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Xinjiang Tianshan Wool was the first in the textile industry to release its report. In the first half, the company suffered a loss of 15.94 million yuan ($2.51 million), almost four times the losses in the same period last year. The company said losses were mainly caused by declining international orders and growing production costs.
On August 13, the Jiangsu-based Luolai Home Textile Co. Ltd. published its interim report, saying that net profits declined by 17.7 percent in the first half. Its own and its parent company's inventories rose by 48.5 percent and 28.4 percent respectively.
On August 15, another Jiangsu-based textile company, Huafang Textile Co. Ltd., said its sales revenue was recorded at 733 million yuan ($115.43 million) in the first half, a year-on-year increase of 2.28 percent. However, the operational costs were as high as 788 million yuan ($124.09 million), soaking up the net profits and making the company suffer losses of 33.76 million yuan ($5.32 million). Losses were largely due to declining prices of textiles on the international market. Since the company is located in the developed eastern region, a labor shortage has restricted its production capacity.
According to the China Cotton Textile Association, 40 percent of the cotton and textile enterprises it surveyed are suffering losses, and nearly 50 percent of the small and medium-sized spinning enterprises are reducing or stopping production.
Europe's sovereign debt crisis is spreading and the global financial crisis is still affecting the world economy, leaving uncertainties to the prospect of the international market and depressing the confidence of Chinese textile companies seeking recovery.
"Industrial tendency in the second half is not optimistic and the growth rate will continue declining compared with the first half," said the announcement of Huafang Textile Co. Ltd.
The real economy is fundamental to stabilizing economic growth. The most urgent for China now is to consolidate development of the real economy to overcome the crisis. Although the consumer price index grew by 1.8 percent in July, indicating that inflation is alleviated, top decision-makers have not formulated further measures to stimulate the economy.
The central bank's hesitation in making decisions may deliver two signals to the market: Decline of the real economy at present is still acceptable; and the central bank is not yet optimistic about the price tendency in China, especially when striking price hikes of farm produce in the international market have added to inflation worries of the decision-makers.
However, stabilizing growth is one of the focuses of the Central Government, and to stabilize growth, the government needs to revitalize the real economy. Liu Shangxi, Deputy Chief of the Research Institute for Fiscal Science of the Ministry of Finance, said measures of the government supporting the real economy mainly focus on upgrading and transforming the industrial structure, as well as financing.
Liu said there are serious problems in China's economic structures. Under the downturn pressure, economic restructuring is accelerated and dilapidated production capacity and enterprises are being phased out, making it difficult for enterprises to develop. Particularly, some enterprises are faced with financing difficulty and declining economic returns during the process of technology transformation. "The government should figure out ways to combine government policies with bank credit in order to provide a good environment for enterprises. The key is to promote economic restructuring, not just preserving those dilapidated production capacities and enterprises that should have been eliminated," Liu said.
Liu believes the government should first carry out structural tax reduction to enterprises, reducing their burden, improving the business environment and promoting their transformation and upgrading. The government should also solve the financing difficulty for enterprises, especially for small and micro enterprises.
Yu Gang, Vice Chairman of the CFLP, said what enterprises look forward to most from the government is tax reduction and more financial supporting policies, so that they will have good prospects of profits and be better motivated to production.
Industrial Figures In July
- Added value completed by industrial enterprises with annual sales revenue above 5 million yuan ($787,402) grew by 9.2 percent, 0.3 percentage points lower than that in June.
- Added value in state-owned and state-holding enterprises rose by 4.8 percent over a year ago, and the growth of collectively owned enterprises, joint stock enterprises and foreign-invested enterprises stood at 7.1 percent, 10.9 percent and 5.3 percent, respectively, year on year.
- Sales ratio of industrial products was 98.2 percent, a decline of 0.6 percentage points compared with the same period last year.
(Source: NBS)
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