A look at textile companies at the Canton Fair: Difficult situation, tax refunds and warmth

There are few customers and negotiations are cold. The deserted scene at the ongoing third phase of the 104th Canton Fair has made many exhibitors worried. The products on display in this issue are mainly textiles and clothing. In the past year or so, the growth rate of China’s textile and clothing exports has slowed down significantly. The deserted scene of the Canton Fair once again confirmed the difficult situation of this industry.
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          Export growth slowed down significantly
 
Data released by the General Administration of Customs show that from January to September, my country’s total exports of textiles and clothing were 136.94 billion yuan, a year-on-year increase of only 8.12% in 2007, and the growth rate has declined for eight consecutive months.
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Among them, especially the slowdown in clothing exports is the most obvious. Data show that my country’s textile exports in the first nine months totaled US$49.86 billion, a year-on-year increase of 21.34%. Total apparel exports reached US$87.08 billion, a year-on-year increase of only 1.76%. During the same period, Guangdong, my country’s major clothing export province, exported US$17.84 billion in clothing and clothing accessories, a year-on-year decrease of 30.6%.
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Behind the sharp slowdown in export growth is the fact that under the attack of various unfavorable factors, most textile and garment enterprises are already operating at low or even no profit.
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“Looking at the whole year of 2008, it would be good for the company to remain flat.” Li Zhenyu of Zibo Lanyan Group Co., Ltd. said. I also interviewed this company at the last Canton Fair. At that time, this leading local company with tens of thousands of workers was still confident because it had sufficient orders.
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Lan Yan’s situation represents the plight of many manufacturing companies. In fact, the difficulty is divided into two aspects: on the one hand, profitability is greatly reduced. Since the second half of 2007, the combined effects of various factors such as rising raw material costs, rising labor costs, and the accelerated appreciation of the RMB have led to rising costs. The overall price of China’s textile and apparel has been difficult to increase accordingly. As a result, many companies have fallen into the dilemma of rising or flat sales and sharp declines in profits. On the other hand, the dwindling orders have left many companies feeling confused. Taking Lan Yan as an example, it can maintain operations by producing 3 million yards of fabric every month, and only 4 million yards can make a profit. In October 2008, the order received by the company was only 2 million yards. According to the production schedule, it means that in 2009 Production capacity cannot be met in February and March this year.
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The situation in 2009 will be more severe
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In fact, Canton Fair exhibitors are generally worried about the lack of orders in 2009. Industry profits have reached their lowest point in 2008. If there are insufficient orders, life will be even more difficult in 2009.
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“Some companies have closed down around me.” Zhong Yugui, general manager of Ruiwo Garment Co., Ltd. from Fengcheng, Liaoning, said that if the market continues to cool down, more companies will have a difficult time.
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In the second half of 2008, many Korean companies that set up factories in Liaoning withdrew. “But we private enterprises can’t just say we don’t want to do it,” Zhong Yugui said. We built our own factories, and our families and children are here. “We can only suffer and wait.”
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Zhao Xiaodong, deputy general manager of Oriental International Group Shanghai Litai Import and Export Co., Ltd., believes that market risks have increased under the impact of the international financial crisis, which is often fatal to some small and medium-sized enterprises. Small companies have weak production capabilities, and some only have one or two regular customers. If there is a problem with this customer, it will be difficult for the company to survive. In contrast, large companies often benefit from market diversification. The east is not bright and the west is bright, and they have strong risk resistance capabilities.
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Canton Fair exhibitors generally believe that with the increasing impact of the international financial crisis, the United States, Germany, the United Kingdom, Japan and other countries have experienced economic contraction, and consumer demand has dropped significantly, and China’s textile and apparel exports will face challenges. It’s the global market that’s shrinking.
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Industry insiders believe that my country’s textile industry exports will further decline. In particular, the export situation in 2009 will be extremely severe, and there will be negative growth for the first time since 1998.
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Tax refunds and warm -up government and enterprises to spend a lot of time
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As my country’s traditional bulk commodity, the development of the textile and apparel industry covers a wide range of areas and has a large impact. The current situation of difficulties in textile and apparel exports has attracted great attention from the central government. Since 2008, various “favorable” policies have been frequently launched: since August 1, 2008 From November 1, 2008, the export tax rebate rate for textile and clothing will be increased by 2 percentage points. On November 1, 2008, the country will again issue a policy to increase the export tax rebate rate for textile and clothing.to 14%.
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Exhibitors at the Canton Fair reported that the increase in the tax refund rate has brought waves of warmth to enterprises. Li Zhenyu believes that the increase in the tax refund rate will play a certain role in easing the financial pressure on enterprises. However, since tax refunds have a cycle, which can be as fast as 1-3 months and as slow as 8 or 9 months, many struggling companies may not be able to wait. Tax refunds are dead once they are issued, so it is more important for the government to improve the efficiency of tax refunds.
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Many export companies believe that the government’s “rescue” cannot just rely on raising the tax refund rate by a few points, but more importantly, it must improve service awareness and find various ways to tide over the difficulties with companies.
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“The most terrible thing now is that the capital chain is tight and financing is getting more and more difficult.” Zhong Yugui said that because he is not optimistic about the future economic situation, especially because he is worried that companies may collapse at any time, banks are increasingly reluctant to lend to companies, and some banks even Withdrawal of funds is undoubtedly a drain on struggling companies.
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Song Bilin of Cixi Xiangsheng Clothing Co., Ltd. said that with the international economic downturn, buyers may go bankrupt at any time. Some customers pay a deposit in advance after placing an order. However, due to the poor market environment, some customers would rather give up the deposit and directly break the contract. Therefore, many companies now give top priority to risk prevention and are very careful when accepting orders. Song Bilin believes that export companies generally lack effective channels to investigate the credit and operating conditions of foreign buyers, and there is also a lack of a corresponding and effective domestic trade risk protection system. As market risks become increasingly prominent, a trade risk protection system needs to be established urgently. At the same time, my country’s export credit insurance rates are relatively high, which also restricts companies’ ability to avoid risks.