With the full outbreak of the financial crisis, textile companies have fallen into panic, and the situation will become increasingly severe
“During the Spring Festival of 2008, I stood for a long time in front of the bronze statue of a Jewish garment worker on Seventh Avenue in New York, watching the heaviest snow in winter fall on his shoulders. I took this photo and thought to myself: Winter has really come for the textile industry. !” Jiang Xiaping, the chairman of Yangzhou Jiadi Group, said that her accidental capture marked a turning point for the industry.
“If winter has arrived for textile enterprises in the spring of 2008, then the end of 2008 will be the arrival of a heartbreaking winter.” Industry insiders believe that the appreciation of the RMB, increased labor costs, and loan compression have made the low-profit textile industry plagued by serious illnesses. The financial crisis has fully erupted, and textile companies may “break” by the end of the year.
Case
“Suppliers come one after another to collect debts”
Jiadi Group, which produces 3.6 million pieces of knitted garments annually, laid off two-thirds of its workforce. “A factory near us with more than 500 employees laid off 408 people. Layoffs and debts are no longer uncommon.” Jiang Xiadi, chairman of Jiadi, said, “Currently, bank loans have not been repaid, and suppliers are coming one after another to collect debts. However, the more than 20 million US dollars in payments owed by American buyers have not been paid.”
Industry profits plummet
Since 2007, Jiang Xiaping has clearly felt that the profits of the garment processing industry have been shrinking. She said that the cost of a garment with an export price of US$20 is roughly as follows: fabric of US$8, accessories of US$2.50, workmanship of US$5, freight of US$2, plus the exporter’s 10% profit. “When I first entered the textile industry, the profit was the highest. It can reach 40%.”
Not only that, there is also a serious shortage of orders. Jiang Xiaping said, “In the past, there were endless orders. For a while, there was no order. Even if the order came, I didn’t dare to raise the price, let alone take the order.”
Since the outbreak of the financial crisis, U.S. importers have been very price-sensitive and adopted an unprecedented tight procurement strategy. Not only is there no need to raise prices for old products, but it is also difficult to raise prices for new products.
“The financial crisis has caused panic in textile companies, and the outbreak of the financial crisis has deepened this panic.” Industry insiders believe that under this panic, small and medium-sized export companies are facing difficulties in survival. At the end of the year when bank loans and supplier payments expire, The difficulties will become more severe.
Workers’ wages have increased significantly
In the past, the salary of a worker who completed a piece of garment manufacturing was US$5, but now it is US$8. “If the advantage was cheap labor costs in the past, this advantage has completely disappeared now. “Can’t afford” full-time workers, Jiang Xiaping can only place some orders to individual small processing plants.
It is understood that a group of “guerrillas” of professional textile workers are currently active in some industrial parks. As soon as they hear that a company has an order, they are taken to the factory for short-term work by the foreman. After completion, they return to idle status.
Like the biological chain, the clothing industry cluster has developed over the past 20 years, and the fate of one company is related to the survival of dozens of upstream and downstream factories. “A clothing company is connected to 88 factories. As long as there is a problem in one of the links, problems will occur in all the upstream and downstream.” A single move affects the whole body. And this seems to explain the phenomenon of mass closures or suspension of production in the textile industry.
Traveling halfway around the world to collect debt
Due to the credit crunch in the European and American markets caused by the financial crisis, oversupply has affected a large number of dealers in the United States, Europe, and Hong Kong. Their severe business environment is also being transmitted to the upstream and midstream of the domestic manufacturing industry in different ways. Local manufacturing companies are least likely to Incidents of overseas debt arrears that we would like to see happen frequently.
Jiang Xiaping witnessed all the things that the company had never come into contact with in more than ten years in a malicious overseas debt #p##e#. “I often think of those things and feel as if I have been in this world for 100 years.”
With the outbreak of the financial crisis, different buyers have declared bankruptcy in the U.S. Bankruptcy Court every week. Chinese companies have borne the brunt of bad debts ranging from hundreds of thousands to hundreds of millions of dollars, especially Chinese textile companies that have always exported huge quantities. “One order is the entire wealth of a company. Failure to collect the payment for an order will declare the death of the company.”
Although she wanted the goods back, Jiang Xiaping lost nearly 10 million yuan during the sale, which was all her profits in the past five years. “I’m lucky. There are many people who can’t pay for the goods, and they won’t even get the goods back.”
