CNTEX: Can China textile and apparel industry decouple itself from the global fi
[2008-12-23 17:03:34]
CNTEX Exclusive: Driven by the rising specter of both recession and inflation, the financial woes of the Wall Street have recently become deepened. The current US financial turmoil has its root in the sub-prime crisis, which is in turn rooted in the housing bubble. The collapse of the housing market has seriously affected the building and construction industry, and a lot of economic activities related to household consumption. Hence, the continuing financial turmoil will precipitate or deepen the US economic recession. In July 2008, the US unemployment rate spiked again, to 5.7 percent, its highest level in more than four years. Moreover, the International Monetary Fund (IMF) expects a moderation in global economic growth from 5 per cent in 2007 to 4.1 per cent in 2008 and 3.9 per cent in 2009.
Table 1: World economic growth from 2000 to 2008
US IT bubble bursts JPMorgan Global PMI Global recession and inflation
Global GDP growth
Consumer confidence in the US has collapsed to a record low after one of the bleakest months in Wall Street's history dented public optimism in the outlook for the world's biggest economy. The worsening labour market was also eroding consumer confidence, with more Americans reporting in Oct. that jobs were hard to come by. With home values falling and the stock market in a slump, Americans are finding it more and more difficult to pay for basic purchases. Credit card debt has spiraled upward, home foreclosures are rising, and banks have become more guarded in giving out loans and mortgages. In June, prices rose 1.1 percent, the second highest monthly pace in 26 years. As Americans cut back their spending, demand for products and services is droping.
Chart 2. The growth rate for United State commodity value from 2003 to 2008
total retail dollar value Y-on-Y Apparel and accessory retail dollar value Y-on-Y
The economy of Japan, Korea and EU have also retreated owing to weaker consumer spending and easing export growth. EU’s consumer expenditure on clothing has increased by only 1.5% during July and August, its lowest level in more than four years; Japan’s consumer expenditure on clothing has decreased by 7.8% in the second quarter.
The present economic crisis has affected China’s textile and apparel industry with the exports growth rate in the first eight months going down by 26.52 per cent than the previous year. The buyers who are coming in are not buying in as large quantities as they were buying earlier. The orders are already down in terms of quantity.
The growth of China textile and apparel industry, on the demand, depends on both domestic demand and external demand. They are vulnerable to the global economic ebbs and flows. A substantial slow-down of US’s imports would create a large negative effect on China’s textile and apparel industry growth.
Some economist said China, the world's fastest expanding economy, should be more cautious of fully opening up its capital account, the government should continue its market reforms on the domestic financial industry without being intimidated. The growing risks on global markets would render a negative effect on China in the short term but provided an opportunity for the country to fuel its growth more on domestic demand than on external needs.
By Gracie Guo
e-mail: einfo@ml.ctei.gov.cn
http://english.ctei.gov.cn
