Economic activity picked up in China in early 2024, buoyed by stronger exports. The World Bank projected China’s GDP growth at 4.8 per cent in 2024, marking an upward revision of 0.3 percentage points from the December 2023 forecast. The revision reflected stronger-than-expected exports and the impact of policy measures to support the property market and higher fiscal spending.

During H1, 2024, China’s GDP expanded by 5 per cent, aligning with the economic target set at the beginning of 2024. The economic data released by the National Bureau of Statistics (NBS) indicated the expansion in several key areas, including industrial output and foreign trade. The second quarter of 2024 presented a more complex picture. GDP growth slowed to 4.7 per cent y-o-y, and was down from 5.3 per cent in the first quarter. The industry & manufacturing sector saw the highest growth rate, increasing 5.8 per cent y-o-y.

Outside China, the validation of China’s economic growth came from the Conference Board which also forecast China’s real GDP growth of 5 per cent. The US think tank’s Leading Economic Index (LEI) for China decreased by 0.2 per cent in August to 149.7, after remaining unchanged in July. The LEI declined by 1.3 per cent over the six-month period from February to August of 2024. On other side, its Coincident Economic Index (CEI) for the country improved by 0.8 per cent in August to 149.8, following an increase of 0.7 per cent in July. The index grew by 1 per cent over the six-month period from February to August of 2024. LEI provides an early indication of significant turning points in the business cycle and where the economy is heading in the near term, while CEI offers an indication of the current state of the economy.

Plans to upgrade industry

In early 2024, the Ministry of Industry & Information Technology and three other departments jointly released plans to upgrade the overall quality of the textile industry (2023-2025) of China. The plans additionally aimed to ensure that 70 per cent of the country’s textile businesses reach a high level of digitalisation by 2025. Further, the plan also set out seven other priorities for the sector: bolstering independent innovation, integrating high-end textile manufacturing, transitioning to intelligent manufacturing, adopting green and low-carbon circular economic development models, building recognisable brands, ensuring supply chain resilience and optimising regional resources.

Slowdown in manufacturing

The month of September witnessed a deterioration in China’s manufacturing sector that got reflected by a downturn in new orders including exports, after an improved August, as reported by S&P Global Market Intelligence. The headline seasonally-adjusted Caixin China Purchasing Managers’ Index (PMI), a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy, fell to 49.3 in September, down from 50.4 in August. Though the fall was marginal, the rate of decline was the fastest since July last year.

Overall confidence was also affected by concerns over the global economic and trade outlooks. Optimism levels at Chinese manufacturers slipped to the second lowest recorded since data collection for this series began in April 2012. Firms lowered headcounts amid reduced workloads and cost concerns. Purchasing activity declined amid reduced new work inflows and with adequate inventory holdings. In fact, the slowdown in production growth resulted in pre-production inventory holdings rising for a second successive month in September.

Further, the stocks of finished goods accumulated as well, owing to delays in outbound shipping and a drop in new orders. Supply constraints and shipment delays led to another slight lengthening of lead times for the delivery of inputs to Chinese manufacturers. Still the manufacturers managed to keep production on, by working through their backlogs. The slowdown caused a fall in average input prices with export charges also easing as competition intensified.

Seven-month trade

Between January and May, the Chinese exports of textiles, garments and accessories increased around 1.4 per cent to $115.842 billion compared to $114.283 billion in the same five-month period of 2023. A year prior, the exports of garments and accessories totalled to $55.680 billion which increased marginally at 0.2 per cent to $57.126 billion in 2024. Textile products, including yarn and fabric, increased 2.6 per cent to $58.716 billion from $58.603 billion during the comparable period. In May alone, the exports of garments and clothing were recorded at $13.246 billion, and shipments of textile yarn, fabrics and articles amounted to $12.886 billion, yielding an aggregate amount of ~$26.133 billion.

During the same period, China imported textile yarn and fabric products worth $4.591 billion, rising 5.9 per cent over $4.335 billion in the first five months of 2023. In May alone, the imports by China totalled to $0.920 billion.

In the first half of 2024 i.e. from January to June, China achieved a significant value addition in textile exports, when fabric exports comprised nearly 80 per cent of its total exports. Asia’s largest nation exported $42.66 billion in textile products, with fabric exports amounting to $33.983 billion which reflected the country’s consistent focus on fabric exports.

At the same time, China’s exports of home textiles to ASEAN nations decreased 2.8 per cent from $2.311 billion in the first half of 2023 to $2.245 billion in 2024. Since 2022, when it peaked to $5.283 billion, the exports have eased. During the pandemic in 2020, the ASEAN block had become a significant buyer driving China’s exports up to $4.709 billion.

Including July, the cumulative exports of textile and garments grew 1.1 per cent and reached $169.839 billion, driven by a 3.3 per cent rise in textile exports. However, the garment exports witnessed a 0.8 per cent drop with an export value of $26.798 billion in the month of July alone. During the seven-month period, imports of textile yarn and fabrics increased slightly by 0.5 per cent.

