Jakarta, CNBC Indonesia – China’s weak domestic demand has resulted in many Chinese goods being “dumped” overseas at low prices. China’s exports of cheap goods flooded the world, including clothes. This condition has a major impact on countries that have been dependent on textile exports.
The textile industry is an important pillar of world trade. Countries like China and India are major players in this industry. These countries are not only important in terms of textile production, but some are also important in exporting textiles.
In terms of the world’s textile industry, China has long been the global leader and controlled more than 50% of the world’s textile production in 2014.
China is the largest textile producer in the world with output reaching 52.2% of global textile production in 2019. With rapid growth over the past two decades, China’s textile industry has become one of the main pillars of the economy of the country of Bamboo Curtains.
In addition to being the world’s largest textile producer, China is also the world’s largest textile exporter, accounting for US$303 billion or 32.2% of the world’s total textile exports. – world in 2022.
One important thing to note is that China’s economy has recently been very weak, followed by low domestic demand due to a decline in the real estate sector and sluggish consumer confidence.
With domestic demand slowing, investments by Chinese companies continue to increase.
In 2023, BCA Chief Economist Barra Kukuh Mamia explained that high inventories may force Chinese companies to do “liquidation sales” to reduce inventories.
They will export their products at discounted prices to reduce supply backlogs. On the one hand, the “solvent sale” made by China could deflate in imported Chinese goods. This has an effect on the desire of other countries that import goods (especially clothing) to choose China as an option compared to other countries because it is considered to be cheaper.
China is one of the most preferred countries to import garments due to lower production costs, availability of good quality raw materials, modern industrial infrastructure and high-tech machinery.
China’s clothing industry offers many clothing categories that are valued by fashion brands. These sectors are the production of cotton fabrics, silk fabrics, woolen fabrics, knitted fabrics, chemical fabrics, printing and many more.
India is one of the countries affected by this situation.
For your information, India has one of the oldest textile industries which can be traced back to colonial times, India now ranks fourth in the global textile export trade. The export value of the Indian textile industry will reach about US$ 41.1 billion or 4.36% as of 2022.
If we look back 10 years, to be precise in 2012 and 2013, the percentage of India’s textile exports was 4.66% and 5.14% respectively or higher compared to 2022.
One of the major challenges facing the Indian textile industry is stiff competition from Chinese textile imports. Chinese textiles have a large market share in India, especially in the Man-Made Fiber (MMF) textile sector, competing directly with Indian manufacturers in textiles and home textile products.
Chinese clothing benefits from economies of scale and lower production costs, leading to intense price competition. As a result, Indian manufacturers were forced to reduce prices, affecting profitability and possible closure.
In addition, Chinese government subsidies and favorable trade policies increase their competitive advantage, raising concerns about fair trade practices.
Worse, industry estimates indicate that 1-2 million jobs are likely to be lost in the Indian textile industry between 2018 and 2023, with 30-40% of these job losses due to imports from China.
Not only India, named from European Council on Foreign Relationss, China’s overcapacity has weakened African economies. In short, the Chinese economy is currently compensating for low domestic consumption by relying on global markets as its outlet. This allows China to maintain large subsidized production, while domestic consumption remains minimal.
Usually, traditional models of economic development benefit Africa because of cheap labor. However, China’s subsidized production makes their price unbeatable, eliminating the advantage of cheap African labor.
China is flooding African consumer markets with textiles, clothing and other low-value products, meeting demand at lower prices than almost all local products.
This overcapacity, flooding international markets with Chinese-made products, is creating different challenges for economies beyond Africa.
For Western economies, China’s overproduction of high-value goods creates dependency and threatens some European industries. Examples include cheap photovoltaic panels or discounted electric vehicles that beat comparable European manufacturers. On the other hand, emerging African economies have benefited from these results. They don’t produce it yet, so there is no competition.
World Trade Organization (WTO) data shows that China’s share of textile exports has shot up in the past 13 years from 30.40% in 2010 to 42.06% in 2023 or nearly half of the t – world
WTO data also shows that the value of China’s exports will reach $134 billion in 2023, well above the European Union which is in second place with a value of US$70 billion.
Is Sritex going to be a victim?
This situation has shaken not only the global market, but also the country as well.
Recently, PT Sri Rejeki Isman Tbk (Sritex) and its 3 subsidiaries were declared bankrupt by the Commercial District Court of Semarang (PN).
PT Sri Rejeki Isman Tbk (Sritex) Commissioner President Iwan S Lukminto was speechless about Trade Regulation Minister (Permendag) Number 8 of 2024 regarding Import Policies and Regulations. According to him, this regulation makes it difficult for the domestic textile industry.
“So this is how it is if the Minister of Commerce Regulation 8 is a classic problem that everyone already knows about. Just look at the textile industry, many people have been affected, many have been disturbed, to the extent that some have closed,” Iwan said when he met at the Jakarta Ministry of Industry Office, Monday (28/ 10/2024).
One of the reasons for Sritex’s bankruptcy was due to declining revenues due to the Covid-19 pandemic and global business competition. Sritex’s export revenue fell to US$158.66 million in 2023 from the original US$257.85 million. Meanwhile, domestic sales fell to US$166.42 million from the original US$266.71 million.
Dumping practices from China make it difficult for domestic products to compete because the prices of Chinese products are too cheap and attract buyers.
It is important that the government protects domestic industry so that what happened to Sritex is not repeated to other companies, especially MSMEs. One of them is by restricting the entry routes for Chinese goods, such as banning the Chinese e-commerce application Temu.
Bangladesh & Vietnam remain stable
Reporting from The Diplomat, The textile industry in Bangladesh and Vietnam continues to grow.
OEC World he noted that exports from these two countries continued to increase in the 2012-2022 range.
Bangladesh’s textile export in 2012 was recorded at 3.42% of the total global textile export and will increase to 6.13% in 2022. Likewise with Vietnam, from 2.66% to 5.18% in the same period.
The development of the textile industry in Vietnam and Bangladesh was partly due to relatively cheap labour. As a result, these two countries have become more attractive to producers.
Even Vietnam is often used by fast fashion companies to get cheap labor. Although garment workers in Vietnam are usually paid minimum wage, they often do not earn enough to make ends meet, forcing them to work many extra hours.
They can earn almost double the minimum wage in Vietnam, but the minimum wage is different from the living wage.
For your information, a living wage is the standard amount of income needed to meet the basic needs of life, such as food, clothing, shelter, education and health care. Just because someone earns minimum wage does not mean they can support themselves and their family.
Major companies often outsource their work to countries where labor laws are not enforced, or at least not strictly enforced, such as in Vietnam.
According to the Fair Labor Association (FLA), it is common for workers to work more than 50 hours of overtime in a month, and many of them still sleep on an empty stomach because they cannot afford to pay. for dinner. These companies pressured factory owners to keep workers’ wages below a living wage in order to keep the prices of clothing low when exported.
CNBC INDONESIA RESEARCH
2024-10-30 03:25:00
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