The European Union is one of the important export markets for China’s textile industry. The proportion of China’s textile and clothing exports to the EU to the entire industry reached a peak of 21.6% in 2009, surpassing the United States in scale. Afterwards, the proportion of the EU in China’s textile and clothing exports gradually decreased, until it was surpassed by ASEAN in 2021, and the proportion had dropped to 14.4% in 2022. Since 2023, the scale of China’s exports of textiles and clothing to the European Union has continued to decrease. According to Chinese customs data, China’s exports of textiles and clothing to the EU from January to April reached 10.7 billion US dollars, a year-on-year decrease of 20.5%, and the proportion of exports to the entire industry has decreased to 11.5%.
The UK was once an important component of the EU market and officially completed Brexit by the end of 2020. After Brexit’s Brexit, the EU’s total textile and clothing imports have shrunk by about 15%. In 2022, China’s textile and clothing exports to the UK totaled 7.63 billion dollars. From January to April 2023, China’s exports of textiles and clothing to the UK amounted to 1.82 billion US dollars, a year-on-year decrease of 13.4%.
Since this year, China’s textile industry’s exports to the EU and the English Market market have declined, which is closely related to its macroeconomic trend and import procurement pattern.
Analysis of Consumption Environment
Currency interest rates have been raised several times, exacerbating economic weakness, resulting in poor personal income growth and an unstable consumer base.
Since 2023, the European Central Bank has raised interest rates three times, and the benchmark interest rate has increased from 3% to 3.75%, significantly higher than the Zero interest-rate policy at the middle of 2022; The Bank of England has also raised interest rates twice this year, with the benchmark interest rate rising to 4.5%, both reaching their highest levels since the 2008 international financial crisis. The increase in interest rates increases borrowing costs, constraining the recovery of investment and consumption, leading to economic weakness and a slowdown in personal income growth. In the first quarter of 2023, Germany’s GDP decreased by 0.2% year-on-year, while the GDP of the UK and France increased by only 0.2% and 0.9% year-on-year, respectively. The growth rate decreased by 4.3, 10.4, and 3.6 percentage points compared to the same period last year. In the first quarter, the disposable income of German households increased by 4.7% year-on-year, the nominal salary of British employees increased by 5.2% year-on-year, a decrease of 4 and 3.7 percentage points respectively compared to the same period last year, and the actual purchasing power of French households decreased by 0.4% month on month. In addition, according to the report of British Asadal supermarket chain, 80% of British households’ disposable income fell in May, and 40% of British households fell into a negative income situation. The actual income is not enough to pay bills and consume necessities.
The overall price is high, and the consumer prices of clothing and clothing products are fluctuating and rising, weakening the actual purchasing power.
Affected by factors such as excess liquidity and supply shortages, European countries have generally faced severe inflationary pressures since 2022. Although the eurozone and the UK have frequently raised interest rates since 2022 to curb price increases, the inflation rates in the EU and the UK have recently dropped from their high point of over 10% in the second half of 2022 to 7% to 9%, but still far above the normal inflation level of around 2%. High prices have significantly raised the Cost of living and curbed the growth of consumer demand. In the first quarter of 2023, the final consumption of German households decreased by 1% year-on-year, while the actual consumption expenditure of British households did not increase; The final consumption of French households decreased by 0.1% month on month, while the quantity of personal consumption after excluding price factors decreased by 0.6% month on month.
From the perspective of clothing consumption prices, France, Germany, and the United Kingdom not only did not gradually decline with the easing of inflation pressure, but also showed a fluctuating upward trend. Against the backdrop of poor household income growth, high prices have a significant inhibitory effect on clothing consumption. In the first quarter of 2023, household clothing and footwear consumption expenditure in Germany increased by 0.9% year-on-year, while in France and the UK, household clothing and footwear consumption expenditure decreased by 0.4% and 3.8% year-on-year, with growth rates falling by 48.4, 6.2, and 27.4 percentage points respectively compared to the same period last year. In March 2023, the retail sales of clothing related products in France decreased by 0.1% year-on-year, while in April, the retail sales of clothing related products in Germany decreased by 8.7% year-on-year; In the first four months, the retail sales of clothing related products in the UK increased by 13.4% year-on-year, slowing by 45.3 percentage points compared to the same period last year. If price increases are excluded, the actual retail sales are basically zero growth.
