China's textile industry affected by global financial crisis

China's textile industry is a traditional pillar industry of national economy and is greatly affected by the global financial crisis, the industry experienced negative growth since 2003. However, the textile and garment industry will insist on self-regulation and carry out their corporate social responsibilities. 

Textile products mainly contain cotton, wool, silk, chemical fiber and some primary dyeing and printing products. Thus analysis and research of the textile industry will focus on the industrial chain of these products and development trend of related industries.  Actually, the textile industry mainly involves processing such raw materials as cotton, wool and silk and materials for daily necessaries like clothes and so on. The industry which is closely linked to both the textile industry and the chemical industry is the chemical fiber textile industry, especially the man-made chemical fiber textile industry. In addition, the process of dyeing and printing may use many chemical instruments. 

The rapid development of China's economy, increasing demands and favorable policies all contribute to the improvement of the textile industry. However, some adverse factors and risks also exist. These risks mainly include rising costs, uncertainty of demands of downstream market and so on.  In 2009, development of China's textile industry mainly relied on government's policies which helped the industry to reduce risks of the whole industry by means of industrial planning, concentration and stimulus packages.

Most risks come from increasing labor costs and stricter environment-protection requirements listed on "Law of the People's Republic of China on Employment Contracts".

Labor always serves as an important advantage for China's textile industry. The requirement of raising wages will lead to an increase of 5% in labor cost. However, China's textile industry, whose sales profit rate can not reach 5%, will suffer more pressure. Energy-saving policies set limitations to output and water emission, which also imposes great pressure on enterprises. 

The demand and supply of the textile industry in China shows that domestic demands will serve as the major factor stimulating development of the textile industry. Thus risks are mainly from export demands.

Although the textile industry has seen a recovery since the second half of 2008 due to the rising export tax rebates, international trade environment does not clear up and risks still exist as the growth of global economy slows down and demand for costume slumps.

Meanwhile, trade barriers and environment-protection requirements will affect the export of China's textile industry and further exacerbate competition on textile market. The overall situation of the textile industry shows that risks in 2009 are mainly from gloomy demands for textile products.

CSR Report: Textile Enterprises-2008