The Industry Has Known For A Long Time: Pay Attention To The Operation Of China'S Clothing Industry In The First Seven Months

In July, in the face of a more complex and severe international environment and frequent outbreaks of domestic epidemics, China's clothing industry made great efforts to overcome the difficulties and problems of weakening demand, rising costs and overstocking of stocks. The overall operation of the industry continued the development trend of stabilizing and recovering. In addition to small fluctuations in production, domestic sales continued to improve, exports grew steadily, and investment increased well, The efficiency of the enterprise keeps increasing. However, it should also be noted that the rising risk of stagflation in the world economy further increases the risk of weakening international market demand. The downward expectation of domestic residents' income, the lack of consumer confidence, and the enhancement of clothing optional and improved consumption attributes will inhibit the growth of clothing consumption to a certain extent. The sustained economic recovery of China's clothing industry is still facing multiple risks and challenges.

　　  1  Operation of clothing industry

　　 Clothing production fluctuates slightly

In July, affected by factors such as epidemic disturbance and insufficient market demand, the industrial added value of Enterprises above Designated Size in garment industry turned to negative growth again. According to the accumulated data from January to July, the industrial added value and the growth rate of clothing output of the clothing industry showed a continuous downward trend, and the clothing output had a negative growth for two consecutive months, and the recovery rate of clothing production slowed down significantly. According to the data of the National Bureau of statistics, in July, the industrial added value of Enterprises above Designated Size in the clothing industry decreased by 0.2% year-on-year; From January to July, the industrial added value of Enterprises above Designated Size in the clothing industry increased by 3.6% year-on-year, and the growth rate slowed down by 6.8% compared with the same period of last year, and slowed down by 0.8% compared with that from January to June. Over the same period, the garment output of Enterprises above designated size was 13.386 billion, a year-on-year decrease of 1.54%, a decrease of 17.32 percentage points over the same period of last year, and the decrease rate was 0.06 percentage points larger than that of January June; Among them, the output of woven clothing was 5.015 billion pieces, a year-on-year decrease of 0.82%; The output of knitwear was 8.171 billion pieces, a year-on-year decrease of 1.98%.

Figure 1 production growth of clothing industry from January to July 2022

Source: National Bureau of statistics

　　 Domestic market continues to recover

Due to adverse factors such as multi-point spread of domestic epidemic, high temperature and rainy weather, etc., which greatly restricted the social travel and commercial operation of residents, the growth of clothing sales slowed down in July. However, in general, with the effective promotion of consumption policies and measures and the gradual smooth circulation of production in various regions, clothing sales in the domestic market have maintained a recovery trend, online retailing has increased steadily, and the operation of physical stores is getting better. According to the data of the National Bureau of statistics, the retail sales of clothing goods of units above the quota in July increased by 1.3% year-on-year, 1.2 percentage points slower than that in June; From January to July, the total retail sales of clothing goods of units above the quota in China totaled 513.07 billion yuan, a year-on-year decrease of 6.9%, 1.1 percentage points lower than that of January June. Online clothing retail sales maintained a steady growth. From January to July, online retail sales of wearing goods increased by 3.4% year-on-year, 1.0 percentage points faster than that from January to June. The operation of offline stores has improved. According to the statistics of China's national business information center, from January to July, the retail sales of clothing goods of key large-scale retail enterprises in China decreased by 11.3% year-on-year, 1.3 percentage points lower than that from January to June.

Figure 2 clothing sales in the domestic market from January to July 2022

Source: National Bureau of statistics

　　 Export maintained steady growth

From January to July, under the strong support of the sustained recovery of international market demand, China's clothing export continued to maintain a rapid growth on the basis of the high base in 2021, showing a strong development toughness. In addition, there will be more inflation in China, but China's clothing production will not be under normal pressure. According to the data of China Customs, from January to July, China's total exports of clothing and accessories reached US $99.558 billion, up 12.9% year-on-year, 0.9% faster than that of January June; In July, the export of clothing and accessories reached US $19.638 billion, up 18.5% year on year.

