Apparel / Textiles & Accessories

Since 2023, China's textile industry has faced a complex international market demand and trade environment, resulting in increased export pressure. According to Chinese customs data, from January to April, China's cumulative export of textiles and clothing reached 92.89 billion US dollars, a year-on-year decrease of 2.9%, and the growth rate was 11.4 percentage points lower than the same period last year. The support of the US market for China's textile industry exports has significantly decreased. According to customs data, China's textile and clothing exports to the US decreased by 15.1% year-on-year from January to April, with a significant decrease in growth rate of 22.5 percentage points compared to the same period last year.

There are three main reasons for the sluggish growth of China's textile industry's exports to the United States

01 Slowing growth in consumer demand for textile and clothing products in the United States

After the COVID-19, the US dollar liquidity continued to ease and the labor participation rate hovered at a low level, triggering 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in order to alleviate inflationary pressure, short-term economic stimulus policies in the United States have gradually withdrawn. However, while inflationary pressure has not yet been completely alleviated, the negative effects of policy withdrawal such as weak demand and reduced employment have been fully manifested, and the driving force for economic and consumer growth is clearly insufficient.

Customs data shows that in the first quarter of 2023, the GDP of the United States increased by 1.6% year-on-year, a slowdown of 2.1 percentage points compared to the same period last year. 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 data from the "Layoff. fyi" website in the United States, as of May, 675 technology companies had laid off over 193000 employees, surpassing the number of layoffs for the entire year of 2022. The Federal Reserve's benchmark interest rate has increased from 0.125% in 2021 to 4.875% in April of this year. Although inflation has decreased, it still reaches 4.9%, far above the normal level of around 2%, while clothing CPI is still fluctuating upwards. In May, the US consumer confidence index was only 57.7, showing a continuous downward trend since this year. In the first quarter, personal clothing and footwear consumption expenses in the United States increased by 4.4% year-on-year, a slowdown of 6.6 percentage points compared to the same period last year; From January to April, the retail sales of clothing and apparel stores in the United States increased by 2% year-on-year, a slowdown of 12.8 percentage points compared to the same period last year.

02 High Commercial Inventory Suppresses Brand Merchants' Import Procurement Demand

Affected by weak demand, the inventory pressure of clothing products in the United States has been showing since the second quarter of 2022 and has been rising 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 statistics of this data were available in 1992, which is only lower than the inventory to sales ratio of 4-6 at the beginning of the COVID-19 outbreak from April to May 2020. Since 2023, brand merchants have generally slowed down their procurement pace and actively reduced inventory, but overall inventory is still increasing month by month. In March, the retail inventory of clothing stores in the United States reached 61.83 billion US dollars, an increase of 8.8% year-on-year and 0.8% month on month. The inventory sales ratio of clothing wholesalers was 30% higher than the same period last year. A recent survey by the Inventory Planner in the United States shows that nearly half of fashion stores still have excess inventory after the first quarter. In the context of sluggish demand and high inventory, the amount and quantity of imported textiles and clothing from the United States have significantly slowed down. In the first quarter of 2023, the total amount of textiles and clothing imported from the world by the United States decreased by 20% year-on-year, while the import quantity decreased by 24.3% year-on-year, with a significant decrease of 30.1% in the import quantity of clothing.

03 International supply chain pattern adjustment and reconstruction, with the proportion of direct imports from the United States decreasing

In recent years, China's proportion in US textile and clothing imports has shown a continuous downward trend. According to customs data, the peak proportion of China's textile and clothing imports to the United States occurred in 2010, with a proportion of 41.2% that year. Since then, it has decreased year by year, and in the first quarter of 2023, it has dropped to 20.6%. Among them, the proportion of cotton textile and clothing products has decreased from 35.4% in 2010 to 12.6%. Part of the reason for the decline in the market share of China's textile and clothing products in the United States is that in recent years, the international textile industry chain and supply chain structure have undergone significant changes. Developing countries such as Southeast Asia and South Asia, relying on factor cost advantages and tariff preferences granted by developed countries, actively undertake the transfer of the textile and clothing industry, especially achieving rapid growth in clothing processing capacity. With the increasingly complex economic and trade cooperation between China and the United States, international buyers are continuously reducing the proportion of purchase orders in China. After the introduction of the so-called Xinjiang related "Act" 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 adjustment process of international industrial and supply chains. They have built production and processing bases in Southeast Asian countries such as Vietnam, Cambodia, and Myanmar, and have transferred some export orders to overseas factories for completion. According to customs data, from 2010 to 2022, the total proportion of Vietnam, India, and Bangladesh in US textile and clothing imports increased from 16.9% to 30.8%; India and Bangladesh accounted for a total of 27.8% of the import volume of cotton textile and clothing products in the first quarter of 2023.

The situation of China's textile and clothing exports to the United States remains complex in the second half of the year

Currently, the demand in 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 situation in the United States shows signs of improvement, with residents' actual disposable income increasing by 3.4% year-on-year in the first quarter, 16.2 percentage points higher than the same period last year; Although the pressure on commercial inventory has not been completely alleviated, there are signs of improvement. The growth rate of retail inventory in clothing and clothing stores in March decreased by 17.4 percentage points compared to 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.