China’s textile manufacturing industry, which is the largest in the world and accounts for 7 per cent of the country’s GDP, is in a downward spiral.
The COVID-19 pandemic proved the major reason for decline in demand besides the increase in raw material prices. There are gloomy days ahead as China is losing its space in textile exports to other Asian countries like Vietnam and India.
However, things are going to get much worse as the UK and US banned cotton imports amid allegations of forced labour in China’s Xinjiang even as the European Union is mulling a similar move, reported Financial Post.
There has been a massive loss to the textile industry in China since 2020 while the demand in 2022 has lowered by 40 per cent from the last year.
After the Uyghur Forced Labour Prevention Act (UFLPA) came into force, US companies stopped buying cotton from China. This has come as a big blow to the Chinese economy which is already facing multiple headwinds.
The US ban has choked the supply chain of China’s textile industry as over 3 million tonnes of cotton remained unsold in Xinjiang despite the new harvest season a couple of weeks away.
“Xinjiang cotton used to be the most expensive cotton in the world. Now it has become the cheapest, and still, no one buys it,” said a Chinese cotton-ginning mill owner.
Further, human rights activists are urging Canada, European Union and other major countries to ban products manufactured by forced labour in China, reported Financial Post.
Laura Murphy, a human rights professor at UK’s Sheffield Hallam University, said “The EU also needs to be a leader in passing mandatory human rights due diligence. Both these tools are necessary to ensure that companies address the forced labor and other abuses in their supply chains.”
The ban on such products especially cotton is going to hurt China seriously since the textile industry’s contribution to China’s total exports is over 11 per cent.
The impact of all these factors is quite visible. According to China National Cotton Information Centre, the rate of machines actually turned on at textile factories was 79.7 per cent, which showed a decline of 13.3 percentage points year-on-year, reported Financial Post.
Also, China’s loss is other Asian countries’ gain. India, Vietnam, Bangladesh and Indonesia are getting new clothing orders, which include USD 6 billion worth of textile orders that were originally meant for China.
The Chinese loss of orders is around 90 per cent within a year, said the China Chamber of Commerce for Import and Export of Textiles.
Vietnam has set a record in exports of clothing material. In the first half of 2022, it exported textile products worth 22 billion, which is 23 per cent higher than the corresponding period last year.