China’s government will support textile industry

China’s government will support textile industry

China’s industrial activity peaked in June, according to official and private investigations. These good results are due to the government’s support, especially for textile industry.

China maintains its dominant position in textile manufacturing and its position as the second largest economy in the world at the same time. Beijing will probably announce new stimulus measures in the coming months.

 

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Chinese Textile Companies’ situation

The Production at g Big Chinese textile group (sales amout more than $3.3 million) rose by 13.3% in the 1st 6months of 2013 from a year earlier, to $488 billion.

China’s exports manufacturer of textiles grew by 12% in the first half of the year to $127 billion, despite rising local  wages and tepid global consumption of yarn.

But demand and manufacturing at home is facing that :

Overseas shipments that generated 37% of fabric and yarn sales in 2002 today account for only 16%

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The Chinese Economy

The index of the official PMI (Purchasing Managers’ Index) – published by the National Bureau of Statistics – peaked at 51  in June, in line with market expectations and following the index of May (50.8).

“The economy has turned the corner, but it will take time for the recovery more broad based. Investments in infrastructure should pick up more strongly in the coming months to raise the demand,” said Julia R Wang, an economist at HSBC Hong Kong.

“Meanwhile, the slowdown in the housing market continues to pose downside risks to growth in the second half of the year. We expect fiscal and monetary policies remain accommodative until the recovery is sustainable “.

Chinese governement will take a series of measures

The government has unveiled a series of measures modest recovery in recent months to give a lift to economic growth, which fell to a 18-month low in the first quarter. These measures included targeted reductions in reserve requirements for some banks to encourage more lending, rapid budget disbursement and construction of railways and accelerate social housing projects.

Monday, China’s banking regulator has announced changes in the way it calculates the ratio (LDR) bank loan to deposit to help channel more credit to the real economy.

More government support may be needed

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Example of a Chinese group

With Texhong’s $56 million acquisition in 2014 is still of a smaller domestic player, you can find more potential in China through consolidation.

“The superior will survive, and the inferior will be squeezed out,” he says of the country’s 10,000 yarn and fabric makers. And of China’s textile industry as a whole, “The lack of big companies in the industry is an opportunity.” 

 

Nie Wen, an economist at Hwabao in Shanghai

“Targeted policy easing will continue in the second half. Government may strengthen policy measures if it really wants to achieve the target of 7.5 percent,” .

“the ability to cut reserve requirements for all banks still exist if growth in the third quarter disappoint”.

A recent Reuters poll showed analysts expect annual GDP growth to slow to 7.3 percent in the second quarter. They expect that the annual growth of 7.3 percent in 2014, the lowest in 24 years. via Forbes

 

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