Currently, the epidemic is still spreading around the world, and international business exchanges and the flow of goods have been affected to a certain extent. The “Overview of China’s Overseas Investment in the First Three Quarters of 2020” recently released by Ernst & Young, a cross-field professional service organization, shows that in the first three quarters of 2020, Chinese enterprises’ overseas investment continued a downward trend, with the total overseas mergers and acquisitions totaling US$24.4 billion, a year-on-year decrease of 50.6%. The lowest for the same period in the past 10 years.
In this ups and downs year, how are the textile companies that “go global” doing?
Africa: Risks still exist and are generally controllable
According to incomplete statistics, as of the end of 2019, my country’s textile industry’s overseas investment The stock exceeds US$10 billion, overseas investments are distributed in more than 100 countries and regions, and annual sales revenue exceeds US$10 billion. In this process, Africa has become a key region for my country’s textile enterprises to expand overseas due to its advantages in resources, labor force, policies and consumption potential.
Faced with the continued spread of the epidemic since 2020, the exports and employment of the African textile industry have been affected, and Chinese-funded textile companies in Africa will inevitably be affected.
Jiangsu Sunshine Group invested in a wool textile and dyeing project in Ethiopia in 2016 and established a wholly-owned subsidiary, Sunshine Ethiopia Wool Textile and Dyeing Co., Ltd. As of the end of 2019, its Ethiopian company had invested 469 million yuan. Jiangsu Sunshine’s 2020 semi-annual report shows that the project has been officially put into production in the first half of 2020, but due to the epidemic and other reasons, production and operations have been affected to a certain extent.
Jiangsu Sunshine Group also pointed out that differences in legal environments, economic policies, market situations, as well as culture, language, and customs at home and abroad have brought certain difficulties to the operation and management of Ethiopian companies. At the same time, changes in the local economic situation and related economic policies may have an adverse impact on the Ethiopian company’s future operations.
In addition to enterprises, some industrial parks in Ethiopia were also forced to suspend operations in 2020. The Ethiopian Oriental Industrial Park, developed and constructed by China Jiangsu Yongyuan Investment Co., Ltd., is fully occupied in the first phase of the planned 2.33 square kilometers. 129 companies have settled in it, with an agreed investment of US$1 billion, an output value of US$1.5 billion, and 16,000 local jobs. indivual. Liu Zhenghua, vice president of the company, admitted that the epidemic has delayed the construction of the second phase of the project. However, he said that the second phase of the project is still in progress and is planned to be completed in two years and will introduce about 150 companies. “The second phase of the project will aim at introducing upstream and downstream enterprises in the industrial chain, such as jeans manufacturing, to create a ‘one-stop’ model from cotton planting, spinning, weaving, printing and dyeing to clothing.”
Liao Hongying is in Ethiopia’s Oriental Working in an industrial park, as the assistant to the general manager of Linde Textile Co., Ltd., she looked back on the past 2020 with a relaxed expression: “There will be any impact. In March last year, the company received notifications from customers in the United States and the United Kingdom. Some orders have been delayed. Logistics has indeed stalled for a period of time, but the overall impact is still within the acceptable range.”
Southeast Asia: The impact has had its ups and downs
The outbreak of the epidemic has also pressed the pause button on the development of the textile industry in Southeast Asia. The retail industry in many countries around the world is weak, physical stores in Europe and the United States are closed, and textile and clothing sales have fallen sharply, putting the burgeoning Southeast Asian textile and clothing industry in trouble.
So what will be the changes in the development of Chinese textile companies that are “going overseas” in Southeast Asia in 2020?
Shenzhou International Group Holdings Co., Ltd. built a fabric production base in Vietnam as early as 2013 to better meet the orders and trade needs of core customers. As of the end of 2018, Vietnam’s Deli Fabric Factory was able to provide 45% of the group’s fabric supply. The company’s recently released financial report shows that in 2020, the production capacity of the Vietnam factory has reached 300 tons/day, which is almost the same as the headquarters Ningbo Beilun fabric factory.
