Written Before The Big Changes In The Industry: A Trade War, Awakening The Great Power Dream.

Starting from the consequences of the Sino US trade war, analyzing the domestic economic pain points and basing on the development process of the global cotton textile industry, it puts forward that the cotton textile industry in China should be at the early stage of the third and the fourth stage.

The superiority of China's cotton textile is closely related to the working atmosphere of the people.

Although trade frictions between China and the United States have been continuous since 1979, the Sino US trade war will bring unprecedented confusion to the export trade of China's textiles and clothing, and to some extent, accelerate the development stage of China's textile manufacturing industry to the subsequent quality improvement.

Meanwhile, India's textile industry is developing rapidly, and China's cotton textile industry must be laid ahead in advance.

The first part is about the causes and consequences of trade war.

A trade war awakens the great power dream.

The pattern of economic and trade has changed dramatically, and we are still muddled in the atmosphere of "not knowing the true colors of Mount Lu, only in the mountains".

The United States' "toss up" to global trading partners is not "talking about it" from the beginning.

Trump's "reinvigorate the manufacturing industry" coincides with China's strategic thinking of developing a high quality manufacturing industry in a new era.

Is this coincidence? The answer is not.

As we all know, manufacturing is the foundation for the survival and development of a country's economy, and its contribution to GDP is very large.

As shown in the figure:

Over the years, the US manufacturing industry has contributed to the growth of GDP.

US manufacturing industry's GDP growth in 2017

Comparison of China's manufacturing output value and GDP over the years

As can be seen from the above picture, the pull of GDP in the US manufacturing industry was slightly downward before Trump became president of the United States, while the manufacturing industry in China was growing steadily. However, the scissors gap with the GDP growth rate has been expanding, which shows that the manufacturing industry in China has been increasing in recent years and has been increasing at GDP.

China's economic strength grows year by year, which is the last thing the United States and other developed countries want to see.

GDP comparison between China and developed countries in recent years

Second domestic economic structure problems

House price is a sensitive topic attracting attention from all walks of life in contemporary China. The development of the real estate industry has exceeded the imagination of generations.

Because housing prices continue to rise and mortgage pressure, people in addition to houses, consumer demand for various commodities, including daily consumption categories and textiles and clothing, has gradually reduced trend, leading to various industries, especially the manufacturing industry is gradually operating difficulties, industry and product upgrading appears neither intentional nor powerless, national income and employment stability is now hidden trouble.

As a result, the popular psychology of "prosperity overnight, quick success and instant benefit" has made the "stock crisis" - the carnival of commodities, the high price of housing and the interbank business.

The "property market" has been rated as the most valuable and safe market.

The funds of various financial institutions do not want to enter the real economy with long investment cycles, and the funds turn around in the "interbank business" or "out of the table" and "outsourcing" to all kinds of investment and financial institutions.

The measures to improve productivity, such as the development and application of new and high technology, should be the right way of development in any era.

Trump, President of the real estate business, is very clear about where the real estate is.

The excessively high Chinese housing price has gone far beyond the world average "price to income ratio".

The bank "mortgage" and China's "house slaves" have been locked up at high levels, and the top executives are trying to stabilize housing prices, perhaps the camel that can be crushed by "a few straws".

Trump, as a bystander, may have known this for a long time.

To revitalize the United States and contain China, the indefinite increase rate cycle will drain the investment market funds such as bonds and exchange houses into the United States, trade wars to contain China's export processing trade, and then restart the US manufacturing industry, so that China's struggling economic structure will collapse, and the economic means of "fighting against the enemy" will be the masterpiece of Trump's think tank.

Americans use the ancient art of war of the sun.

The added value of real estate and related construction industry in China and Japan and their proportion to GDP

Source: National Bureau of statistics, BEA, Japan National Bureau of statistics, and Institute of strategic planning.

From the above table, we can see that according to the contribution of generalized real estate value added to GDP, China's current real estate contribution rate is higher than that of the United States and Japan.

In 2016, the value of China was 16%, compared with 14.53% in the United States and 13.5% in Japan (based on a more stable historical value in the past six years).

The higher part is mainly from the real estate related construction industry, which is consistent with the continuous demand for new housing in the process of rapid urbanization in China. The urbanization process in the United States and Japan is basically completed, and the contribution rate of real estate related construction industry to GDP is relatively low.