Figure 3 export of China's clothing and accessories from January to July 2022

Source: China Customs

The export volume and price of knitwear have risen, and the export unit price of woven clothing has increased significantly. According to the data of China Customs, from January to July, the number of clothing exports was 18.49 billion, an increase of 5.0% year-on-year. The average export unit price was $4.45, up 14.6% year-on-year. Among them, the export volume and export unit price of knitted apparel increased by 10.2% year on year; Due to the rising prices of raw materials and the rapid growth of clothing export with high added value of outdoor commuting, the export volume of woven clothing fell and rose, with the export volume falling by 4.9% and the export unit price increasing by 25.2% year on year. Over the same period, China's exports of gloves made of plastics and vulcanized rubber decreased by 67.3% year-on-year, and the protective clothing made of chemical fiber decreased by 57.0% year-on-year.

China's clothing exports to the main markets increased strongly, while the decline of China's exports to Japan continued to narrow. According to the data of China Customs, from January to July, China's clothing exports to the United States, the European Union and ASEAN amounted to US $239.9 billion, US $20.65 billion and US $8.54 billion, respectively, up 15.7%, 21.8% and 29.3% year-on-year, and the growth rate was 1.19, 2.28 and 1.84 percentage points higher than that of January June; China's clothing export to Japan was US $7.68 billion, down 1.3% year on year, 3.89% lower than that in January June. The above four countries and regions together accounted for 61.1% of China's total clothing export, driving the growth of China's clothing export by 10.0%. Over the same period, China's clothing exports to countries and regions along the belt and road, Latin America and Oceania continued to maintain rapid growth, with growth rates of 13.8%, 35.8% and 18.0%, respectively, driving the growth of China's clothing export by 3.3%, 1.6% and 0.6%. In addition, China's clothing exports to Canada and Russia decreased by 7.2% and 29.1% respectively over the same period of the same period last year, while that to Africa decreased by 6.2%.

Zhejiang, Jiangsu, Shandong clothing export growth rate slightly accelerated, Guangdong exports decreased significantly. From January to July, Zhejiang, Guangdong, Jiangsu, Shandong and Fujian, the top five provinces of China's clothing exports, totaled 72.1 billion US dollars, a year-on-year increase of 12.5%, accounting for 72.4% of China's total clothing exports, down 0.3 percentage points compared with the same period last year. Among them, Zhejiang's clothing exports amounted to 20.74 billion US dollars, with a year-on-year increase of 30.2%. The clothing exports of Jiangsu and Shandong provinces increased by 13.9% and 20.1% respectively, 1.1%, 0.5 and 2.2 percentage points higher than those in January June; Guangdong's clothing export decreased by 5.0% year-on-year, 1.3 percentage points deeper than that in January June; Fujian's clothing export increased by 4.9% year-on-year, 2.2 percentage points slower than that in January June. In addition, Shanghai's clothing export recovered, with a growth rate of 6.3 percentage points faster than that in January June. Clothing exports of Hebei, central and western provinces of Hubei, Sichuan and Hunan increased by 69.4% and 69.4%, respectively.

　　 Enterprise benefit growth under pressure

In July, the efficiency of China's clothing enterprises continued to recover, but affected by multiple factors such as epidemic disturbance, insufficient demand and high cost, the growth rate of main benefit indicators of clothing industry slowed down, and the economic operation continued to be under pressure. According to the data of the National Bureau of statistics, from January to July, there were 13106 Enterprises above Designated Size (annual main business income of 20 million yuan and above) in China's clothing industry, with an operating revenue of 815.937 billion yuan, a year-on-year increase of 3.91%, and a growth rate of 0.54 percentage points slower than that of January June and 7.13 percentage points lower than that of the same period of last year; The total profit was 37.003 billion yuan, with a year-on-year increase of 3.96%. The growth rate was 0.04 percentage points slower than that of January June and 5.86 percentage points lower than that of the same period of last year. The operating efficiency of the industry has slowed down, and the rising cost has made it difficult to improve the profitability. From January to July, the turnover rate of finished products of Enterprises above Designated Size in the clothing industry was 11.83 times / year, a year-on-year decrease of 5.76%; The operating cost increased by 4.68% year-on-year, which was 0.77 percentage points higher than the growth rate of operating revenue. The operating cost per 100 yuan of operating income included the cost of 86.10 yuan, an increase of 0.64 yuan over the same period in 2021; The profit margin of operating revenue was 4.53%, which was the same as that of the same period in 2021.

