China's textile industry: Added value upgrade, stability highlights, new opportunities for global expansion

4) Adhere to sustainable development, eliminate and optimize high-emission and high-pollution production capacity: The textile "14th Five-Year Plan" pointed out that by 25 years, the textile industry is required to reduce energy consumption and carbon dioxide emissions per unit of industrial added value by 13.5% and 18%, respectively, and the water reuse rate of the printing and dyeing industry has increased to more than 45%. The output of biodegradable materials and green fibers increased by more than 10% annually, and the annual processing volume of recycled fibers accounted for 15% of the total fiber processing weight. The "China Chemical Fiber Green Development Plan" points out that by 2020, caprolactam production lines with unit energy consumption 25% higher than the advanced value in 2017 and processing costs 30% higher will be eliminated or optimized; Eliminate or optimize the production line of recycling and reuse polyester bottle flake with the unit comprehensive energy consumption higher than the 2017 advanced value by more than 20%, the wastewater discharge higher than 40%, the COD discharge per unit product higher than 10%, and the processing cost higher than 30%.

Trend 2: The epidemic highlights the stability of China's supply chain and its global core position

Under the digital wave, brands pay more and more attention to real-time capture and response to changes in consumer demand, and gradually build a channel system that faces consumers and shortens the whole industrial chain. With the improvement of the brand's demand for supply chain response speed and delivery reliability, cost is no longer the most core factor for brands to consider suppliers, and companies that can reduce waste by improving commodity sell-out and turnover efficiency, feed the supply chain and enhance product power, and gradually build a new core competitiveness. In this context, China's textile manufacturing industry with a complete industrial chain supporting and advanced production technology reflected in the short delivery, high quality and other advantages to gain brand favor. Especially during the epidemic, textile orders returned to China, proving the advantages of the reliability of the Chinese supply chain.

The impact of the epidemic in Southeast Asia can be seen from several perspectives:

1. Nike and Adidas have lost hundreds of millions of pieces of production capacity due to the epidemic in Vietnam, and the losses will continue in the next two quarters

Adidas management pointed out in early November 21 that the blockade in Vietnam has led to the loss of 100 million pieces of production capacity in the second half of the year, and the actual situation of Vietnam's unsealing and workers' rework is slower than the company expected, the company expects that 21Q4 and 22Q1 revenue will continue to lose due to the epidemic in Vietnam. Losses amounted to 400 million euros and 600 million euros, respectively, for a total of 1 billion euros. Coincidentally, in late October this year, a senior analyst of BTIG in the United States said that Nike will lose about 116 million pairs of shoe production capacity due to the epidemic in Vietnam.

2. The shortage of supply has led to sharp price increases in the US retail industry this year

Affected by the ongoing lockdown of the epidemic in Southeast Asia, the power rationing in China and the global shipping congestion, the retail industry has experienced a reduction in production capacity of different categories of goods this year, resulting in higher prices. According to the US Bureau of Labor Statistics, the current inventory sales ratio of the US retail industry is far lower than the level of 10 years ago, footwear prices rose 4.6%/5.1%/6.5% from July to September this year, and American clothing/sporting goods rose 10%/16% compared to last year on Black Friday. FDRA also pointed out that footwear prices in the United States so far this year have increased at the fastest pace in more than 20 years.

Since the epidemic, China's supply chain advantages have been highlighted, and its export share has been significantly increased:

1) China's textile export share in the past 20 years +8p.p., clothing share reversed: In 2020, under the impact of the epidemic, Vietnam's textile and shoe exports continued to decline year-on-year, and the export share of clothing and textiles also increased rapidly from the past to just flat; India's share of textile/garment exports was -1.0/0.6p.p. to 4.6%/3.1% respectively. At the same time, China, due to the rapid recovery after the epidemic, quickly undertook a large number of global textile orders, in the case of global textile exports declined year-on-year, China's annual textile exports increased by 29%, the share increased by 8p. To 47%, the share of apparel exports rebounded for the first time since 2014, +0.9p.p. To 34 per cent.

2) 21 years of Vietnam blockade, China's textile and apparel exports accelerated growth: in the first half of 21 years, Vietnam's textile and footwear exports recovered rapidly, but since the end of July, the epidemic blockade led to Vietnam's exports from August to October in a low base still fell significantly, footwear exports fell even 40%. In contrast, China, with its superior supply chain and stable production environment, took over more orders, apparel export growth accelerated significantly after August, and textile export growth also resumed growth from a high base last year.