Note: the above charts and views and data are cited from the central bank counselor Sheng Songcheng's "China's real estate industry's contribution to economic growth is seriously underestimated".

The article believes that the National Bureau of Statistics announced that the added value of real estate in 2016 was 4 trillion and 819 billion 90 million yuan, and the contribution rate to GDP was 6.48%.

According to Sheng Songcheng's point of view, the actual value is around 12%, which is underestimated by about 5.52 percentage points.

Third articles

In the history of the development of the world textile industry, textile industry has been selected as the preferred industry in the initial stage of economic development in Britain, the United States, Japan, Germany, Italy, Korea and other developed countries and regions.

The textile industry has a life cycle from the prosperity to decline of Britain, the United States, Japan and other countries.

The textile industry is a labor-intensive industry characterized by less investment, quick results, short production cycle, daily consumer goods that are closely related to the majority of people's livelihood and the ability to provide more job opportunities.

Therefore, most capitalist countries will choose the textile industry as the preferred industry in the early stage of industrialization.

But with the development of economy and the changes of various factors, its status will decrease year by year.

Therefore, in recent years, the "industrial pfer theory" may be able to better explain the changes of the world textile manufacturing center.

The so-called industrial pfer is that enterprises pfer part or all of their production from the original production area to other areas.

In the paper of Chen Rongfang's theory of industrial pfer and the evolution of the international textile manufacturing center, the industrial pfer is described in the paper: "industrial pfer, also known as industrial regional pfer, is the economic behavior and process of the pfer of certain industries from one country or region to another country after the change of resource supply or product demand conditions. It is mainly due to the spontaneous behavior of enterprises in the market economy. This is a comprehensive process of international and regional investment and trade activities, which is a dynamic process with time and space dimension." in the paper, industrial pfer is also referred to as the economic behavior and process of the pfer of certain industries from one country or region to another country or region. "Chen Rongfang"

It is also an important factor in the formation of industrial division between regions or regions, and is also an important way to pfer countries or regions and pfer industrial structure and industrial upgrading in countries and regions.

The article quotes the academic works of Liu Futan, vice president of the Macroeconomic Research Institute of the former State Planning Commission, and defines the concept of "world factory". The world factory is the global manufacturing center. On the one hand, it is embodied in its overall manufacturing capacity. On the other hand, it is also reflected in the leading position of some industries and industries in the world. Its manufacturing products are mainly produced by countries all over the world, and the manufacturing scale and manufacturing capability are enough to affect the output and price of the world.

The article says that the modern manufacturing industry is no longer a simple factory concept. Its connotation is quite rich. Its center is no longer in the "processing" gathering point, and even the processing is not at a gathering point, but globalization.

Where is the soul of the industry?

The representative country of manufacturing center is the United States. The rise of the United States has replaced the British world economic hegemony, rather than the British world factory status.

The economic development of the United States always takes the domestic market as the starting point and support. When the domestic market is overabundant, the expansion of the international market further establishes the position of the global manufacturing center of the United States.

After the United States, Japan and Italy have been international textile manufacturing centers.

In the history, Britain, the United States and Japan have gone through the process of "start, glory, and decay". Britain was once called the world factory, and the United States was once called the world manufacturing center.

Japan, Hongkong and Italy have all become world textile manufacturing centers.

But now, Trump seems to be breaking the rules of history.

The development stages of textile manufacturing history in Britain, the United States and Japan

The article concludes that the reasons for textile industry from prosperity to decline are related to the following factors: technological factors, institutional factors and market factors.

From the perspective of Britain, the United States and Japan, the following are summarized as follows:

1, the relevance effect of textile manufacturing industry itself.

Specifically, the textile industry has increased the huge demand for textile machinery through its own expansion.

The development of industry has contributed to the rise of relevant industrial sectors.

2, the objective needs of industrial deepening.

The textile industry has promoted the development of various industries such as pportation and pportation. It has increased the demand for energy, raw materials and mechanical equipment objectively. Heavy industry has begun to increase substantially, and the proportion and development of light industry, including textiles, has begun to decline.

3, repeated investment and expansion of production capacity lead to international industrial pfer.

When the textile manufacturing industry becomes a surplus industry, for the developed countries, with the wide spread of textile technology, the technological advantages of the country gradually disappear.

The cost of capital, raw materials, labor and other factors began to play a key role, and the national advantages of sufficient raw materials and cheap labor were highlighted.

