Situation Overview
From the end of January to the beginning of March 2020, the sudden “new coronavirus pneumonia” epidemic quickly swept across the country from Wuhan, Hubei. In mid-March, the domestic epidemic situation had just eased, and the world was plunged into a huge disaster with the rapid spread of the epidemic. The United States, Italy, Spain, Iran and other countries became the hardest hit areas. As of the morning of April 8, Beijing time, infection cases had occurred in more than 200 countries around the world, and the cumulative number of confirmed cases had exceeded 1.41 million.
The epidemic has completely disrupted the rhythm of the manufacturing industry. In previous years, the normal production and foreign trade order after the Spring Festival fell into chaos. From post-holiday to mid-April, companies experienced a series of setbacks and blows: the inability to resume work and production in time after the holiday, shortage of epidemic prevention materials, lack of raw materials and auxiliary materials, obstruction of transportation and logistics, difficulty in fulfilling contracts, and shortage of funds… In the domestic epidemic situation, there are With the situation improving and enterprises actively resuming work and production, the international epidemic has begun to enter a peak period. Short-term demand in the international market has frozen, and purchasing willingness has decreased. Export companies are once again faced with the dilemma of foreign buyers canceling orders on a large scale or requesting delayed shipments. Corporate confidence been severely suppressed. From January to February, China’s manufacturing purchasing managers’ index (PMI) was only 35.7%, down 14.3 percentage points from the previous month, setting the lowest record since data began to be collected. The production index was 27.8 and the new orders index was 29.3, both less than 30, which is far lower. At the critical value of prosperity. At the same time, international oil prices have fallen sharply, U.S. stocks have experienced circuit breakers four times, financial risks caused by the uncertainty of the epidemic have continued to rise, employment rates and consumer confidence have declined, and pessimism has pervaded the market. Major financial institutions have lowered their forecasts for the global economy and trade. growth indicators.
Under the combined effect of multiple factors such as the epidemic, Sino-US economic and trade frictions, increased tariffs, and the Spring Festival holiday, the foreign trade volume of textile and clothing dropped significantly in the first two months, mainly due to a decline in exports, while imports continued to grow. . In March, foreign trade companies shipped large quantities of goods to complete the backlog of orders. Exports in that month will be better than those in the previous two months. A large number of foreign orders have been canceled since mid-March and there are no signs of recovery. Foreign merchants’ willingness to buy has declined, and the number of orders placed has been significantly reduced compared with the same period in previous years, which will have a long-term negative impact on exports. According to reports from enterprises, the current orders on hand will only last until mid-to-late April, and the situation of new orders is still uncertain. It is expected that starting from April, exports will decline sharply in the second quarter and even the third quarter.
In response to the epidemic, the State Council and various departments have successively issued a series of policies to benefit enterprises and the people, through measures such as stabilizing domestic trade, stabilizing foreign trade, stabilizing foreign investment, reducing corporate taxes and fees, stabilizing finance, and stabilizing employment. Economic protection. However, except for some companies that mainly produce or switch to producing protective clothing or masks, as well as corresponding upstream raw materials and auxiliary materials, which have full orders and large profit margins, most companies are facing cancellation or uncertainty of original orders, and production has temporarily stagnated. The resulting shortage of funds and employment decline are the most pressing problems. More policies are needed to focus on ensuring the survival of enterprises and letting them survive first. Enterprises generally recommend that the government increase financial and credit support for the industry and continue to introduce and implement measures such as tax cuts and fee reductions, accelerating export tax rebates, and deferral of social security payments.
Trade data
From January to February 2020, the total import and export value of national trade in goods was US$591.99 billion, a year-on-year decrease of 11%. Among them, exports were US$292.45 billion, down 17.2%; imports were US$299.54 billion, down 4%, the first deficit in the past eight years, with a deficit of US$7.1 billion.
In February 2019, the textile and apparel trade volume was US$7.35 billion, a decrease of 49.5%, of which exports were US$5 billion, a decrease of 61.7%, and imports were US$2.34 billion, an increase of 58.5%. The trade surplus for that month was US$2.66 billion. down 77.1%. From January to February 2020, the textile and apparel trade volume was US$34.39 billion, a year-on-year decrease of 17.8%. Among them, exports were US$30.55 billion, a decrease of 19.9%; imports were US$3.83 billion, an increase of 4.5%, and the cumulative trade surplus was US$26.72 billion, a decrease of 22.5%.
