China cotton textile industry performed very well in the time period of Q1 to Q3, 2009. Parameters such as sales revenue, fixed asset investment and profit margin all indicated a reinforced recovering momentum. But four aspects of burdensome encumbrance still widely existed hindering the marching pace of China cotton textile industry.

Excessive capacity and fiercer competition

First and foremost, production capacity of China domestic cotton textile industry has seen phenomenal expanding since after the year 2001, and yet international market demand plummeted because of the global recession led by the financial crisis. Domestic sales competition is becoming more brutal than ever before and contradictions of excessive production capacity against limited market demand gradually emerge. Statistics indicated that cotton textile products and cotton apparels have declined by 14.5% from Q1 to Q3 as contrast to last year. Domestic sales revenue keeps all the way up accounting for 91.68% of overall sales revenue. Profit margin of the whole cotton textile industry for first eight months is merely 3.62%, and yet still declined by 0.13% compared with last year.

Heavy tax burdens

Second, cotton textile industry companies are facing heavier tax burdens. Many companies are unable to absorb the 13% of buy-in tax and 17% sell-out tax. 4% discrepancy is becoming a large gap that far too many textile companies failed to fill and the high cotton import sliding tariff also obstructed the competitive advantage of domestic cotton textile industries.

Equipment and technology obsolete

Third, high added value products only took up a very limited fraction of overall cotton textile industry products. Obsolete technology as well as equipment failed to satisfy the top-class demand. To eliminate obsolete capacity and upgrade the whole industry cannot be treated only as a slogan. Take automatic winding machines for instance, 95% spinning mills in advanced countries have already induced while only 53% of domestic spinning mills are using automatic winding machines.

Limited financing channels

Fourth, capital shortage problem remains widely existed. Banks are extremely cautious to grant loans to small-sized and medium-sized companies.

Source: China Textile Leader