Textination Newsline

• Nevertheless - automation, environmental compatibility and energy efficiency increase machine imports

China's textile and clothing industry is modernizing. High-quality textile machines are in demand. But because of the trade dispute with the USA, investments are also postponed.

How the trade dispute between the USA and China affects its business is currently being discussed by China's textile and apparel manufacturers - and in particular by the companies located in the high-quality sector: Of the approximately USD 119 billion, that they sold abroad in 2018, about two thirds went to the United States.

According to the American Apparel & Footwear Association (AAFA), 41 percent of the clothing sold in the USA, 72 percent of the shoes and 84 percent of the accessories come from China. On the other hand, the producers of intermediate products or textiles are less or hardly affected by the punitive tariffs, because here the dependence on the USA is not quite as great. Apparel manufacturers in Vietnam and Bangladesh, for example, generally are also buying in China.

Following previous punitive tariffs on Chinese imported goods, in September 2018 the USA imposed a 10 percent punitive tariff on a wide range of other Chinese imported goods, including goods from the textile and clothing industry. On January 1. 2019, the tariffs should originally be raised to 25 percent, but at the beginning of December 2018 US President Trump and China's President Xi agreed not to increase the tariffs until March 1^st 2019.

Companies are reluctant to invest
It is hardly possible to make predictions about the outcome of the conflict. In view of the uncertainty, many of the companies affected are therefore waiting for the time being. German textile machine manufacturers are also feeling the effects of this, whether due to lower demand for machines from Germany or locally. According to a representative of the German Engineering Federation (VDMA) in Beijing, many investments have been stopped.

But apart from the upheavals, the modernization process of the Chinese textile and clothing industry is far from complete. Gone are the days when the numerous street markets in China were flooded with cheap clothes. They're hard to find these days. Their manufacturers either had to modernize or have since disappeared from the market.

Number of Chinese textile and clothing companies down sharply
China's textile and clothing industry has been through tough years of consolidation and modernization. In fact, between 2013 and 2017 alone, the number of predominantly private-sector companies in the sector fell by almost 11 percent to around 33,500.

Chinese customers don't want any more junk - and can usually afford better. According to the Chinese National Bureau of Statistics (NBS), they spent about RMB 1,371 billion; equivalent to about USD 207 billion; (1 USD = about 6.6114 RMB, annual mean rate 2018) on clothing and shoes in 2018. This is 8 percent more than in the previous year.

Rising personnel costs force automation
On the one hand, consumer demand has grown and led companies to invest in better machines, on the other hand, the constant pressure on personnel costs has forced them to automate their processes. Between 2010 and 2017, the number of employees in the sector fell from 10.9 million to 7.8 million.

Many have tried (and are trying) to escape the pressure by relocating their companies - for example to the interior of the country, where the wages are lower, or to cheaper foreign countries. However, the great migration movement did not take place, as most of them see themselves too strongly interwoven with their suppliers. Some are also skeptical about the move to the West, arguing that it would only be a temporary solution - and that sooner or later the wages there would follow.

Traditionally, the industry has concentrated on the provinces of Guangdong, Fujian, Zhejiang and Shandong. There, the average gross monthly wages of urban workers rose between 2013 and 2017 (latest available figures) by between 38.9 per cent (Fujian) and 48.5 per cent (Guangdong) - with significantly lower inflation rates.

*) only companies with an annual turnover of more than RMB 20 million are included.
Source: National Bureau of Statistics (NBS)

Environmental legislation and energy efficiency as additional investment drivers
The industry also has to deal with a generally stricter environmental legislation, which increasingly is being implemented. Added to this is the growing importance of the energy efficiency aspect.

Both are good news for German textile machinery manufacturers, according to VDMA estimates. As a result, the market for high-tech machines is expanding and the resulting demand is still far from being met by local production. China imported USD 4.2 billion worth of textile machinery in 2018, an increase of 6.7 percent over the previous year. A further customer potential arises from the growing importance of technical textiles.