Import situation analysis
Currently, the import volume of textiles and clothing within the EU has increased, while external imports have decreased.
The consumption market capacity of EU textile and clothing products is relatively large, and due to the gradual reduction of EU’s independent supply in textile and clothing, external imports are an important way for the EU to meet consumer demand. In 1999, the proportion of external imports to the total EU textile and clothing imports was less than half, only 41.8%. Since then, the proportion has been increasing year by year, exceeding 50% since 2010, until it falls back to below 50% again in 2021. Since 2016, the EU has imported over $100 billion worth of textiles and clothing from outside every year, with an import value of $153.9 billion in 2022.
Since 2023, the demand for imported textiles and clothing from outside the EU has declined, while internal trade has maintained growth. In the first quarter, a total of 33 billion US dollars were imported from outside, a year-on-year decrease of 7.9%, and the proportion has decreased to 46.8%; The import value of textiles and clothing within the EU was 37.5 billion US dollars, an increase of 6.9% year-on-year. From a country by country perspective, in the first quarter, Germany and France imported textiles and clothing from within the EU increased by 3.7% and 10.3% respectively year-on-year, while imports of textiles and clothing from outside the EU decreased by 0.3% and 9.9% respectively year-on-year.
The decline in textile and clothing imports from the European Union in the UK is significantly smaller than imports from outside the EU.
Britain’s Import of textiles and clothing is mainly trade with the outside of the EU. In 2022, the UK imported a total of 27.61 billion pounds of textiles and clothing, of which only 32% were imported from the EU, and 68% were imported from outside the EU, slightly lower than the peak of 70.5% in 2010. From the data, Brexit has not had a significant impact on the textile and clothing trade between the UK and the EU.
From January to April 2023, the UK imported a total of 7.16 billion pounds of textiles and clothing, of which the amount of textiles and clothing imported from the EU decreased by 4.7% year-on-year, the amount of textiles and clothing imported from outside the EU decreased by 14.5% year-on-year, and the proportion of imports from outside the EU also decreased by 3.8 percentage points year-on-year to 63.5%.
In recent years, China’s proportion in the EU and UK textile and clothing import markets has been decreasing year by year.
Before 2020, China’s proportion in the EU textile and clothing import market reached a peak of 42.5% in 2010, and has since decreased year by year, dropping to 31.1% in 2019. The outbreak of the COVID-19 triggered a rapid growth in demand for European Union masks, protective clothing and other products. The massive import of epidemic prevention materials lifted China’s share in the EU textile and clothing import market to a high of 42.7%. However, since then, as the demand for epidemic prevention materials has declined from its peak, and the international trade environment has become increasingly complex, the market share of textiles and clothing exported by China in the European Union has returned to a downward trajectory, reaching 32.3% in 2022. While China’s market share has decreased, the market share of the three South Asian countries such as Bangladesh, India, and Pakistan has increased most significantly. In 2010, the textile and clothing products of the three South Asian countries accounted for only 18.5% of the EU import market, and this proportion increased to 26.7% in 2022.
Since the so-called “Xinjiang Related Act” in the United States came into effect, the foreign trade environment of China’s textile industry has become more complex and severe. In September 2022, the European Commission passed the so-called “Forced Labor Ban” draft, recommending that the EU take measures to prohibit the use of products manufactured through forced labor in the EU market. Although the EU has not yet announced the progress and effective date of the draft, many purchasers have adjusted and reduced their direct import scale to avoid risks, indirectly prompting Chinese textile enterprises to increase overseas production capacity, affecting the direct export scale of Chinese textiles and clothing.
From January to April 2023, China’s market share in imported textiles and clothing from the European Union was only 26.9%, a decrease of 4.1 percentage points compared to the same period last year, and the total proportion of the three South Asian countries exceeded 2.3 percentage points. From a national perspective, China’s share in the textile and clothing import markets of France and Germany, the main member countries of the European Union, has decreased, and its share in the import market of the UK has also shown the same trend. From January to April 2023, the proportion of textiles and clothing exported by China in the import markets of France, Germany, and the UK was 27.5%, 23.5%, and 26.6%, respectively, a decrease of 4.6, 4.6, and 4.1 percentage points compared to the same period last year.
Post time: Jul-17-2023