At this time, the developed countries will pfer the textile manufacturing industry through direct investment and other channels to raw materials and low cost countries, and themselves from exporting countries to importing countries.

Based on the above situations, the textile industry of most big countries has declined.

The fourth is whether China will enter the old textile industry of developed countries.

The time when China's textile manufacturing industry really became part of the "China world factory" should be in 1994.

At that time, after several years of "limited production and smashing of ingots" and elimination of backward production capacity, China's textile industry was reintegrated.

In order to adapt to the economic, financial and trade situation at that time, Vice Premier Zhu Rongji implemented a single, managed floating exchange rate system based on market supply and demand.

The US dollar has depreciated from 5.76 to 8.60.

From this point on, China's export processing trade began to develop at a high speed, and experienced the so-called "golden 10 years" that promoted the economic take-off by processing export trade, which made the "world factory" status.

During the 2007-2010 years of financial crisis, textile industry development and export trade entered an abnormal stage.

From 2011 to the present stage, China's textile industry has been recovering more stable on the surface (under the US dollar valuation, the total amount has not increased since the RMB exchange rate is strong), but the growth rate has turned to negative growth.

The trend of US dollar to RMB exchange rate in recent years

Note: in the US dollar comparison, downward trend indicates RMB appreciation.

China's export volume and export growth rate are declining, and its capacity and growth rate are also declining.

1999-2017 over the past years, China's textile (yarn) and apparel industry has increased its total manufactured goods over the same period last year (%):

Note: eliminating the 2007-2010 loan crisis period data

The picture shows that since the financial crisis, the domestic textiles (yarn) and clothing products finished in dollar terms have not changed much, but the growth rate has dropped sharply. The RMB exchange rate has strengthened, resulting in a real increase in the real value and a sharp decline in the actual growth rate.

Moreover, the growth rate of textiles (cotton yarn) is always lower than that of clothing, and the impact of semi finished products such as cotton yarn on the Chinese market is obvious.

Then, what is the status of China's textile industry? How to evaluate the development stage of China's textile industry? We still refer to Chen Rongfang's "theory of industrial pfer and the evolution of the international textile manufacturing center". The theory of sustainable development of textile manufacturing industry is analyzed by Professor Peter Kilduff of North Calle Rona State University.

According to the main products, industrial growth, import and export volume, industrial strategy, production capacity, industrial structure and other project indicators, combined with the development characteristics of the textile manufacturing industry, the development of textile manufacturing industry is divided into five stages.

The first stage is the maintenance stage of the textile industry.

It is characterized by traditional natural products made by natural fibers.

The development of the industry is slow, the quantity of import and export is not large, the scale of the domestic market is small and it is difficult to enter, and the national economy is mainly self-sufficient by agricultural production.

The second stage is the take-off stage of the textile manufacturing industry.

It is characterized by textiles and garments based on natural fibers.

The industry is in the follow-up period of accelerated growth, the product structure is developing vertically, the export of the garment industry is growing, and it becomes a large category of textile export.

At the same time, the import of finished fabric and chemical fiber import increased rapidly, and processing is the main way of export production and processing.

Diversification of clothing products, traditional textile production is its competitive advantage, but its own market is still small and difficult to enter.

The third stage is diversified integration.

The content and scope of the products are even broader. Chemical fiber and home textiles have also been developed. The speed of development is sliding from peak to gentle.

Garment exports reached a peak.

The export of chemical fiber, yarn and cloth has increased rapidly.

End of the era of processing, instead of producing mid-range products.

The domestic economy has entered the era of rapid industrialization. Urbanization has accelerated the rapid growth of population, and the domestic market has expanded rapidly and is easy to enter.

In the fourth stage, the original mass production mode ended and turned to the stage of designing and producing high value-added products.

It is characterized by the development of the national economy to the mature stage of industrialization. The urban population has increased a lot, the industry has been growing slowly, the industrial structure has begun to be vertically and horizontally integrated, and the product strategy has been extended backward and the quality has been improved.

The production mode is to produce high-grade products instead of original ones, and to develop original designs and create private brands.

The main products are synthetic yarn, cloth, garments, garments, household and industrial textiles.

The export of chemical fiber and high value added products has increased, and garments have not only declined greatly, but also imported rapidly and extensively. The competitive advantage of local industry has changed to middle grade chemical fiber and high quality popular products and high technology textiles.

The professional market is large and large, and the degree of market segmentation and development are very high. The industrial strategy is continuous upgrading and product and regional diversification.

