in the three sub-sectors in Xinjiang showed negative growth, the decline in investment in the chemical fiber industry in Sichuan Province reached 70.5%, and due to the small base number, the investment growth rate in Shaanxi and Gansu provinces was higher.
The profitability situation has deteriorated significantly. Under the condition of severe insufficient demand and a significant decline in production and sales, the income of textile enterprises has decreased sharply, and profits have severely shrunk. According to data from the National Bureau of Statistics, from January to May, 33,000 enterprises above designated size nationwide achieved an operating income of 1552.106 billion yuan, a decrease of 17.23% year-on-year; the total profit from January to May reached 546.03 billion yuan, a decrease of 24.54% year-on-year; the operating profit margin of enterprises from January to April was 3.2%, 0.5 percentage points lower than the same period last year. Among the 12 sub-sectors of the textile industry, except for the silk and industrial sectors which achieved positive profit growth, the profitability of other sectors is under pressure. Among them, the deterioration of the profitability of the chemical fiber, textile machinery, and cotton textile industries was particularly prominent. Specifically, the total profit of the chemical fiber industry decreased by 60% year-on-year; the total profit of the textile machinery industry decreased by 56% year-on-year; and the total profit of the cotton textile industry decreased by 49.2% year-on-year. From January to May, the loss rate of textile enterprises above designated size nationwide reached 32.00%, and the amount of losses of loss-making enterprises increased by 52.08% year-on-year. The burden of enterprise costs and expenses is heavy.
In general, the global epidemic has not yet peaked, the speed of domestic consumption recovery is lower than expected, and the situation of insufficient enterprise orders remains severe. Problems such as inventory backlog, intensified competition, profit shrinkage, and tight cash flow are generally troubling enterprises in the industry, and many small and micro enterprises are facing a survival crisis. The increase in overdue and defaulted loans for enterprises is increasing the financial risks of the entire industrial chain. The industry urgently needs to deepen the docking of production and finance to effectively alleviate the financial pressure on enterprises and reduce the impact of the epidemic on enterprise production and operation.
II. The industrial environment has undergone profound adjustments, and deepening industry-finance cooperation is an objective requirement for adapting to changes
Currently, the world situation is undergoing profound adjustments, and the uncertainty and instability of global political and economic development are becoming increasingly prominent. Trade protectionism and unilateralism are continuing to rise. Geopolitical risks such as the China-India border conflict and the China-Japan island conflict are continuing to escalate. Recently, the United States signed the so-called "Uyghur Human Rights Policy Act of 2020" into law, attempting to stigmatize Xinjiang's counter-terrorism, anti-separatism, and de-extremization measures and using this as an excuse to interfere with brand manufacturers' international procurement and industrial chain layout. This has had a significant impact on the industry. In the face of an unprecedentedly complex industrial environment, we must discern trends from the turmoil and seek new opportunities amidst change.
1. Production pattern has undergone profound adjustments: Global value chain cooperation is under pressure
In recent years, with the collective rise of emerging market countries and developing countries, the global industrial division of labor and interest pattern centered on global value chain cooperation have changed, some countries have developed resistance, and unilateralism and trade protectionism have continued to rise. The evolving Sino-US trade friction is a direct manifestation, and the outbreak of the epidemic has further strengthened the atmosphere of trade protectionism. The shortage of important materials such as masks and medical protective clothing has led more countries to consider how to achieve a new balance between efficiency and safety, and the localization and diversification of the supply chain will become an important direction. In the early stages of the epidemic, the United States and Japan have already introduced policies to encourage companies to return home, and the British government is also formulating a "defense project" to reduce its dependence on major importing countries such as China and achieve diversification of imports of key goods.
The profound changes in the global value chain cooperation model have made it increasingly difficult for the industry to seek development in its original position in the global value chain. The industry needs to leverage capital to accelerate the improvement of the overall factor productivity and added value of the industry, so as to establish a global comparative advantage with higher quality and higher efficiency. At the same time, the industry should vigorously develop an open economy, better achieve the global allocation of factor resources and the global layout of the supply chain, and ensure the safety and stability of the industrial chain and supply chain.
2. Market pattern has undergone profound adjustments: Weak global demand has become a long-term existence, and the importance of domestic demand has increased
Currently, world economic growth continues to slow down, and it is still in the deep adjustment period after the international financial crisis, and market demand continues to decline. The global spread of the epidemic has made the situation even more serious. Europe and the United States, as important consumer markets for China's textile and apparel industry, have suffered a huge impact in this epidemic. In April, US apparel retail sales fell by 89.3% year-on-year, while Japan and the EU's textile and apparel retail sales fell by 53.6% and 62.8% respectively. Many brand manufacturers and traders have canceled orders, and the demand at the front end of China's industrial chain has been directly impacted. The suspension of work and production in countries such as India, Vietnam, and Bangladesh has also led to a significant reduction in China's textile exports. Due to the continued increase in downward pressure on the world economy and the lack of stable support for market growth, weak global demand will become a long-term existence. The shrinkage of international market demand will inevitably have a huge impact on the industry's foreign trade exports.
