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Challenges confronted by textile and apparel exports at present

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  Textile industry generally depends on exports in the first half of year and relies on domestic sales in the second half of year, but compared with 2021, textile orders of this year have been unsatisfactory so far. The seasonal demand is still expected to come later, but the improvement may not exceed expectations and orders of export market are still challenging this year.

  

  

  

  Firstly, from the perspective of overseas clothing retail and inventory, the growth rate of apparel retail in the US has started to decline from a high level in the context of high inflation. At the same time, the delivery of stocks stranded at the ports is accelerating with the easing of congestion in overseas port.

  

  

  

  The wholesale inventory of apparel fabrics in the US is also recovering rapidly, so there is smaller room for further restocking from overseas market.

  

  

  

  Apparel wholesalers have witnessed falling inventory to a low level since the COVID-19 outbreak in 2020 and they are urgent to place orders due to good consumption but difficulty in restocking, including real demand and speculative demand. But now the growth rate of apparel consumption is slowing down and port congestion starts to be alleviated. Moreover, the sea freight has been falling, except for the North American route and stocks stranded at the ports are gradually delivered. Coupled with high crude oil price at present, maybe they are not so eager to place new orders.

 

 

  Secondly, Southeast Asian countries have resumed operation. In recent months, the textile and apparel exports in major countries have recovered rapidly, and there is high expectation for the export targets this year. Taking Vietnam as an example, the country has set its target for 2022 based on three scenarios: the first scenario is the most optimistic, assuming the epidemic is under control in the first quarter of 2022, the export value can hike to 42.5-43.5 billion USD. The second scenario is more neutral, assuming the epidemic is under control in the middle of the year, the total export value is expected to reach 40-41 billion USD. The third and worst case, the epidemic will continue to spread until the end of 2022, and the total export value will reach 38-39 billion USD. According to the second neutral scenario, the target growth rate of Vietnam's textile and apparel exports in 2022 can be 26%, while the growth rate in 2021 is 9%.

  

  
  Finally, the continuous appreciation of RMB will also suppress the export of textiles and apparels in the short term. Since the beginning of this year, RMB has been rising in fluctuation. On the first trading day of 2022, the central parity rate of the RMB against the USD was 6.3794, which was 6.328 by Feb 24, an increase of more than 500 basis points.

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