The fifth stage is creative integration.

Most of the countries that achieve this stage are advanced and post industrialized countries, and their competitive advantage industries are high quality brands, innovative products and services that meet the needs of consumers, and high-tech textile industry.

Through horizontal integration and better quality integration, the industrial structure separates creative functions and design elements from production and manufacture, carries out original design and brand marketing, has the world's top technology and spreads to the whole world, products pay more attention to high-end brands and quality and fashion elements, and high-end weaving and customized orders are the main development directions.

The products are mainly exported with the perfect technology and the large-scale export of the popular textile and clothing products. The import is also the import of large-scale, all-around fiber, textiles and garments. It has the characteristics of large scale, high grade and high subdivision. It is a perfect and highly open market.

From the above five stages of the development of textile manufacturing industry, the overall production capacity and industrial quality trends are summarized as follows: "low quality and low starting"; "low quality but rapid development"; "low and medium quantity but peak to quantity"; "medium and high grade but quantity decline"; "high-end high-end but limited quantity and stability" mode. China should be at the early stage of the third and the fourth stage.

Compared with the old textile powers in the world, the only difference is that China is a large country with large population and resources, and domestic sales account for a large proportion.

In an interview article by Professor Feng Liping and Professor Peter, "Professor Peter kilduff", Professor Peter kilduff believes that the development advantage of China's textile industry lies in labor resources, which not only refers to the advantages of labor costs.

Compared with Bangladesh and the Middle East countries, their labor costs are much lower than that of China.

But what China embodies is the quality of labor force, not only refers to skills, but also includes the labor tradition and labor atmosphere established by a country.

In some countries in the world, workers earn enough wages to meet their needs in the next six months or a quarter, so they will not go out to work in the next six months or a quarter.

Such behavior will make it difficult for foreign businesses to stabilize their production and operation activities in the country. Meanwhile, the disqualification of technicians will make it necessary for manufacturers to pay high training costs.

Therefore, China has absolute advantages in terms of labor tradition, incentive mechanism and labor productivity.

Several years ago, Professor Peter kilduff made the following analysis on the development of China's textile manufacturing industry: "the biggest development advantage of Chinese textiles lies in its widest range.

And the huge potential domestic market, all international competitive advantages are built on the basis of the development of domestic industry.

The huge domestic market demand will provide the space for industrial development. This concept can be explained by learning curve: a country accumulates in a large scale production process, improves its learning, and reduces the labor cost of unit products. That is to say, China has an advantage in terms of market demand, and it can strengthen its labor cost and low advantage through large-scale and continuous production.

On the other hand, China's textile fiber supply is very abundant. The biggest change in the textile industry in the next few years will be the integration of global decentralized procurement to vertical supply chain. In the past, yarn production in A countries, production of garments in B country, production of garments in C countries, and lack of efficiency in the traditional supply chain mode sold in D country. In the future, if we adopt the vertical supply chain mode sold in China to produce yarns, fabrics, clothing, and then sell in a country, maybe soon after that, China will become a leader in fabric finishing and artificial fibers, or will open up the market with Japan's 50 year low quality commodity, and finally achieve industrial upgrading through technological investment.

Regretfully, the conclusions and predictions drawn from the rise and fall of the old textile countries have drawn the "fragrant" and tempting "cake" to the Chinese textile manufacturing industry, or will be wiped out by Trump's "revival manufacturing industry" and the "reverse" textile manufacturing process of eliminating the Sino US trade deficit.

Fifth Sino US textile trade frictions and trade surplus under the rules of international trade over the years

After the birth of new China and Nixon's visit to China in 1972, China and the United States formally established diplomatic relations, and it was only in July 1979 that they signed the Sino US trade relations agreement. It came into force in February 1, 1980 and the two countries gave MFN treatment to each other.

However, the Sino US textile trade friction began soon.

In 1979, the United States unilaterally announced a quota of seven major export textiles in China.

In 1983, when the US textile trade agreement was negotiated, the annual growth rate was asked to reduce. The Chinese side did not give in and the negotiations broke down.

The US announced new quotas for Chinese textiles, while the Chinese announced that it would reduce or terminate the purchase of US cotton, chemical fiber and soybeans.

Finally, in September of that year, the first textile trade agreement "multi fibre agreement" (MFA) was reached.

