Trade with China: US ban on Xinjiang looms even as textile and apparel exports hit record $33 billion in July
China’s textile and apparel industry saw a surprising rise in export value last month, despite the United States’ sweeping ban on products from the region which produces 90% of the country’s cotton.
Monthly textile and apparel exports beat expectations and rose 17.5% from a year earlier to a record high of $33.22 billion in July, according to data released by Chinese customs on Sunday.
The value also rose 5.3% from June, when Washington’s Uyghur Forced Labor Prevention Act went into effect.
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But industry insiders said the momentum did not accurately reflect the strength of the industry as July exports largely came from orders placed months earlier, while the surge may also have been caused. by rising prices.
Exports are a lagging indicator of the industry
“Exports are a lagging indicator of the industry,” said Alex Chen, general secretary of the Wenzhou Garment Chamber of Commerce.
“Garments exported in July were finished in June or earlier, when orders could have been placed by downstream customers in the second half of last year.”
Garment exports from Wenzhou, a manufacturing hub in eastern China, rose 42.55 percent in the first five months of 2022 from the same period last year, according to Chen, but he foresees increased challenges for the rest of the year.
“The whole industry has been impacted [by the US law]and in the future, with other issues such as the tensions around Taiwan, the continuing conflicts between Russia and Ukraine, the Sino-American relationship may become more subtle and then affect more [the garment exports to the US],” he added.
Higher prices for cotton products transmitted through soaring commodity prices may also have contributed to the surge in the value of exports.
China exported 3.62 million tons of cotton products in the first half of the year, an increase of 2.73 percent year on year, while the export value rose 15.05 percent to 43 .07 billion, according to Beijing Cotton Outlook Consulting on Monday.
The smothering effect of US bans world’s largest textile maker may have already surfaced, according to recent industry statistics.
As China’s official manufacturing purchasing managers index fell to 49 in July, According to Zhao Qinghe, senior statistician at the National Bureau of Statistics, it was mainly driven by textiles and other industries which continued to be in the contraction range and significantly below the overall level of manufacturing.
Meanwhile, in the first six months of the year, the added value of China’s textile industry fell 1.1 percent year on year, which is lower than the growth rate of industrial enterprises in general, according to data from AskCI Consulting, an industry research and consulting firm. service provider based in Shenzhen.
Total profits for China’s textile industry fell 5.3% from a year ago to 42.63 billion yuan ($6.3 billion) in the first half of 2022, AskCI figures show. Consulting.
While a fifth of the world’s cotton is effectively banned from entering the US market, the price has risen further due to the pressure caused by the war in Ukraine.
But the price of Xinjiang cotton has continued to fall as it has been increasingly shunned by downstream manufacturers who fear breaching the U.S. ban, despite state storage started last month.
Under the terms of the law, US imports of all products from Xinjiang are prohibited unless “clear and convincing” evidence shows that no forced labor was involved in their production.
The price of cotton futures on the Zhengzhou Commodity Exchange has been reduced by more than 30% since May, closing at 14,225 yuan ($2,106) a ton on Wednesday.
“The pressure is enormous,” said the owner of a cotton gin in southern Xinjiang, who spoke on condition of anonymity due to the sensitivity of the issue.
“More than 2 million tons of Xinjiang cotton currently occupy inventory space, and the new harvest season is looming, which will add another 6 million tons to unsold inventory.”
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