According to Chinese customs statistics, German suppliers supplied textile machinery worth USD 1.1 billion to China in 2017 (latest available data) - a whopping 28.3 percent more than in the previous year. Despite this success, however, they had to cede their previous leading position as the main supplier country to Japan. However, this statistic shows only one side of the medal. Almost all well-known manufacturers are now represented in China with their own production facilities - and no figures are available about their activities.

Sources: UN-Comtrade; Calculations by Germany Trade & Invest

Environmental model companies point the way ahead

Already today there are manufacturers with ambitious plans in environmental protection. One of them is the Dongrong Group. Based in Chifeng, Inner Mongolia, the Cashmere company has been selected by the government of the Autonomous Region, together with a dairy company, as a model company for environmental protection. This included President and owner Cheng Xudong having his company - by the way inspired by the German Pavilion at the World Expo in Shanghai 2008 - sealed energetically (albeit not with materials "Made in Germany").

The next big step will be the purification of the company's own waste water. "Cheng describes his goal as follows: "Fish, suitable for consumption in our canteen, should be able to swim in it. The company is already now growing vegetables for the canteen itself. In his efforts it is financially supported by the state. But certainly not all entrepreneurs are so ambitious.

And there is still an old Chinese saying for many companies: "The sky is high - and the emperor is far away". In other words, what the central government decides in Beijing does not necessarily have to be implemented in the huge hinterland. But all these efforts show in which direction the journey goes.

Preparations for a successful Kind + Jugend from 14 to 17 September 2017 in Cologne are running at full speed, and the leading international trade fair for baby and children's outfitting is really picking up speed. Four months before the event, around 1,000 exhibitors from more than 50 countries have already confirmed their participation in the trade fair. Virtually all of the renowned manufacturers and brands have applied to participate. Around 85 percent of the confirmations are from foreign companies. In addition to the comprehensive industry offerings, the target group-specific event program, the so-called Support Circle, is considered to be one of the key factors of the trade fair’s success.

In past years, the traditional trade fair Kind + Jugend has been able to continuously expand its position as the world's leading trade fair of the baby and children's outfitting industry. Exhibitors from the industry of many years, including the following key players, contribute to this: ABC Design, aden & anai, Alvi, Angelcare, Artsana-Chicco, Baby Björn, Babymoov, bibi-Lamprecht, Bebecar, Brevi, Britax Römer, Cam il mondo, Combi, Concord, Cybex, Delta Children, Diono, Dorel, Doudou et Compagnie, ergobaby, Easywalker, Foppa Pedretti, Gautier, Geuther, Hauck, Hartan, HTS, iCandy, Infantino, Jané, Joie/Nuna, Joolz, Kaloo, Kiddy, KidsII, Kidsmill, Lässig, Lodger, Mayborn – Jackel, Medela, Munchkin, Mutsy, Nattou, Newell, Noukies, Novatex, Nuby, Nürnberg Gummi, Odenwälder, Paidi, Peg Perego, Philips Avent, Pinolino, Playgro, reer, Reisenthel, roba-Baumann, rotho, Schardt, Sauthon, sigikid, Silver Cross, Sterntaler, Suavinex, Takata, Tobi, Uppababy, Vulli, Wickelkinder – manduca and Julius Zöllner. Kind + Jugend also has renowned exhibitors or returnees in all segments, like Blue Seven – H. Obermeyer, David Fussenegger, Didis, Koelstra, lief! Lifestyle, nobodinoz, Teddy-Hermann, Tiriciclo and VTech.

In addition to the high-class product show, the leading international trade fair once again offers an interesting event and supporting programme with many awards for all exhibiting companies, from start-ups and young designers to established, globally active brand manufacturers.

The successful and proven concept of the "Support Circle" is thereby oriented to the typical development and distribution chain of a product. A convincing concept and a prototype is always at the start of a product development process. Kind + Jugend presents the best prototypes with the nominees of the KIDS DESIGN AWARD. Further information can be found here:
http://www.kindundjugend.com/kindundjugend/Trade-Fair/Events/Kids-Design-Award/index.php 

The DESIGN PARC presents extraordinary objects, furniture and toys that are already ready for the market, and thus offers a good possibility for traders to distinguish their assortment from those of competitors. The newly created #DESIGNINFOCUS design hotspot in hall 11.1 rounds off the offering in this segment.

