Apparel / Textiles & Accessories

India's new crown pneumonia epidemic is still worsening

According to data from the Ministry of Health of India on May 12, India has 348,421 new confirmed cases of new crowns, and a total of 23,340,938 confirmed cases; 4,205 new deaths and a total of 254,197 deaths. The University of Washington Institute of Health Measurement and Evaluation (IHME) model predicts that by August 1, the number of deaths from the new crown pneumonia epidemic in India may reach a staggering 1 million cases.

The out-of-control epidemic is impacting India's position in the global trade landscape.

Guohai Securities Research Report believes that India's position in the global trade chain is not leading, so its impact on global trade may be limited. However, the Indian epidemic has curbed India's advantageous industries such as textiles and garments, crude oil refining and chemical industries, and pharmaceuticals. Considering that parts of Southeast Asia adjacent to India have been affected to a certain extent, it will have a positive effect on the exports of related Chinese companies.

Textile order transfer to China

Under the impact of the epidemic in India, consumer electronics and textile industries have also been affected.

India is the world's largest cotton producing country, the largest jute producing country, and the second largest silk producing country. Its yarn production capacity accounts for 22% of the world's total, and the textile industry accounts for approximately 15% of India's total export revenue. Due to the impact of the epidemic, many large-scale export-oriented textile companies in India cannot guarantee normal delivery. Therefore, some retailers have transferred multiple production orders in India to China for production in order to ensure that the supply is not affected.

According to data from the consulting agency Wazir Advisors, India’s main garment production centers, Delhi and Bangalore, are experiencing serious COVID-19 outbreaks, with workers’ absenteeism rates as high as 50%.

Affected by the transfer of Indian orders, the A-share apparel and home textile sector index has been rising for three consecutive months since February this year. Among them, Jinhong Group (603518.SH), Kingfa Rabbi (002762.SZ), Langzi (002612.SZ), Smith Barney Apparel (002269.SZ) and other stock prices rose more than 100%.

398.2 billion! China's textile raw material exports soared in the first quarter

According to a report by the Global Times citing foreign media sources on May 8, PinPoint analysts pointed out that China’s export growth is once again surprising. The main reason behind this is the recovery of US demand and the counterattack of the Indian epidemic. Due to the influx or transfer of a large number of orders to the Chinese market.

Statistics show that in the first four months of this year, China’s total exports reached 6.32 trillion yuan. What's more surprising is that in the first quarter of this year, the total export value of China's textile raw materials and textile products reached 398.228 billion yuan, a year-on-year increase of 27.7%. In fact, since May last year, China’s cotton production has continued to surpass India. Even if Western countries boycott Xinjiang cotton on the pretext of "human rights issues," this did not have much impact. Instead, China’s textile raw material exports in the first quarter There is a skyrocket, which undoubtedly makes Western resistance a laughing stock.

Under the suppression of Western countries, although some key products and enterprises in Xinjiang have been sanctioned, Xinjiang's cotton exports have not decreased but increased. According to Hong Kong’s South China Morning Post, data from the General Administration of Customs showed that Xinjiang’s exports to the United States surged 113% year-on-year in the first quarter. It can be seen that the impact of Western sanctions on the Chinese raw material market is quite limited, especially after the outbreak of the epidemic in India, due to the impact of local raw material production capacity, many orders have been transferred to China, which has ushered in new opportunities in the Chinese raw material market.

India’s export of textile raw materials has been overtaken by China. This may be just the beginning. If the epidemic cannot be controlled as soon as possible, India will be overtaken in more ways.

According to the research report of CITIC Securities, in the context of the current outbreak, India's demand for China's medical and anti-epidemic materials is expected to increase, which in turn will stimulate the export of related medical equipment, plastics, and textile products.

However, the GF Securities Research Report pointed out that in the medium and long term, if India’s domestic production capacity is restored, the continuity of order transfer is uncertain, because the positioning of Indian products is still different from that of China, and China’s domestic labor costs are not dominant. .