Trade Characteristics
The import and export of textiles and clothing from January to February 2020 showed the following characteristics:
1. Affected by the epidemic, exports fell sharply in February, which is rare in history. International donations of anti-epidemic materials drove import growth.
Affected by the “New Crown Pneumonia” epidemic, the export volume of textile and clothing in February was the lowest in the past 15 years, only 5 billion US dollars; despite the low year-on-year base last year, the decline still reached 62%, exceeding The decline during the 2008 financial crisis (-35.1%) set a historical record in 25 years. Cumulative exports from January to February fell by nearly 20%, also hitting the lowest level in the past 20 years.
At the beginning of the outbreak, Japan, South Korea and other countries immediately extended a helping hand and donated masks, protective clothing and other anti-epidemic materials to me together with overseas Chinese, driving a rapid increase in imports in February.
2. General trade exports were hit hard, and the import of free aid and gifts from countries and international organizations and other overseas donated materials surged.
In February, exports in all major trade modes fell sharply. General trade, which accounted for 80% of exports, fell by 63.8%, a decline greater than processing trade (49.7%) and the average. From January to February, general trade fell by 21.1% cumulatively, and processing trade fell by 31%.
In February, imports of free aid and donated materials between countries and international organizations and other overseas donated materials surged. Imports that month reached US$170 million, a year-on-year increase of more than 20,000 times. �The supplies mainly include masks, protective clothing, surgical gloves, etc., mainly from the United States, Japan, South Korea, Germany, Vietnam and other countries.
3. Exports to the global market have declined on a large scale, and the epidemic will not accelerate industrial relocation for the time being.
In February, China’s textile and apparel exports were to 198 countries (regions), with exports to 96% of them falling. The key export markets of the European Union, the United States, ASEAN, and Japan dropped by 62.1%, 69%, 55%, and 64.4% respectively, and the declines were more than half. From January to February, the declines in the four major markets were 14.5%, 30.4%, 17.6% and 23.7% respectively.
As the epidemic continues to spread overseas, the global economy has come to a standstill. China’s major textile and apparel trading partners, the EU, the United States, the Middle East, Japan, South Korea and other places, have experienced widespread spread. The international market environment has further deteriorated and demand has further shrunk. In mid-March, customers in major markets began to cancel orders on a large scale or request delayed shipments. Compared with the failure of the supply side to resume work and production in time, the cancellation of orders from the external demand side has a more fatal blow to our exports.
In the early days of the epidemic, as China vigorously strengthened prevention and control, the rate of resumption of work and production was low, and order production and exports were affected. It can be seen from the import data of major markets that the market share of Chinese products has declined significantly: in February, the proportion of U.S. imports from China dropped rapidly to 22.8%, a decrease of 10 percentage points from the end of 2019, and the proportion of imports from ASEAN climbed to 25.6% , surpassing China for the first time; the Japanese market also showed the same trend, with the proportion of imports from China falling by 6.7 percentage points from January to February compared with the end of last year. At the same time, some foreign buyers lack confidence in China and are accelerating the transfer of orders to regions outside China. It is expected that China’s market share will still be at a low level in March and April. However, judging from the subsequent development, on the one hand, the Chinese government has taken strong measures to effectively control the domestic epidemic, and at the same time, it has issued intensive support policies to help enterprises resume production. By the end of the first quarter, more than 90% of enterprises across the country had resumed work and production. China’s production capacity has recovered rapidly; on the one hand, the foreign epidemic has worsened and spread around the world, and countries and regions that have become competitive with our industry cannot be immune. In addition, major buyers in Europe and the United States are too busy to take care of themselves and have significantly reduced transaction volume, thus reducing the risk of order transfer.
Textiles and clothing exports fell by 60% in April and February, and exports of protective equipment are expected to grow.
In February, the export value of all products fell by 20% to 80%, with textiles falling by 59.5%. Among them, yarn, fabrics and home textiles fell by 38.6%, 65.2% and 64.9% respectively. %. Clothing dropped by 63.6%, among which the export volume of large categories of needle and woven clothing dropped by 60.8%. From January to February, textiles and clothing dropped by 19.8% and 20% respectively.
Judging from the current development of the epidemic, the expectations of China’s major export markets are not optimistic. Exports in the second quarter will continue the downward trend, and the decline will further expand. The only thing worth looking forward to is that as a large number of Chinese companies quickly switch production in response to the current situation, there is currently an adequate supply of epidemic prevention materials that can be exported. The tightening of the epidemic situation abroad has created a large demand for anti-epidemic materials. The United States has included masks, protective clothing, etc. on the list of tax exemptions. The export of these products will reach a peak from March to the second quarter, forming a weak positive pulling effect on overall exports.