The Kind + Jugend Innovation Award is a permanent fixture in the industry and is viewed as an important marketing and sales argument in the trade. The award is seen as a springboard for establishing oneself on the market with a product. The award is traditionally conferred in eight categories at the start of Kind + Jugend on the first day of the fair.
Further details: http://www.kindundjugend.com/kindundjugend/Trade-Fair/Events/Innovation-Award/index.php or http://news.kindundjugend.de/2017/02/kind-jugend-fragt-nach-ein-interview-mit-whisbear/

A real drawing card is the Consumer Award, which was established in 2014, with which Kind + Jugend addresses the wish of visitors to also be presented with the favourite products and best sellers of the consumers that are already well-established on the market in addition to the brand-new product innovations. This year the following partner magazines and portals provided support with the surveying of consumers: Germany participated with 1st Steps, the Netherlands with Baby Stuf, Austria with NEW MOM, Poland with Branza Dziecieca, Russia with Rodi, France with Parole de Mammans, Turkey with Baby & Kids Store and the UK with Mother & Baby.

Kind + Jugend supports startups and smaller companies in the form of country pavilions. This year there will be group stands from Australia, the UK, France, South Korea, Latvia, Singapore, Spain, Taiwan and the USA. Twenty young German companies will also present themselves in the special area of the Young Innovative Companies, which is sponsored by the Federal Ministry for Economic Affairs and Energy (BMWi).

The Kind + Jugend Trend Forum also offers valuable pro tips and best practices for everyday application in the form of lectures, discussion groups and workshops. High-quality speakers will pick up on the trend themes of the industry and acknowledged experts will present information and strategies that are tailored to meet the needs of the trade and which are practice-oriented, as well as offering the trade visitor added value. The benefits of visiting the trade fair are thus double.

Online admission tickets are available under the following link:
http://www.kindundjugend.com/kindundjugend/For-Visitors/Admission-ticket/index.php

Large Companies focus on abroad and the Digitization 

Tokyo (GTAI) - Japan's machinery and facility manufacturers expect increasing orders again. An increase is expected, especially for the international business. They saw the slight financial doldrums of 2015 before. However, there were exceptions - for example at the robot technology. The big companies have a strong interest in the subject of Industry 4.0. Here are cooperation opportunities for German companies, also on third markets.

The Asian region remains high on the Agenda

Japan's economy is not yet in full swing. A new in August released stimulus package of the government is to ensure the recovery. In total Yen 28.1 billion (EUR 246.49 billion, in early September 2016: 1 Euro = Yen 114) amounts to the "package” which is funded to about 25% directly from the state treasury. The investment plans of the manufacturing industry are looking promising in the fiscal year 2016 (4.1 to 3.31.). They could rise by 14.5% over the previous year, according to the result of a survey of the Development Bank of Japan (DBJ) in July 2016.

This is confirmed by a survey of the business newspaper Nikkei with 1,140 participating companies. In the fiscal year 2016 they want to investment a volume of Yen 25.28 billion. This would be an increase over the investments made in the fiscal year of 2015 of 8.3%. If the expansion plans will actually be implemented, it would be the seventh consecutive increase year. Manufacturers of electronic machines have the most ambitious investment plans: Yen 3,64 billion, they have scheduled approximately 9.4% more than in the previous year.

Meanwhile lean foreign Business

According to the sector association JSIM (Japan Society of Industrial Machinery Manufacturers) in the fiscal year 2015 the incoming orders for industrial machinery remained below the expectations. Incoming orders came nearly to Yen 5.50 billion.  These were almost 10% less than the year before. Industry experts had already expected in advance that particularly the foreign business would suffer after the exceptionally successful year 2014. For the fiscal year 2016 the JSIM experts expect an increase of 4.6% to Yen 5.73 billion.

