Examining Unexpected Changes in the Textile and Fashion Industry in 2011 (Part Two)

High-end manufacturing change incidents:

The niche high-end show takes the pulse of China's market shock index: ★★★☆☆

During the exhibitions held during the spring of this year, the Premiere Vision China Fabric Show and the Japan Advanced Fabric Fair, both of which belong to the high-end niche, all exhibited the “Made for China” change. At the exhibition, besides displaying the fabric products with exquisite craftsmanship and design sense, the manufacture of foreign high-end fabrics also began to be closer to the needs of China's localization. Including custom-made fabric color sample cards for Chinese customers, as well as silk fabrics with Chinese traditional cultural characteristics of the peony pattern.

Reporter commented: In the process of continuous improvement of China's textile and clothing industry, the market is in need of diversified and high-end fabrics. However, how to grasp this demand is a top issue for high-end textile manufacturers in various countries. It is worth mentioning that this year's PV Show and the Japan Advanced Fabrics Exhibition sponsored by Tianjin New Textiles Import & Export Co., Ltd., more and more foreign manufacturers have begun to innovate specifically for the Chinese market. They realized that for China's manufacturing, they did not develop several products for casual orders, but rather they wanted to listen to the voices of Chinese designers and consumers. Combining the essence of French design, Italian quality, and Japanese manufacturing with the needs of the Chinese market, this product can be deeply rooted.

Settlement of the settlement method

***Cross-border settlement was affected by the cold shock index of the textile industry: ★★☆☆☆

The instability of the international currency exchange rate and the continuous rise of the exchange rate of the *** exchange rate have caused textile exporting companies to face many trade difficulties. To this end, the government has vigorously promoted the cross-border settlement business. Since the beginning of this year, the road map for the internationalization of *** has become increasingly clear and visible. From the BRICS summit held in Sanya, Hainan, in April to the meeting of finance ministers of China, Japan, and Korea held in Hanoi, Vietnam in May, "local currency settlement" has become a high-frequency vocabulary mentioned by ministers of finance of various countries. In July, the official launch of the cross-border settlement business of China’s currency with Laos also marked a new step in cross-border trade settlement. Facing the accelerating internationalization of ***, China's textile and garment companies, which bear the turmoil of international currency exchange rates and cost pressures, will undoubtedly benefit from it. However, some companies have shown a rather calm attitude toward it.

Reporter commented: *** Cross-border business settlement can effectively help companies avoid exchange rate risks. Compared with the volatility of the US dollar, the value of the currency is relatively stable, and the company’s expected return can be better protected. But now our country's textile and apparel foreign trade market is the "buyer" market after all. China's exporters are generally at a disadvantage in negotiations with foreign investors. The choice of settlement currency is mainly determined by foreign companies. In addition, the exchange rate between the local currency and the local currency, the amount of bank holdings held by the bank where the merchant is located, and the exchange rate of the local bank's exchange rate, etc., all of these factors may become the “burden” for foreign investors. In order to fully implement the settlement business, there is a need for a longer process of understanding and running-in between textile companies and foreign companies.

Sharp changes in emerging markets:

ASEAN's fourth-largest export export market shock index: ★★★★☆

In 2011, the establishment of China-ASEAN Free Trade Area (CAFTA) has entered the second year. As the most active countries and regions in the world of textile and apparel trade, the implementation of the free trade zone has promoted the rapid growth of bilateral import and export trade. In the first three quarters of this year, ASEAN officially surpassed Hong Kong and China to become China's fourth-largest export market for textiles. The rapid growth of China’s exports to ASEAN indicates that the effectiveness of China-ASEAN Free Trade Area in reducing two-way tariffs is gradually emerging.

Reporter commented: In the 2011 China textile and apparel export report card, the performance of the ASEAN market was outstanding. Adjacent geographical advantages provide an opportunity for textile trade between China and ASEAN countries. On January 1, 2010, the free trade zone between China and 10 ASEAN countries was fully launched, and the tax rate of textile products imported from China by major ASEAN countries as a whole was significantly reduced, further enhancing the export competitiveness of China's textile products. At the same time, the establishment of a free trade zone has also accelerated the pace of recovery of the ASEAN economy, allowing it to gradually get rid of the impact of the financial crisis, thus also stimulating consumer demand for textile products.

