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Three Factors Lead To Increased Pressure On China'S Textile And Clothing Exports To The United States

2023/6/2 14:13:00 0

U.S.A

Since 2023, China's textile industry has faced more complex international market demand and trade environment, and increased export pressure. According to Chinese customs data, from January to April, China's textile and clothing exports totaled US $92.89 billion, down 2.9% year on year, and the growth rate was 11.4 percentage points lower than that of the same period last year. The supporting role of the U.S. market on China's textile industry exports has significantly declined. From January to April, China's textile and clothing exports to the United States fell 15.1% year on year, and the growth rate dropped significantly by 22.5 percentage points compared with the same period last year.

1、 The export growth of China's textile industry to the United States is weak Mainly Three reason

　　01 The growth of consumer demand for textile and clothing products in the United States slowed down

After the outbreak of COVID-19, the liquidity of the US dollar continued to ease and the labor participation rate hovered at a low level, which triggered the US inflation rate to rise all the way. Fiscal policy is an important factor supporting the growth of market consumption. Since last year, in order to alleviate the inflationary pressure, the short-term economic stimulus policies of the United States have been withdrawn. However, when the inflationary pressure has not been completely alleviated, the negative effects of the withdrawal of policies such as weak demand and employment reduction have been fully manifested, and the economic and consumption growth momentum is obviously insufficient.

In the first quarter of 2023, the U.S. GDP grew by 1.6% year on year, 2.1 percentage points slower than the same period last year, and the number of layoffs and layoffs increased by 19.8% year on year, 30 percentage points higher than the same period last year. According to the data of "Layoffs.fyi" website in the United States, as of May, 675 technology enterprises had laid off more than 193000 people, exceeding the number of layoffs in 2022. The benchmark interest rate of the Federal Reserve has increased from 0.125% in 2021 to 4.875% in April this year. Although the inflation rate has declined, it still reaches 4.9%, which is far higher than the normal level of about 2%. The clothing CPI is still surging. In May, the US consumer confidence index was only 57.7, showing a continuous downward trend since this year. In the first quarter, the consumption expenditure on personal clothes and shoes in the United States increased by 4.4% year on year, 6.6 percentage points slower than the same period last year; From January to April, the retail sales of clothing stores in the United States increased by 2% year on year, 12.8 percentage points slower than the same period last year.

Figure 1: Federal Reserve's benchmark interest rate and clothing CPI

Source: Bank for International Settlements, U.S. Bureau of Labor Statistics

Figure 2: Cumulative year-on-year growth of consumption expenditure on personal clothes, shoes and shoes in the United States

Data source: US Bureau of Economic Analysis

Figure 3: US layoffs and consumer confidence

Source: U.S. Bureau of Labor Statistics, University of Michigan

　　02　 High commercial inventory inhibits the import purchase demand of brand merchants

Affected by weak demand, the inventory pressure of American clothing products began to appear in the second quarter of 2022, and rose all the way. The inventory of clothing retail stores exceeded $60 billion in June, with a year-on-year growth rate of 32%. The inventory to sales ratio of clothing wholesalers in December reached 3.26, the highest level since the data was available in 1992, and only lower than the inventory to sales ratio of 4-6 at the beginning of the outbreak of COVID-19 in April May 2020. Since 2023, brands have generally slowed down their procurement and actively destocked, but the overall inventory is still increasing month by month. In March, the retail inventory of clothing stores in the United States reached $61.83 billion, up 8.8% year on year and 0.8% month on month. The inventory sales ratio of clothing wholesalers was 30% higher than that of the same period last year. According to a recent survey by the American Inventory Planner, nearly half of fashion stores still have excess inventory after the first quarter. In the case of low demand and high inventory, the amount and quantity of textile and clothing imports from the United States have slowed down significantly. In the first quarter of 2023, the total amount of textile and clothing imports from the world by the United States has decreased by 20% year-on-year, and the number of imports has decreased by 24.3% year-on-year, of which the number of clothing imports has significantly decreased by 30.1%.

Figure 4: Retail and wholesale inventory of clothing products in the United States

Data source: US Census Bureau

Figure 5: Cumulative year-on-year growth in the amount and quantity of textile and clothing imports in the United States

Data source: Textile and Clothing Office of the US Department of Commerce

　　03　 The pattern of international supply chain has been adjusted and restructured, and the proportion of direct imports from the United States has declined

In recent years, China's share of textile and clothing imports in the United States has continued to decline. According to the relevant statistics of the U.S. Department of Commerce, the peak proportion of China's textile and clothing imports in the United States appeared in 2010, accounting for 41.2% in that year. Since then, it has declined year by year. In the first quarter of 2023, it has dropped to 20.6%, of which the proportion of cotton textile and clothing products has dropped from 35.4% in 2010 to 12.6%. The decline in the market share of China's textile and clothing products in the United States is partly due to the important changes in the international textile industry chain and supply chain structure in recent years. Southeast Asia, South Asia and other developing countries actively undertake the transfer of textile and clothing industry, especially the rapid growth of clothing processing capacity, relying on the cost advantage of factors and tariff preferences given by developed countries. With the increasingly complex economic and trade cooperation between China and the United States, the proportion of international purchasers' purchase orders in China has been continuously reduced. After the so-called Xinjiang related "Act" was introduced by the United States, the trend of cotton product purchase orders flowing out of China is more obvious. In order to avoid trade risks and improve the efficiency of international layout, Chinese textile enterprises have also participated in the process of international industrial chain and supply chain adjustment. They have built production and processing bases in Vietnam, Cambodia, Myanmar and other Southeast Asian countries, and transferred some export orders to overseas factories for completion. From 2010 to 2022, the combined share of Vietnam, India and Bangladesh in the textile and clothing imports of the United States will increase from 16.9% to 30.8%; India and Bangladesh accounted for 27.8% of the import of cotton textile and clothing products in the first quarter of 2023.

Figure 6: The proportion of China's textiles and clothing in the US import market

Data source: Textile and Clothing Office of the US Department of Commerce

Figure 7: Change of import market share of American cotton textile and clothing products

Note: The three countries in South Asia refer to India, Bangladesh and Pakistan

Data source: Textile and Clothing Office of the US Department of Commerce

2、 The situation of China's textile and clothing exports to the United States in the second half of the year is still complex

At present, the demand of the US market is sluggish and consumer confidence is insufficient, but various positive factors that promote the recovery of consumption are gradually accumulating. The personal income of the United States showed signs of improvement. The real disposable income of residents in the first quarter increased by 3.4% year-on-year, 16.2 percentage points higher than the same period of the previous year; Although the pressure on commercial inventory has not been completely alleviated, it has begun to show signs of improvement. In March, the growth rate of retail inventory in clothing stores decreased by 17.4 percentage points compared with the same period last year. However, since March, the crisis in the US financial industry has increased the risk of economic recession, and also brought uncertainty to the recovery of consumption. The US debt has reached the ceiling, and there is no consensus on the solution, which will have a negative impact on the improvement and recovery of the US and even the global economy. The recovery of the consumer side is also highly uncertain.