Not as positive as in the preceding years the situation looks in the machine tool segment. According to the industry association JMTBA (Japan Machine Tool Builders' Association) the orders declined in 2015 over the previous year by 11.4% and reached around Yen 1.40 billion. - This is justified by an overcapacity abroad. In fact it was the overseas business which fell by 22.1% to just under Yen 820 billion, while there was still an increase of 9.9% to Yen 579 billion yen domestically. With a view on the 1st quarter of 2016 the association has to state that the foreign business has not yet recovered. With more than one-quarter the orders declined compared to the same period last year.

The domestic market thus wins in importance for Japan's machinery builders. Generally, there is a need of modernization of the partly obsolete equipment at the local businesses. In addition, the reconstruction of the earthquake regions is required too. In addition, the hosting of the 2020 Olympic Games in Tokyo is considered quasi as a guarantor of business orders from the construction sector.

 
 ¹⁾ actual results; ²⁾ preliminary; ³) forecast; ⁴) also included in category: pulp- and paper machines, chillers, equipment for air- and water cleaning; ⁵⁾ among others: equipment for waste treatment, industrial washing machines
Source: Japan Society of Industrial Machinery Manufacturers, February 2016

A high importance is given to the field of environmental and energy technology for the machinery industry in Japan. Although reactors, that meet stringent safety regulations, are expected to enter the net again in the next few years, renewable energy will be pushed up. In addition, there are intelligent power networks (smart grids) in the focus. Especially in areas with high priority, such as the energy and environmental technology, German suppliers with innovative technologies and customized solutions can win the points.

Connection links by Industry 4.00

Digitalization and with it topics related to Industry 4.0 keep the Japanese machinery and factory builders now very much interested. In June 2015, the "Industrial Value Chain Initiative (IVI)" was launched. About 40 Japanese companies belong to this interest group – like as the branches of the German Bosch and Beckhoff Automation GmbH. End April 2016 the German Federal Ministry of Economics (BMWi) signed with the Japanese Ministry of Economy (Meti) a Memorandum of Understanding (MoU) for joint cooperation in the region.
Equipment manufacturers from abroad should observe under cooperation aspects with big business interests the international activities of the Japanese mechanical and plant engineering. The Japanese abroad generated production shares are not far from the 40% mark the Japan Bank for International Cooperation (JBIC) determined the end of 2015. This creates opportunities for third-market operations, which are often controlled by the parent companies in Japan.

In foreign projects the PRC stands not as strong in the foreground as it used to be. The focus is increasingly directed on the ASEAN countries („Association of Southeast Asian Nations"), while currently the general economic activities in the emerging markets are critically observed. In the longer term India has been planned as a manufacturing location. Single, large companies dominate.

According to preliminary data from the industry association JMF (Japan Machinery Federation) Japanese engineering companies manufactured machines worth of about Yen 13.55 billion in the fiscal year 2015. This was 2% less than last year. Important were cooling machines, (Yen 1.98 billion, 4.8%) as well as equipments for manufacturing of semiconductors and flat panel monitors -Yen 1.61billion, 2,8%. The manufacturer of metalworking machines had a production decline over the previous year by 5.9% to Yen 1.18 billion. Growth rates of just over 10% are registered in the robotics segment since several years.

In general the concentration in the individual equipment segments is high. According to the Yano Economic Research Institute in the fiscal year 2015, slightly more than two thirds of the NC milling machine production came from three companies: Makino Milling, Okuma and OKK. In general metalworking machines Amada, Kobe Steel and Kawasaki Hydromechanics (subsidiary of Kawasaki Steel) came on a market share of about three-quarters. Other important tool machine vendors are Yamazaki Mazak and Mori Seiki. Also in construction, textile, packaging and food processing equipment the three leading manufacturers account for at least 60% of domestic production for themselves.

¹⁾ actual results; ²⁾ preliminary; ³⁾ forecast
Source: Japan Machinery Federation (JMF), July 2016

Japan imports partly from our own production abroad

The Japanese imports of machinery and equipment continue to increase. It should be noted, that some of the imports are based on the foreign production of local companies. The largest share of supplies from abroad accounts for the category pumps and compressors. According to the United Nations Comtrade database this category reached on the basis of USD around USD 3.57 billion in 2015. This was 6.5% less than in the last year.

