The Chinese Cotton Textile Industry Confronts Five Key Challenges

In 2024, the textile industry will continue to face problems such as overcapacity, high inventory, and tight cash flow. At the same time, the export market for terminal consumer goods is affected by the continued high inflation in major overseas economies and demand is weak, which also brings challenges to mainland cotton textile companies.

1

Adjustment of production capacity layout

In recent years, my country's cotton textile industry has gradually shifted from Jiangsu, Zhejiang, Shandong, Guangdong and other regions to the central and western regions. In particular, Xinjiang has seen significant growth in production capacity in recent years, thanks to its raw material advantages and the support of national policies.

In April 2024, the General Office of the People's Government of the Xinjiang Uygur Autonomous Region adjusted and optimized the policy measures for the development of the autonomous region's cotton and textile industry, further promoting the local conversion rate of raw materials such as cotton and cotton yarn in Xinjiang, and building a complete industrial chain. Spinning projects such as the 300,000 spindles of Xinjiang Sujin Textile Co., Ltd. and the 1 million spindles of Xinjiang Kuitun of Digital World Group are also being actively promoted, and Xinjiang's textile industry continues to have major projects.

In addition to its scale advantages, Xinjiang is also extending the textile industry chain and attaches great importance to the expansion of the printing and dyeing industry chain. In the future, it is expected to become an important destination for the transfer of printing and dyeing capacity of mainland enterprises.

The pricing initiative of the mainland cotton yarn market is being lost, and the industry is undergoing upgrading and reconstruction. Mainland cotton spinning enterprises are gradually losing their advantages in terms of cost due to being far away from the main cotton producing areas. The pricing power of cotton yarn products has been transferred to local enterprises in Xinjiang. Most mainland enterprises that are ambitious to continue to deepen their cotton spinning industry have chosen to deploy production capacity in Xinjiang, or use imported cotton to meet traceability orders, and some have transformed into blended or differentiated varieties.

In this context, mainland enterprises should avoid homogeneous competition with Xinjiang. They should clearly position themselves, find the right track, actively transform, adjust their product structure, improve product quality and grade, and develop in a differentiated manner.

According to relevant surveys, although the overall profit of downstream spinning is not good, some differentiated products are still in short supply. Compared with some conventional variety manufacturers and some companies that make differentiated, functional products, and environmentally friendly green products, the operating performance is really like heaven and hell.

2

Intensified international competition

With the intensification of international trade barriers in recent years, my country's cotton and cotton textile industries have been affected, and the changes in terminal product exports are particularly reflected in the reduction of orders from Europe and the United States. Europe and the United States are the most profitable markets for my country's cotton textile orders. Losing the European and American markets means a relative decline in the profits of the cotton textile industry, which in turn transmits upward to form pressure on the cotton market.

Against this background, some cotton was forced to turn to internal circulation, requiring more support from the domestic consumer market, resulting in oversupply in some parts of the domestic cotton market and compressed profit levels. Insufficient effective terminal demand has become a difficult problem for companies to solve.

During his campaign, Trump said he would impose high tariffs on Chinese imports, especially on industries with competitive advantages such as China's textile industry. If Trump takes office and implements this policy, China's cotton textile exports to the United States will face severe challenges, which may lead to a significant decline in export volume, thus affecting the profitability and survival of enterprises.

In addition to tariffs, Trump may also restrict the import of Chinese cotton textiles by setting up other trade barriers. These barriers may include anti-dumping measures, anti-subsidy measures, technical standards and environmental protection requirements. These barriers will increase the difficulty and cost of Chinese cotton textiles entering the US market, thereby further squeezing the profit margins of China's cotton textile industry.

3

Development and changes in the use of raw materials

Under the influence of market demand, national policies and Xinjiang-related issues, the product structure of the cotton textile industry is changing. In recent years, cotton and non-cotton have accounted for about 34% and 66% respectively. The use of non-cotton fibers has been increasing, and the use of green fibers such as lyocell has increased significantly, but overall, the rigid demand for cotton still exists.

4

Changes in market demand

As consumers' requirements for product quality and environmental performance increase, especially their preference for environmentally friendly green products, such as Lyocell and functional products, cotton textile companies need to increase their efforts in technological research and development and innovation to meet market demand.

Consumers' increasing demand for diversified and personalized products also provides more market opportunities for mainland cotton textile enterprises. Mainland cotton textile enterprises should pay close attention to market trends and changes in consumer demand, strengthen market research and judgment capabilities, so as to adjust product structure and production strategies in a timely manner.

5

Costs continue to rise

The cotton textile industry is a light industry, but the cost of employment is gradually increasing. For example, the monthly salary of a car blocker in Jiangsu and Zhejiang can reach about 8,000 yuan, but the three-shift work and high temperature and humidity working environment still make it difficult for companies to recruit workers. As the proportion of local cotton decreases, the cost of raw material procurement and transportation for mainland cotton spinning companies is gradually increasing due to their distance from the main cotton producing areas.

As the textile market continues to expand, new products, new technologies and new concepts emerge in an endless stream. In order to survive, a large number of textile companies are improving themselves in the competition. While facing challenges, mainland cotton textile companies are also facing many opportunities.Recommendations for textile companiesBy strengthening market research and analysis, improving product quality, optimizing production capacity layout and strengthening international cooperation, we will continuously enhance our competitiveness and achieve sustainable development.

Source: China Yarn Network, China Cotton Association, CITIC Construction Investment Futures Co., Ltd.

Editor: China Yarn Network, please indicate the source for reprinting