Changing trade dynamics

The 2024 Fashion Industry Benchmarking study of leading US fashion companies was released by the US Fashion Industry Association (USFIA) in July. The study found 43 per cent of surveyed companies sourcing less than 10 per cent (18 per cent in 2018) of their apparel products from China in 2024. Almost 60 per cent were reported to no longer use China as their top apparel supplier which is much higher than 25-30 per cent range before the pandemic. In addition, a huge number of companies (80 per cent) admitted to further reducing their apparel sourcing from China over the next two years through 2026.

Although China still maintains the overall market share, it is gradually losing momentum in nearly all key western clothing markets – the US, EU, the UK and Canada. This is mainly because of perceived heightened sourcing risks that is associated with China, ranging from concerns over forced labour in the Xinjiang region to escalating geopolitical tensions involving the country. As a response, China has also been diversifying its clothing exports beyond these markets to Asian members of the Regional Comprehensive Economic Partnership (RCEP) and Africa since 2021. Since these developing economies also aspire to expand their own clothing production and exports, the long-term prospects for their ‘Made-in-China’ demand remains uncertain.

Between June 2023 and June 2024, the average unit price of US apparel imports from China decreased unusually by 7.6 per cent, as an increased supply of Chinese clothing began to suppress market prices. This resulted in a 40 per cent lower unit price of US apparel imports from China than the imports from Bangladesh in the first half of 2024, thus raising the risk of market disruptions. This is feared to potentially lead to additional trade tensions and restrictive measures against Chinese products.

At the same time, Asian countries are also becoming more cautious about using Chinese yarns and fabrics due to the enforcement of anti-forced laws, such as the Uyghur Forced Labour Prevention Act (UFLPA), and the perceived risks associated with sourcing Chinese cotton.

Green transformation guidelines

In August, Communist Party of China’s Central Committee and the State Council released new guidelines to accelerate efforts in the green transformation of industries, services and other social activities to realise the country's pre-set green, low-carbon development goals. The guidelines said that key areas in China's economic and social sectors would see notable progress in green transition by 2030, as, by 2035, the goal is set for the country to witness a massively green, low-carbon and circular economy with economic and social development fully adopting the green and sustainable path. They also targeted the scale of the energy-saving and environment protection industry in China to reach CN¥15 trillion ($2.1 trillion) by 2030. By the same year, the target for non-fossil fuels is to constitute at least 25 per cent of the country's total energy mix.

The guidelines overall set the tone for many aspects of China's green development, including the commitment to green growth, a comprehensive restructuring of the country's industrial system, broad application of green production methods and societal adoption of an eco-friendly lifestyle.

China’s top cities of Shanghai, Beijing, Shenzhen and Guangzhou have already accelerated their pace of green transformation by rapidly replacing pollutant internal combustion engine vehicles with clean electric vehicles, with other tier-2 and tier-3 cities set to follow the suit.

Y-Warm development

Beijing MatrixTech Technologies Co. developed a new thermal insulation material, Y-Warm, in its Beijing laboratory. The developed material processes a pore thickness of 20-280 nanometres, pore diameter 30-190 microns, closed pore rate above 95 per cent and void rate above 96 per cent (substrate is subtracted). The Y-Warm has extremely low thermal conductivity but has multiple practical features, such as moisture permeability, quick-drying, and antimicrobial. While evaluating Y-Warm, SATRA Technology Centre found that four times the weight of a renowned brand is required to achieve the same insulation effect as Y-Warm. Additionally, Y-Warm passed the standard EU test SVHC, which is a safety guarantee for application.

According to Beijing MatrixTech Technologies Co., the tactility of Y-Warm functional textile stays stable and warm after storing at -60°C for a week. In addition, this new material can float on water after being soaked with water several times of the original weight. Even folding 30,000 times at -40°C does not damage the material. Y-Warm has been successfully applied in garments, gloves etc due to its excellent insulation performance and remarkable features. A new application of Y-Warm in shoe wear, set to be launched in the winter, would produce lighter, better warm-keeping and more comfortable shoes.

Cinte Techtextil 2024

Cinte Techtextil China was held at Shanghai New International Expo Centre from September 19-21, 2024, organised by Messe Frankfurt (HK) Ltd; the Sub-Council of Textile Industry, CCPIT; and the China Nonwovens & Industrial Textiles Association (CNITA). Nearly 400 exhibitors from 13 countries and regions participated in the global trade event spanning over 38,000 sq metre of exhibition space. In addition to the high-traffic International Areas which featured the German Pavilion, European Zone, and various overseas brands, the fair also showcased six domestic themed zones and six domestic pavilions covering major market segments and application areas. Suppliers from other countries and regions across Asia and the Middle East also added to the variety of offerings in the International Area.

Fibre2Fashion News Desk (SB - WE)