Event review:

Textile manufacturing countries extend their investment in olive branch consternation index: ★★★☆☆

In addition to factors such as geographical and cultural differences, and low labor costs, the generous “treatment” offered by Southeast Asian countries to investors and a more relaxed foreign trade environment are making them the most attractive investment sites for Chinese companies. . In July this year, Pakistan announced the establishment of the Pakistan Textile City, hoping to further attract companies including China, Turkey and South Korea to invest in factories in the park. Bangladesh also used its preferential tax policy to hand out attractive “red envelopes” to investors and reduce income tax for foreign investors.

Reporter commented: The continuous increase in domestic labor costs and the rise in the price of hydropower resources were once considered to be the biggest driving force for Chinese companies to set up camps in foreign countries. In fact, under the background of the accelerating regional economic integration process, companies that choose to invest in Southeast Asian countries have long been not simply “escape” from cost pressures; they have used the favorable measures of the target country to optimize resource allocation and maximize their development. The target market is what they value most. For example, most of the textile companies that invested in and built factories in Bangladesh are treated to the export tariff reduction and exemption of textiles produced in Bangladesh. For the textile and apparel products imported from Cambodia, the United States has given more relaxed quotas and exemptions from import tariffs, and the EU has no restrictions on preferential treatment. This is also the main reason for attracting textile and garment companies headed by China to invest in Cambodia.

Remarks on the changes in the free trade agreement:

"The United States and South Korea Agreement" has been officially approved by the surprise index: ★★★★☆

On October 12, the U.S. Congress formally approved the "US-Korea Free Trade Agreement." The agreement covers a number of areas. Textiles and clothing are also an important part of it and there are separate chapters. South Korea's textile and apparel exports to the United States will undoubtedly receive "ex-gratia permits." According to the US forecast, after the implementation of the "US-Korea Agreement," Korea's textile and apparel exports to the United States will increase by about 3 billion U.S. dollars per year, and about 85% to 90% of this figure will be South Korea's "robbed" market share from other members. On the other hand, many of the core textile clauses of the "US-Korea Agreement" implicitly point to China.

Reporter commented: In the field of textile and apparel trade, Libra, which appears to be a mutually beneficial free trade agreement, has been slightly tilted. South Korea will undoubtedly become the biggest beneficiary of the "US-Korea Agreement," and on high alternative products, the United States Local and other textile exporters to the United States may lose this "cheese".

Event review:

TPP Accelerates Convulsion Index: ★★★☆☆

At the Asia Pacific Economic Cooperation (APEC) Honolulu Summit held in mid-November, the US President Barack Obama promoted the "Trans-Pacific Partnership Agreement" (TPP) in a high profile, announcing that the basic framework of the agreement has been formulated and is expected to formally conclude negotiations next year. As the world’s largest exporter and the largest importer of the United States, China’s relationship with the “Trans-Pacific Partnership Agreement” (TPP) is striking. At present, it is not clear whether China will join the TPP. However, due to being excluded from the agreement, China is likely to bear the brunt of the TPP as the "most victims", and the textile and apparel industry characterized by export-oriented or will be the first to be affected.

Reporter's commentary: Although the specific impact of the TPP judgment is still waiting for the final negotiation results to be released, based on the effects of free trade agreements, TPP is likely to affect China's textile industry in two ways. The most immediate impact in the short term is the trade diversion effect caused by tariff concessions. In the long term, TPP may lead to the formation of a close textile and apparel production-trading network in the Asia Pacific region. For example, Vietnam currently imports a lot of textiles from China that it is unable to produce, but after the TPP came into force, it was restricted by rules of origin and Vietnam might instead choose to import textiles from the United States, which in turn affected the export of Chinese textiles.