The competitiveness of China's textile and apparel industry has dropped significantly, and industrial upgrading is imperative

The continuous rise in costs has led to a significant decline in the international competitiveness of China's textile industry. From the perspective of the development of the global textile industry, industrial upgrading is the general trend, the industrial chain will accelerate integration, and enterprises in the industry will generally face the pressure of transformation. We believe that the future technological upgrading of high-end production capacity and the transfer of low-end production capacity to Southeast Asian countries are the specific paths for industry upgrading; the integration of the industrial chain is mainly manifested in the outward transfer of low-end processing and manufacturing links, and resources will be directed to enterprises that manufacture high value-added products. After several rounds of elimination, the transformation of enterprises in the industry will be clearly differentiated.

At present, China's textile industry is accelerating the upgrading. While the low-end production capacity is accelerating the transfer to Southeast Asian countries, resources are gradually gathering in leading companies, and textile companies are accelerating their transformation and entering a stage of diversified development. Some leading companies have strengthened their competitive advantages, embedding resources and capabilities into the whole process of textile production, including downstream spinning, weaving, dyeing, and garment manufacturing. Other leading companies are market-oriented towards the non-textile industry. Shifting into emerging fields with rapid development and rapidly expanding demand, such as photovoltaics, lithium batteries, medical equipment, etc.; disadvantaged companies are facing increasingly severe production pressures in an environment where costs continue to rise.

The operating risks of disadvantaged companies continue to increase. In addition to rising costs that directly eat up profits, the increase in operating risks will gradually reduce the competitiveness of companies in receiving orders. Customers are more inclined to concentrate their orders on large companies and resources will gradually be concentrated on leading companies. , The main business of disadvantaged enterprises will be more difficult, or they may close down, or change businesses, or intervene in emerging industries, or reorganize, and transformation becomes inevitable.

At the industrial level, weak enterprises try to make up for the losses suffered by technologically advanced enterprises in the market competition with technologically advanced enterprises through diversified operations, and will accelerate their entry into industries that are highly profitable or in a period of rapid development. The most profitable companies" such as Nisshinbo has successively acquired paper mills, information systems companies, biomedical companies, and even industries such as food processing and real estate leasing.

At the asset market level, with the help of the platform resources of the capital market, the value of the shell resources of disadvantaged companies has become more prominent. Since the second half of 2013, restructuring events have emerged one after another. We judge that in the coming year, restructuring will still be the mainstream capital operation mode of disadvantaged companies. Pay attention to thematic investment opportunities brought by the transformational power of weak textile enterprises.