Table 1 main benefit indexes of clothing industry from January to July 2022

Source: National Bureau of statistics

　　 Good growth of industry investment

In July, the investment in fixed assets of China's clothing industry continued to maintain a rapid growth, and the trend of industrial transformation and upgrading was obvious. According to the data of the National Bureau of statistics, from January to July, China's clothing industry completed a year-on-year increase of 32.8%, with a growth rate of 27.6 percentage points higher than that of the same period in 2021, and 21.7 and 22.9 percentage points higher than the overall level of the textile and manufacturing industries.

Figure 4 growth rate of fixed assets investment in clothing industry from January to July 2022

Source: National Bureau of statistics

　　  2  Analysis on the running trend of clothing industry

　　 Garment export faces great uncertainty

Affected by the repeated epidemic situation in various countries, the slowdown of global economic growth, the deterioration of macro expectation and the rise of inflation, the consumer confidence index of developed countries such as Europe and the United States has continued to decline, and the consumption expectation has declined. Clothing wholesalers are facing high inventory pressure. The possibility of reducing foreign demand will have an impact on China's clothing export. The US consumer confidence index fell to 51.1 in July, far lower than 80.8 in the same period last year; In July, the consumer confidence index of the euro area continued to decline to - 27, the lowest level since 1985; Japan's Central Bank of Japan's economic growth is expected to decline from 21.2% in fiscal year 2029 to February 2.2% in Japan's economic growth forecast. All these indicate that the consumption level of major developed economies in the second half of the year will be lower than that in the first half. With the "normalization" of the epidemic situation, American and European garment enterprises continue to promote the diversification strategy of procurement for the sake of supply chain security and cost, and increase the amount of clothing procurement in India, Bangladesh, Vietnam and other countries. In addition, affected by the US ban on Xinjiang cotton, overseas orders flow from China, and the high cost of testing Xinjiang cotton, the attitude of domestic garment enterprises to accept orders is relatively cautious. Facing the complex international environment, China's clothing export will face more severe challenges.

　　 Slow recovery of domestic consumption demand

Affected by the epidemic situation, the overall domestic consumption is relatively weak, and the consumption capacity and consumption level of residents have declined significantly. In July, the total retail sales of consumer goods increased by 2.7% year-on-year, still very low. According to the survey report of urban depositors in the second quarter of 2022 released by the central bank on June 29, the proportion of residents who tend to "save more" in the second quarter accounts for 58.3%, up 3.6 percentage points compared with the previous quarter, which shows that residents prefer saving rather than consumption. Under the influence of residents' consumption tendency, the recovery of domestic clothing consumption demand is relatively slow, which has not returned to the level before the epidemic, and the sales volume of some enterprises has declined significantly. In addition, the demand changes of domestic clothing consumption market present the characteristics of diversity and complexity. The demand of consumers changes from quantity to quality, which puts forward higher requirements for product quality, professionalism and functionality. This requires enterprises to improve the pertinence of products through supply side reform and increase professional, functional and scene design, so as to further stimulate consumer demand.

　　 Clothing enterprises move forward under pressure

Affected by multiple factors, such as the spread of domestic epidemic, the rise of raw material prices and the weakening of short-term consumer demand, the clothing industry has been under great pressure. In the middle of July, a number of clothing listed companies successively issued semi annual performance forecasts, and some enterprises' performance decreased significantly. The main reason is that affected by the epidemic situation, some offline stores can not operate normally and retail passenger flow is reduced. At the same time, high operating costs of raw materials, logistics and stores also erode the company's profits. In the face of rising manufacturing and export costs, small and medium-sized enterprises continue to increase the pressure of production and operation, and problems such as poor collection of funds, high cost and tight funds are prominent. According to the data of the National Bureau of statistics, the PMI of small and medium-sized enterprises were 48.5% and 47.9% respectively in mid July, down 2.8% and 0.7% compared with the previous month. With the arrival of the "golden nine silver ten" consumption season, the consumer demand for autumn and winter clothing will promote the market repair, but at the same time, the market competition is also more intense. While launching high-quality, personalized and functional products, garment enterprises should constantly expand sales channels, strengthen the connection and interaction with consumers through online and offline marketing activities, and improve the profitability of enterprises.

(source: China clothing association)