Under the new situation, the domestic market is becoming the resilience of industrial development. China has the most growth-oriented consumer market in the world, with consumption contributing 57.8% to economic growth in 2019. The huge domestic market provides support for the industry to better play its scale economy, scope economy, and network effect. The diversification and asynchronous development of demand make multi-level consumption an important characteristic of the domestic market. Relying on the world's largest middle-income group, consumption upgrading is an inevitable trend. The continuous deepening of urbanization, regional coordinated development, and precision poverty alleviation processes, the potential of the sinking market is also being released, and the space for mass consumption is huge.
In the face of major adjustments in both domestic and international markets, enterprises should accelerate the formation of a new development pattern of domestic and international dual circulation.
3. Factor pattern has undergone profound adjustments: Technological innovation has become the core variable determining industrial development
Currently, the fourth industrial revolution is booming, global technological innovation has entered a period of intensive activity, disruptive technological innovations are emerging one after another, leading to major adjustments in productivity and production relations. Technological innovation is gradually becoming the core variable in reshaping the industrial pattern, profoundly changing the development mode and industrial boundaries of the global textile industry.
Over the past decade, digital experience, analytics, and cloud technologies have empowered various technologies and become the core foundation for many companies to effectively advance their strategies and new business models. Over the next decade, digital reality, cognitive technologies, and blockchain will become disruptive drivers of enterprise transformation.
Digital experience is an important driving factor for enterprise transformation in the consumer Internet era. Enterprises are gradually abandoning the traditional marketing model centered on customer acquisition and are instead committed to creating more human-centered interactions—including interactions with their employees and business partners; data and analytics technologies will have a profound impact on business development, and enterprises must use tools and platforms to dynamically data, support data flow, data acquisition, data classification, storage, and access; cloud technology has fully penetrated enterprises, and cloud technology enables any IT capabilities to become cloud-based services for enterprises to use. Cloud technology drives the reshaping of old enterprise management and business functions.
Digital reality technologies, including AR/VR and mixed reality, help users break free from the constraints of keyboards and screens. The purpose of digital reality is to break down traditional spatial boundaries and allow people to interact with underlying technologies in a natural, instinctive, and even subconscious way; cognitive technology is a broader artificial intelligence technology that personalizes and contextualizes human-computer interaction, driving business processes through customized language or image information and achieving unattended operation; blockchain has first gained development in financial services, and other fields are also beginning to implement it, including enterprise credit traceability and communication.
From the supply side, the cross-integration of technologies has led to the emergence of intelligent textiles and multifunctional textiles, constantly enriching product connotations and expanding application scenarios. Various links in the industrial chain are accelerating their transformation towards digitalization, networking, and intelligence, and the level of lean, flexible, and service-oriented industrial supply is constantly improving; the rapid development and industrial application of green fiber preparation technology, clean production technology, green dyeing technology, and fiber recycling technology are also constantly deepening.
From the demand side, driven by technology, the industry's resource organization methods and connection methods with the market have undergone profound adjustments, and new models, new formats, and new attempts such as scenario economy, Internet celebrity economy, and sharing economy are rapidly developing. Especially during the epidemic, innovations in live streaming, community marketing, and online exhibitions have effectively made up for the gap left by the shutdown of offline channels.
The industry must accelerate its adaptation to the industrial pattern adjustments brought about by technological innovation and strive to gain a competitive advantage in a rapidly changing world.
III. The industry-finance ecosystem is constantly being optimized, and deepening industry-finance cooperation has a realistic basis and development potential
With the continuous improvement of China's socialist market economic system, a standardized, transparent, open, vibrant, and resilient capital market is being established. The ecosystem of coordinated development of industry and finance is accelerating its formation.
1. The capital market is becoming more mature
Financial reforms have significantly improved the development level of China's capital market. Currently, China's capital market competitiveness ranks 5th globally. The marketization and rule of law of the capital market have been significantly improved, and basic systems such as information disclosure, issuance, and delisting have been continuously improved. With the successive implementation of major measures such as the Sci-Tech Innovation Board system innovation, the reform of the Growth Enterprise Market and the pilot registration system, and the New Third Board reform, the pace of capital market improvement has significantly accelerated. Channels for capital to flow to the real economy are becoming smoother. The function of financial services to the real economy is continuously strengthening. In 2019, financial institutions increased RMB loans to the real economy by 16.88 trillion yuan. Under the epidemic, monetary policy tools directly reaching the real economy have been continuously enriched. At the same time, the development of technological finance has also brought new convenience to industry financing. The integration of information technology will greatly improve the information asymmetry between industry and finance, thereby greatly improving the scientific nature and possibility of financing.