Exports in all provinces and cities fell in May and February, with 70% of provinces and cities experiencing a drop of more than half.
In February, exports in 31 provinces (municipalities and autonomous regions) across the country all showed negative growth, of which 22 provinces and municipalities saw a decline of more than 50%. Regions with good export momentum, such as Zhejiang, Jiangsu, and Shandong, were not spared. The total exports of the top five exporting provinces and cities, Zhejiang, Jiangsu, Guangdong, Shandong, and Fujian, fell by 61.5%. From January to February, only Heilongjiang and Inner Mongolia achieved growth, and the total exports of the top five exporting provinces and cities fell by 19.6%.
6. Protective materials have driven significant growth in imports.
The large import of protective materials has promoted the growth of cumulative imports in the first two months. The cumulative import of masks, protective clothing, cotton balls and swabs, rubber gloves and other products included in the textile and clothing category is approximately US$980 million (the product tax code also includes other products), an increase of 12 times.
7. Cotton imports rebounded, and cotton prices at home and abroad fell under pressure.
In February, due to concerns about the insufficient supply of upstream raw materials and the decline in foreign cotton prices, companies imported a large amount of foreign cotton and stockpiled it. Cotton imports rebounded sharply that month, with imports of 264,000 tons, an increase of 15.1%. , import prices fell by 14%. From January to February, the cumulative import volume was 413,000 tons, a decrease of 19.1%, and the cotton price fell by 12.6%. Brazil still occupies the largest import source country, and U.S. cotton imports have rebounded. In the first two months, a total of 72,000 tons were imported from the United States, an increase of 58%.
According to the monthly report of the China Cotton Association, in February, affected by the new coronavirus epidemic, textile companies delayed the resumption of work, yarn and cloth production and textile and clothing exports dropped significantly, and cotton market sales basically stagnated. According to the forecast of the China Cotton Association, domestic cotton consumption dropped to 7.82 million tons, a year-on-year decrease of 3.1%, a decrease of 200,000 tons from the previous period, and the import volume was reduced to 1.88 million tons, a year-on-year decrease of 8.3%, a decrease of 100,000 tons from the previous period. Domestic and foreign cotton prices fell under pressure. The decline in international cotton prices was greater than that in domestic. The price difference between domestic and foreign cotton fluctuated greatly. The transaction rate of reserve cotton rotation increased significantly, and the decline in commercial inventories narrowed. In the second half of the year, the epidemic began to spread abroad, causing an impact on the global commodity market, and international cotton prices fell rapidly. At the end of the month, China’s cotton price index (CCIndex3128B) was 13,086 yuan/ton, a decrease of 747 yuan from the end of the previous month; the monthly average price was 13,418 yuan/ton, a month-on-month decrease of 409 yuan, and a year-on-year decrease of 2,082 yuan. International cotton prices have fallen sharply, and the price gap between domestic and foreign cotton has widened compared with last month. China’s imported cotton price index FC Index M averaged 77.90 cents/pound in monthly terms, down 2.19 cents from the previous month. At the end of the month, it was 73.05 cents/pound, lower than 7.86 cents/pound at the end of the previous month. The 1% tariff discount was RMB 12,406/ton, which was lower than the domestic spot price of RMB 680 during the same period. The price difference between domestic and foreign cotton expanded by RMB 787 compared with the end of the previous month.
The transaction rate of cotton rotation has increased significantly, and the decline in commercial inventories has narrowed. In the second half of the year, the epidemic began to spread abroad, causing an impact on the global commodity market, and international cotton prices fell rapidly. At the end of the month, China’s cotton price index (CCIndex3128B) was 13,086 yuan/ton, a decrease of 747 yuan from the end of the previous month; the monthly average price was 13,418 yuan/ton, a month-on-month decrease of 409 yuan, and a year-on-year decrease of 2,082 yuan. International cotton prices have fallen sharply, and the price gap between domestic and foreign cotton has widened compared with last month. China’s imported cotton price index FC Index M averaged 77.90 cents/pound in monthly terms, down 2.19 cents from the previous month. At the end of the month, it was 73.05 cents/pound, lower than 7.86 cents/pound at the end of the previous month. The 1% tariff discount was RMB 12,406/ton, which was lower than the domestic spot price of RMB 680 during the same period. The price difference between domestic and foreign cotton expanded by RMB 787 compared with the end of the previous month. </p
