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China in 2020 - not a typical year
from Wool2Yarn Global
by Ely Torres
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China - not a typical year
2020 has been called the ‘unprecedented year’. It has been the toughest year so far for the entire world wool textile industry, and certainly not a typical one. China has not been spared. When the COVID-19 pandemic first took hold in Wuhan, China took extraordinary measures to lock down much of the country until early April. The national economy took a nose dive and this was at its lowest growth level in last 20 years. The wool textile pipeline was at a standstill for nearly 3 months. This devastating situation was further compounded by the trade war with the USA, with increased textile products tariffs into the US market.
Robert Wang, China Manager for Australia Wool Testing Authority (AWTA) says: ‘The coronavirus in Europe and North America virtually stopped global trading. As a result more than half of the Chinese wool textile manufacturing capability was idle until May. A significant part of the workforce was laid off, factories were deserted, and shops were closed across the country. The GDP growth target set by the central government for 2020 was 6%, however, in April, the economists argued that this figure should be revised down to 1%. Furthermore, in June, the government announced that a fixed target for 2020 was no longer required. This shows the seriousness of the economic
By Robert Wang
performance in the first half this year.
In April the Chinese government attempted a new initiative to encourage “internal economic circulation”. Trillions of dollars were injected into the domestic economy to boost commercial activities. With the easing of the pandemic and government assistance, from May onward the economy showed signs of revival. Although foreign trade has still been hurt badly, the domestic economy has come out of hibernation and is starting to grow again. China re-entered the Australian wool market in April and has been dominating purchases again. Given the withdrawal by other major Australian wool buying countries such as Italy and India, China has purchased more than 90% of Australian wool offered since June. The beginning of the new season, China continued to be the dominant buying power in the global wool market.
On the other hand, global wool supply has hit the lowest level in the last 80 years due to consecutive years of severe drought and devastating bushfires in Australia. Despite the dominance of Chinese buying in the Australian market, the actual quantity of raw wool intake by China has reduced sharply. Overall, because of the low demand, even with the historical low wool production, the EMI has fallen by more than 40% since the beginning of this year. With the deepening global economic crisis, it is almost certain that further deterioration in the wool textile industry is envisaged.
Notwithstanding the partial economic recovery in China from April, the eventual normalisation will take much more time. The latest industry survey shows that consumers have become extremely cautious with their disposable income. There is a general lack of enthusiasm in the retail sector. Textile manufacturers therefore have gradually run out of steam. The lack of orders from retail has forced a large number of mills in China to close, which was reflected in the Australian wool auction rooms. The wool price index has fallen down below 1000 Australian cents since 2012. Unfortunately it will slide further. It may take at least another two years for the industry to fight its way back. The world is still in the middle of COVID-19, and there is no doubt that everyone has to bite the bullet. This is the reality that we all are facing today’.