2. More complete industrial foundation
From raw material supply and design and development to textile dyeing and processing and retail operations, China's textile industry possesses the largest and most complete industrial system in the world. The value chain of the textile industry itself has strong financial attributes and is closely linked to the commodity market, capital market, and money market. The textile industry is also one of the few industrial sectors in China with independent innovation capabilities across the entire industrial chain, with new technologies and new models emerging in large numbers. Many practices in the industry are highly compatible with the reformed Growth Enterprise Market. Cultural and creative attributes have allowed the industry to accumulate a large amount of design, creativity, and IP resources over the long term. As underlying assets, the scale and quality of the industry create enormous potential for industry-finance cooperation.
3. Deeper reform and opening up
In recent years, reform and opening up have entered a new stage based on rule-based and institutional opening up. In the face of the current changing situation, financial opening up to the outside world has not slowed down but has accelerated further. Foreign ownership restrictions in the banking, securities, fund management, and futures sectors have been completely lifted, and restrictions on the qualifications of foreign shareholders are also being continuously relaxed. The accelerated opening up of the financial sector, while bringing diversified capital sources to the industry, has also brought us more innovative models and advanced concepts. As an important sector in international production capacity cooperation, the textile industry has been actively implementing the "Belt and Road" initiative, strengthening global value chain cooperation through greenfield investment and capital operations. The pace of "going out" and "bringing in" is constantly accelerating. Against the background of the continuous deepening of localization and diversification of the supply chain, accelerating the global industrial chain layout of the industry is becoming increasingly important. Realizing cross-national resource allocation and international production capacity cooperation urgently requires the power of capital.
4. In the key stage of national strength building, industry-finance cooperation is an important way to promote high-quality development
This year is the closing year of the 13th Five-Year Plan and a key year for the construction of a strong textile industry. We need to strengthen the power of policy, technology, capital, morality, and unity to support the sustainable development of the industry.
Under the backdrop of a century of global change, deepening industry-finance cooperation and making full use of the important role of capital in optimizing the allocation of factors of production to promote the industry's implementation of the industrial positioning of "technology, fashion, and green" and achieve high-quality development is of great significance.
1. Strengthen industrial chain security with industry-finance cooperation
Under the epidemic, the security and stability of the industrial chain is a core concern. Enterprises need to continuously expand financing channels, utilize various financial tools, transition from passive prevention to active management of market risks, solve resource problems, strive to connect "breakpoints," and unclog "bottlenecks." In particular, it is necessary to strengthen the financing capacity of four types of enterprises: small and micro-enterprises with weaker ability to withstand the impact of the epidemic, foreign trade enterprises whose products are deeply integrated into the international supply chain, enterprises located in key epidemic areas and poverty-stricken areas, and leading enterprises that have a driving effect on the supply chain but are under short-term financial pressure, to prevent large-scale enterprise bankruptcies and enable these enterprises to survive better and ensure the integrity and security of the industrial chain.
2. Promote the digital transformation of the industry with industry-finance cooperation
The digital economy is a major trend in economic and technological transformation. Digital transformation provides the industry with the opportunity to restructure comparative advantages and achieve "asymmetric" overtaking. On the one hand, the industry needs to accelerate the construction of new digital infrastructure and cultivate and expand new driving forces for the development of the digital economy. However, relying solely on individual enterprises and self-accumulation is difficult to meet the capital needs of the industry's new infrastructure. We need to explore the use of a new "national system" to effectively link various forces with financial tools to support the construction of new infrastructure in the industry. On the other hand, industry enterprises need to leverage capital to balance the risks and returns of innovation and steadily promote the application and popularization of information and intelligent technologies in production, research and development, and operations, improving the leanness, flexibility, and service level of industry supply. With the formal implementation of the Growth Enterprise Market registration system reform, industry enterprises should seize the opportunity to accelerate their deep integration with new technologies, new industries, new formats, and new models.
