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China's textile and clothing export data belie reports of sluggish global markets

China's textile and clothing export data belie reports of sluggish global markets Source:
Date: 14-05-2013
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According to data published by China Customs on May 9, the nation’s textile and apparel exports soared in value by 33.26% during April, compared with March and by 18.59% versus a year earlier. The cumulative value during the first four months of the year showed an increase of 16.53% compared with the corresponding period last year.
However, many local sources have questioned whether the figures paint an accurate picture of the market situation. Anecdotal evidence indicates that most Chinese exporters struggled to increase sales in global markets during the period under review.
The recent China Import and Export Fair (Canton Fair), a barometer of Chinese export activity, was dominated by a pessimistic business climate. The total value of deals concluded at the Fair was US$35.5 billion, 1.4% lower than last year. Regarding the textile and garment sectors specifically, several CEOs of large enterprises interviewed by China Business News confirmed their revenue from overseas market shrank more than 10% and they did not expect a turnaround in sales in the short term. Moreover, the same business owners expressed anxiety over their continuing viability, under mounting pressure from surging production costs, labour shortages, weak demand and the appreciation of renminbi.
Data from other sources also cast doubt on the reliability the China Custom figures.
According to information from China’s Textile Council, stocks held by the main apparel companies hit historic highs last October and there is no encouraging sign of immediate relief from that burden.
The export element of the Purchasing Manager Indexes (PMI) for April, published by HSBC Group and the National Bureau of Statistics, were 48.4 and 48.8 (50 being the watershed between contraction and expansion), respectively.
During the last ten weeks, the China Containerised Freight Index, a measure of ex-China freight rates published by the Shanghai Shipping Exchange, declined around 3%, from 1152.47 of February 22, to 1101.57 of May 3. The volume of containers passing through the main local ports increased by merely 8% during the first quarter.  Fourteen ship building firms in China have sought bankruptcy protection since July 2012.
Data from China’s Ministry of Commerce reveal that China’s total global market share of exports has contracted from 40% in 2008, its pinnacle, to 35% last year.
The stark contrast between the textile and apparel trade data and business fundamentals could be explained by the accelerated appreciation of Chinese currency. One of the main stated aims of the recently installed bureaucracy, following last year’s party elections, was the dismantling of exchange controls on capital accounts. A widening in the trading range of the renminbi on international monetary markets is widely anticipated. Speculators, eager to take advantage of any appreciation in the local currency may be using trade as a means of bringing foreign currencies into China for conversion into renminbi, not necessarily selling to end-users or retailers. A similar phenomenon was witnessed in 2005.
During the first quarter, exports from Guangdong province, a major textile and apparel manufacturing hub, were close to 9.0% higher than the corresponding timeframe last year. However, exports out of Shenzhen, a city in the province, skyrocketed by 68.8%. Evidence exists containers have been transported frequently between Shenzhen and Hong Kong.
The government’s tax rebate policy, designed to boost exports, may also have skewed export data. The State Tax Bureau has simplified the process for claiming the rebate and raised the rate from December 2012.
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