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Chinese textile producers get more overseas orders

Date: 2021-05-10

With COVID-19 infections continuing to surge, India is facing growing pressure to maintain the normal operation of global supply chains. As a result, many European and American textile orders are now coming China’s way.

The second wave of the epidemic in India has intensified, as the country has been witnessing a spike in daily infections since mid-April -- more than 200,000 new confirmed cases daily, and the number of deaths has also shown an upward trend. This has far exceeded the peak of the first wave of the epidemic in 2020. On May 1, India reported a record 402,000 confirmed cases in the most recent 24-hour period.

Official data show that in 2020, total trade between China and India reached $87.59 billion, of which China's exports to India amounted to $66.73 billion and imports from India amounted to $20.86 billion.

The raging epidemic in India will undoubtedly have a serious impact on foreign trade and freight forwarders engaged in Sino-Indian trade, as India has already had news of a shutdown in the port and logistics industry.

Kandla Port, the nearest container port to New Delhi, India, recently announced that due to the sudden increase in COVID-19 cases, all terminal operators in the port have unilaterally decided to cease operations on the weekend starting April 24 in order to prevent the further spread of the epidemic until further notice.

This is the first port to announce a partial closure of terminal operations, and more Indian ports are likely to be forced to cease operations in the future. In view of this, some domestic logistics companies have issued notices to suspend the collection and transportation of goods.

At the same time, this suspension and blockade have severely harmed Indian companies. In addition, other issues, such as the decrease in the value of the rupee against the US dollar, blocked transportation, and the abandonment should be heeded by foreign trade companies exporting to India.

However, the textile industry in China may face short-term benefits.

India is the world's largest cotton producer and the world's second largest textile manufacturer and exporter. Its yarn production capacity accounts for 22 percent of global yarn production.

Since the second half of last year, due to the severe situation in India, some European and American retailers have transferred a number of orders from India to China for production, aiming to receive them on time.

From January to December 2020, China’s textile and apparel exports totaled $291.22 billion, a year-on-year increase of 9.6 percent.

A labor shortage and increasingly restrictive measures in India may further impact its garment and textile industry.

Data show that in the first quarter of this year, China’s textile and apparel exports reached $65.1 billion, a year-on-year increase of 44 percent. Among them, textile exports were up 40.3 percent year-on-year, reaching $31.81 billion, while apparel exports were up 47.7 percent year-on-year, reaching $33.3 billion.

In addition, the epidemic in India is also affecting cotton growing, which is now in its sowing season, whereas the cotton market in China has recovered significantly. CITIC Securities' research report on April 25 said that cotton prices are expected to rise due to the promising news.

Many Chinese textile companies have received returned orders, and the amount is expected to increase further from May to June.

The head of a large-scale yarn enterprise in Jiangsu province said many returned orders were made by European and American customers directly, or transferred from customers in Southeast Asia.

Luolai Lifestyle Technology Co, a leading domestic textile company, witnessed an increase of 47.69 percent in operating income in the first quarter of 2021, amounting to 1.32 billion yuan ($204.9 million). In addition, its net profit attributable to the parent company reached 183 million yuan, a year-on-year increase of 156.15 percent.

Bros Eastern Co, a domestic leader in color spinning, reported an increase of 190 percent to 230 percent year-on-year in net profit attributable to the parent company in the first quarter of 2021, amounting to 135 million to 164 million yuan.

A worker at Bros Eastern Co said that their company has gradually recovered productive capacity since the fourth quarter of last year. The company’s performance in the first half of this year is expected to see a sharp improvement compared with the same period in 2020 and even better than in the same period in 2019.

Some analysts pointed out that the rebound of the epidemic in emerging markets may allow China to maintain its export advantage for a period of time. If the epidemic in India, Brazil, Southeast Asia, and other countries resurges, industrial production and exports may be affected, which will benefit countries that are able to better control the epidemic.

For example, since last year, China and Vietnam have managed to contain the virus, resulting in significant export growth for the two countries at the expense of other Southeast Asian countries.