Dilemma
The textile industry may enter a “comprehensive recession”
The crisis in the textile industry caused by the break in the capital chain is spreading everywhere. Where will textile companies go in the face of shrinking industry profits?
The decline in profits is a foregone conclusion
An industry research report recently released by industry websites shows that from January to August 2008, textile enterprises above designated size across the country achieved profits of 73.96 billion yuan, a year-on-year increase of 3.19%. The profit growth rate dropped by 5.17 percentage points compared with the first five months of 2008, and compared with 2007 From January to November this year, it dropped significantly by 33.79 percentage points, the lowest growth rate since 2001.
In order to avoid the huge impact of a “hard landing” on the textile economy, in the second half of the year, the country successively adopted measures such as increasing textile export tax rebates, stabilizing the exchange rate of RMB against the US dollar, and lowering bank interest rates to loosen restrictions and reduce burdens on enterprises. However, the favorable policy stimulus was limited. Obviously, it cannot change the reality of reduced external demand, nor can it curb the continued decline in exports.
The export situation is becoming increasingly severe
Data show that from January to August 2008, my country’s textile and apparel exports increased by 7.72%, with the growth rate falling by 3.36 percentage points from the first half of the year and 11.12 percentage points from the same period in 2007. If exchange rate changes are taken into account, the decline in exports will be even more serious.
What is even more serious is that the growth in export volume has slowed down significantly, which to a large extent means that external orders have begun to decrease under the global economic recession. This is a very likely risk for the Chinese textile industry, which relies heavily on foreign markets to digest excess production capacity. is catastrophic.
Investment in major textile provinces declines
“We have thought about switching exports to domestic sales, creating our own brands, and moving industries to the central and western regions, but this cannot be achieved in a year or two.” The person in charge of a Zhejiang textile company that has announced the suspension of production said that the company started three years ago The trademark has been registered, but due to internal environment and other reasons, the domestic market has never been able to open. “This requires a lot of capital to cultivate, which is not something small and medium-sized enterprises can afford.”
At present, the number of newly started projects in most coastal provinces and cities has declined to varying degrees. In particular, Shandong and Jiangsu, the two provinces with the largest investment amounts, have seen investment declines.
Opportunities
Industry reshuffle ushering in the best opportunities
Some scholars pointed out that the current predicament of the textile industry is a good opportunity for the industry to upgrade its industry. At the same time, many companies are benefiting from this wave of chaos.
The test of life and death has just begun
With the rapid spread of the financial crisis around the world, the weakening of external demand has become increasingly serious. Even with the favorable stimulation of the relatively stable exchange rate of the RMB against the US dollar and the mild adjustment of policies such as export tax rebates, my country’s textile exports still show no obvious signs of improvement, and the downward trend has become more obvious. .
Industry insiders have begun to think that the hardest hit areas for the collapse of textile companies in the first half of the year were mainly export-oriented small and medium-sized enterprises, and now insufficient demand has become a nightmare for all textile companies. “The most brutal life and death test period for textile enterprises has just begun.” Industry insiders boldly predicted.
Facing the increasingly harsh market environment, textile companies are looking for ways out: they may shrink their scale and reduce risks; they may transfer costs and use investment to maintain profits; they may switch to domestic sales and attack the domestic market; or they may change their business direction and focus on brand building.
The time has come for industry reshuffle
“I have been in the clothing processing industry for more than 30 years, and I have never encountered such a big dilemma.” For Wang Jinfei, chairman of Jiangsu Jinfeida Garment Co., Ltd., the difficulties faced by most companies may be their opportunities. “By designing our own fabrics, we can reduce costs and improve our bargaining power, and we can gain the right to speak.” Another unexpected gain for Wang Jinfei is that because a large number of garment processing companies have closed down due to the “cold wave”, some foreign customers have turned to Jinfeida for processing. Products, the number of orders has increased significantly.
“The purchasing volume of foreign merchants has begun to concentrate.” A textile factory supervisor who often “drops orders” to small processing factories said that the ordering methods in European and American countries have begun to change. 80% of factories are unable to receive orders, but 20% of factories receive orders better than before. Increase.
The acquisition of American Apparel Company is Wang Jinfei’s major move to cleverly take advantage of the U.S. economic recession. Jinfeida acquired the American Lanco Company through its wholly-owned subsidiary Jinfeida (Mauritius) Company in June 2007.
��Subsidiary Jinfeida (Mauritius) Company acquired Lanco Company of the United States.