3. Promote basic innovation in the industry with industry-finance cooperation
China's textile industry has the largest scale in the world, but it still has the problem of weak strategic and fundamental innovation capabilities and urgently needs to improve its basic innovation capabilities. Basic innovation in the industry has long R&D times, high input costs, and huge uncertainties, and enterprises often cannot sustain themselves with short-term financing. It is necessary to establish and improve the long-term mechanism for enterprise financing as soon as possible, guide funds to be invested in basic, strategic, and leading fields in a long-term and stable manner, and help enterprises accelerate the achievement of substantial breakthroughs in core technologies. At the same time, the research and development of key generic technologies and cutting-edge leading technologies involves the coordination of various resources and the synergy of multiple lines. Enterprises should be good at using the power of financial capital to coordinate various resources and promote the accelerated gathering of technological and human resources to the industry.
4. Cultivate industrial entities with industry-finance cooperation
As China's textile industry enters a key period of national strength building, it is becoming increasingly urgent to improve industrial concentration and competitiveness and form a group of enterprises with global influence. The empowerment of capital enables enterprises to achieve expansion and growth in a shorter time. Industry enterprises should strengthen their capital operation capabilities and use methods such as listing financing, joint investment, cross-shareholding, and mergers and acquisitions to achieve the aggregation of resource elements at a faster speed, on a larger scale, and with a larger scale, continuously improving the competitiveness of enterprises. At the same time, with the help of capital, enterprises can achieve rapid development across fields and industries. For example, by investing in growth enterprises through corporate venture capital (CVC), the linkage development of the main business and the invested industry can be promoted, achieving "external monitoring" of channel and model innovation, "external R&D" of cutting-edge technologies, and improving its own development ecosystem.
5. Guide the sustainable development of the industry with industry-finance cooperation
Currently, corporate social responsibility has become an important business norm and an effective way for enterprises to manage their strategies and improve their competitiveness. It is necessary to make full use of the relatively complete mechanism and system of the capital market to guide the standardized development of enterprises. The trust crisis of Chinese stocks represented by the Luckin incident some time ago shows that at any time, honest and standardized operation is the foundation for the survival and development of enterprises. Industry-finance cooperation, especially listing financing, requires true, accurate, complete, and timely information disclosure, which helps enterprises improve the compliance and standardization of their finances and operations, thereby promoting the long-term development of the industry. More and more investors are incorporating ESG factors into their investment decisions, which will bring new development opportunities for the green transformation of enterprises. For example, with the help of green financial tools, enterprises can better and faster achieve adjustments in production capacity structure, eliminate backward production capacity, and build green supply chains.
Those who borrow chariots and horses are not necessarily swift of foot, yet they travel a thousand miles; those who borrow boats and rafts are not necessarily good swimmers, yet they cross rivers and lakes. Cultivating new opportunities within crises and opening new situations amidst changes requires us to be "self-reliant," but also to "make good use of external resources." Let us work together to explore how financial and industrial cooperation can accelerate the construction of a strong textile nation and make greater contributions to winning the decisive victory in building a moderately prosperous society in all respects!
Leaders from Xiamen C&D Group visited Tongzhou for investigation and guidance
On March 3, Wang Yongqing, Vice President of Xiamen CNOOC Group, visited Tongzhou Group for investigation and guidance. Wei Gangmin, Chairman of our company; Huang Hongyu, President; Li Tao, Vice President; and Zhang Zhiyan, Director of the General Office, met with and participated in a symposium.
Tongzhou Cotton Market Brief, Week 1 of March 2025
1) This week's National People's Congress and the Chinese People's Political Consultative Conference (NPC & CPPCC) in China boosted market expectations for steady growth. In February, the Purchasing Managers' Index (PMI) for manufacturing stood at 50.2%, up 1.1 percentage points from the previous month, indicating a significant improvement in the manufacturing sector.
In 2024, China's dyeing industry saw rapid export growth to ASEAN and RCEP member countries, exceeding the overall export growth rate. However, this growth was accompanied by a decline in prices. From January to December, China's exports of eight major dyeing products to ASEAN totaled 7.908 billion meters, a year-on-year increase of 12.14%, 4.61 percentage points higher than the overall export growth rate, accounting for 23.58% of total exports. The average export price was US\$1.19 per meter, a year-on-year decrease of 2.75%, 0.64 percentage points lower than the overall decline. Exports to RCEP member countries totaled 8.431 billion meters, a year-on-year increase of 11.35%, 3.82 percentage points higher than the overall export growth rate. The average export price was US\$1.17 per meter, a year-on-year decrease of 2.79%, 0.60 percentage points lower than the overall decline.
On February 28, Mr. Huang Hongyu, President of our company, was invited to attend the 2025 Zhangjiagang Cotton Industry Development Conference and, as a guest speaker at the "Xiangshan Roundtable," shared his views on the cotton market and trading opportunities.
Henan Tongzhou Cotton Industry Co., Ltd.
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