In 1987, China and the United States reached 3 textile trade agreements, extending the quota varieties of textiles from 8 to 87, covering 85% of the textile products exported to the United States.

In 1990s, China and the United States had signed 5 textile trade agreements, and the Americans, despite China's strong opposition, repeatedly unilaterally violated the agreement to reduce Chinese textile export quotas to the United States, and launched anti-dumping investigations several times.

In 2001, China formally joined the WTO, but the US quota policy for textile exports to China has not changed.

In September 5, 2002, the American Textile Association implemented a number of selective protective measures on China's 5 textiles on the basis of China's price competition.

During the 2005-2008 years, the United States set up the American textile import safety valve in the report of China's accession to the WTO, stipulates that if a certain type of Chinese textile exports surge to WTO members, the WTO members can be temporarily restricted when they disrupt the market.

In January 1, 2005, the textile export quota was abolished and China's textile export capacity was released briefly.

However, in order to protect its national interests, the United States frequently initiated the 242 special safeguard clauses permitted by WTO to be restricted.

For example, from May 23rd, restrictions on Chinese cotton knitted shirts, cotton trousers, underwear, combed cotton yarn, men's woven shirts, chemical fiber knitted shirts, chemical fiber trousers, corsets, and other synthetic filament fabrics will be available.

In November 8, 2005, the Ministry of Commerce and the United States signed a memorandum of understanding on trade in textiles and clothing in London, and the trade dispute was temporarily resolved.

Since then, China has entered the post quota era.

At that time, the analysis report of the development research center of the State Council showed that after the quota was abolished, as long as the major importing countries conscientiously implemented the agreement on textile and clothing, perhaps in 2008, the share of China's textile and clothing will increase by 6-7 percentage points in the world, and the total textile exports will account for 30% of the world's total.

Textile production capacity entered a period of rapid expansion until the outbreak of the financial crisis in 2007.

After the outbreak of the financial crisis, most countries, including the United States, were too busy to take care of the textile trade temporarily. During the period, the larger trade disputes were suspended until the time of Trump.

After joining the WTO, especially in the post quota era, China's textile industry has been developing rapidly, but it also brings worries for the textile industry to overheat investment.

At that time, the textile import and export chamber said that the core competitiveness of textiles lies in its cost.

Overheated investment in the industry will inevitably result in overheating of the cost of personnel and raw materials, resulting in price increases and offset the export price advantage.

Moreover, the blowout of output caused by capacity will lead to price competitive decline, forcing the industry to shuffle.

At the same time, the textile trade surplus has been increasing continuously for many years, and has become an important source of foreign exchange earnings and reserves growth.

According to what the US government said at that time, China has replaced Japan as the largest source of trade deficit in the United States since 2000.

The unfavorable balance between us and China will inevitably aggravate the frequency and extent of future trade frictions.

Photo: China US trade balance over the years

All of the above are the history of Sino US textile trade friction which has been running for many years under the rules of international trade.

This time, however, is quite different from before.

Trump, President of the US businessman, is entangled in the balance of interests and balance between trade surplus and deficit. It not only breaks all previous trade rules and complementary functions among countries and economies all over the world, but even threatens to withdraw from the World Trade Organization and destroy the trade framework that many countries and economies have been struggling to achieve.

Concluding remarks

The United States does not follow the new rules of the rules of the game, or will bring unprecedented confusion to the export trade of China's textiles and clothing, and to a certain extent, accelerate the development stage of China's textile manufacturing industry to the subsequent quality improvement.

At the same time, we must never neglect a India, a country with a large population similar to that of China in the early years of reform and opening up. Its current domestic economic situation depends on the textile industry.

If we continue to rely on the idea of "world factory" and "mainland goods" and go through a low-end and extensive way of operation, this road has been blocked by India and other countries, and it will not work.

Maybe China's textile industry.

The industry will not grow too fast and decline to the same extent as Britain, America and Japan, but it will also be reduced to a considerable extent, because the consumption problems and environmental protection requirements of large population countries are increasing, maintaining a certain scale and upgrading the quality structure and brand. Positioning in the middle and high grade should be the best choice.

For the textile industry chain, the branding route of medium and high grade products will bring or reduce the consumption of natural fibers such as cotton and improve the quality structure.

The demand for high value-added products will gradually increase, and the future domestic production will be positioned in the middle and high grade and high quality brand products, and the low end and high-end demand will depend on imports.

All parties in the industry chain should make anticipation and respond well.