Shenzhou International pointed out in its financial report that fabric factories in Vietnam will provide effective supply for Shenzhou International’s downstream production in 2021. In the face of a volatile trade environment, the layout of overseas production capacity makes the company’s delivery capabilities more stable. On the other hand, as uncertainty in the global trade environment increases, overseas factories can flexibly allocate production for customers and are more resistant to stress. The production capacity of Shenzhou International’s factory in Vietnam is enough to handle the current total orders exported to the United States, which can effectively hedge against the impact of Sino-US trade friction.
It is understood that under the impact of the global epidemic, although Shenzhou International’s major cooperative brands have experienced a decline in performance, the company has still maintained business stability. In the first half of 2020, the company’s revenue was 10.234 billion yuan, a slight decrease of 0.4% year-on-year.
Shaoxing Mulinsen Knitting Co., Ltd. specializes in various types of rayon products. Its products are mainly exported to Southeast Asia, and it has a printing and dyeing factory and a bonded warehouse in Indonesia. Huang Yong, the company’s general manager, said that starting from September 2020, the company’s operating income has turned from negative to positive. For the whole of 2020, the company’s annual sales increased by about 15% year-on-year. “The Indonesian factory is not only responsible for producing and storing products, it can also send the latest fashion information on the Southeast Asian market and patterns back to China at the first time, and then improve and develop it through the R&D team at the headquarters, and finally make products for different markets and different designs. New patterns and new products in the region. This also lays the foundation for the company to regularly send the latest product patterns to various customers.” Huang Yong believes that opening factories overseas not only retains old customers, but also attracts a large number of outstanding new customers.�Improve the competitiveness of enterprises.
However, the epidemic has also cast a shadow on some companies that have taken root in Southeast Asia. “Due to the epidemic, the company’s orders have dropped a lot. Calculated, the annual reduction is estimated to be at least 30%.” A person in charge of a Cambodian textile company who did not want to be named said frankly that in 2020, factories are often in a semi-stop state.
Chinese textile enterprises: going global is still the general trend
The epidemic has caused changes in the short-term layout of the global textile supply chain, and the external policy environment is complex. Chinese companies “going global” obviously need more early warning mechanisms and risk awareness in order to better participate in the reshaping of the global industrial chain.
Industry experts believe that before companies go global, they must first conduct preliminary research, especially understand the foreign investment security risk review, understand local laws and regulations, and avoid blindly entering unfamiliar industries. Secondly, we must pay attention to both initial costs and integration costs, take a long-term view, and develop a development strategy. In addition, it is necessary to strengthen communication with local parties, establish a positive image, focus on fulfilling corporate social responsibilities, respect local customs and habits, and gradually cultivate a unique corporate culture.
Liao Hongying believes that the impact of the epidemic will be long-term, and my country’s textile enterprises need to make a clear judgment on this. It is more important to go far than to go fast. In the current difficult situation, companies must not only pay attention to further changes in the epidemic, but also the resulting changes in the international political landscape. But she is still confident in investing in the African market. “The textile and garment industry is one of Africa’s pillar industries. Southeast Africa has the most dynamic textile industry in Africa and is an important cotton-producing area. Chinese companies can bring benefits to African countries.” Advanced technology and management methods will help improve the local production process, and try to transfer the large-scale clothing production process and realize the overall transfer of the clothing industry and related supporting industries to southeast Africa.”
The more faced With downward pressure, we need to find a way out in a wider scope. Zhou Zhaomei, Global Leader of Ernst & Young’s China Overseas Investment Business Department, said: “Although the global economy will enter a recession in 2020 and various political and economic risks will be difficult to eliminate in the short term, economic globalization is still the general trend. We believe that in the ‘domestic and international dual cycle’ ‘Under the new pattern of mutually reinforcing development, ‘going global’ will still be an inevitable choice for more Chinese companies. In the future, the focus of Chinese companies’ overseas investment layout will still be fields and industries closely related to the development of the domestic real economy. ”</p