Just over 30% of the supplies came from the PRC; probably to a not inconsiderable proportion from Japanese production. The latter is also the case with electrical machines. According to Comtrade these reached in 2015 an import value of slightly more than USD 55 billion (-8%). More than a third of this was accounted for the PRC; about one-fifth to Asian emerging markets. In the import statistics Germany is especially noted in machine tools and food and packaging machines.

Despite displacements to abroad Japanese exports continue to play a role. In 2016 they are likely to suffer from the resurgent Yen. Moreover, the economic slowdown in the Asian emerging markets is becoming more noticeable.

Source: Japanese custom statistics

 
Commercial practice

Relevant provisions for machine and plant engineering in Japan will be supplied by the following institutions: Japan Customs, the Ministry of Economy, Trade and Industry (METI), the Center for Information on Security Trade Control Japanese Standards Association (http://www.jsa.or.jp), the Japanese Industrial Standards Committee , the Japan Accreditation Board for Conformity Assessment  and the Japan External Trade Organization (JETRO ). JETRO published in February 2010 the still actual report "Handbook for Industrial Products Import Regulations 2009", which contains the specific import requirements for some types of machines, especially for machine tools, food processing and packaging machines.

Detailed information on commercial and tax laws are available at http://www.gtai.de/recht and for import arrangements, tariffs and NTB under http://www.gtai.de/zoll

The series “Sector compact” provides analysis on important key sectors of German export economy.
Other country reports for machinery and plant engineering and other industries can be found at http://www.gtai.de/branche-kompakt .
Contact for engineering: Roland Lorenz; E-Mail: roland.lorenz@gtai.de

• Import from Germany growing / Domestic Chains expanding

Warsaw (GTAI) - The outlook for sales of clothing and footwear in Poland is favorable. Domestic chains such as LPP, Bytom, Vistula and Monnari are opening additional stores. In 2016 the shoe chain CCC is investing around EUR 33 mio in new sales areas, including in Germany. The western neighboring country is by far the biggest buyer of clothing from Poland. Increasingly popular too is fashion from Germany, which occupies the third place among supplying countries.

In Poland the demand for clothing and footwear is steadily growing. The market research firm PMR (http://www.pmrpublications.com) expects in 2016 sales worth of Zloty 35.3 billion (approximately EUR 8.2 billion, 1 Euro = 4.3283 Zl, as of April 22nd  2016). The price war however is very tough due to the higher US dollar exchange rate, the dealers can hardly pass their higher costs on to the customers. This concerns mainly imported commodity goods from the Far East, while the outlook for the upscale segment outfitters is better.

1) Estimation, 2) Forecast
Source: market research company PMR

The company for classic clothing Bytom (http://www.bytom.com.pl, from the same city (Bytom – Beuthen)) that serves the upper segment, wants to create an offer for the masses. It lowered its prices in March 2016. In order to reach more customers, it plans to increase its sales area of from 10,300 square meters in spring 2016 to 15,000 square meters by the end of 2018. The number of its stores should simultaneously rise from 97 to 120.

Bythom will avoid quality losses through savings in the purchasing of clothing. According to Michal Wojcik, chairman of the company, negotiations with representatives of procurement markets are on the way. In 2019 the retail sales of Bytom should reach around 250 million PLN, double as much as in 2015 (123 million PLN). The company will serve the middle segment between large markets with  
mass-production goods and expensive boutiques with domestic and foreign luxury brands.

The two great rivals Bytom and Vistula (http://vistula.pl) from Krakow (Krakau) are receiving increasing competition by smaller companies. Vistula was able to win in 2016 the soccer star Robert Lewandowski for promotional activities, he will appear in suits of the company.

The stockbroker office of the Bank BZ WBK believes in good opportunities of the smaller chain Monnari  (http://www.emonnari.pl), which could double its sales area until 2019. With the proliferation of the growing clothing and footwear chains a consolidation of the retail structure goes along, and the total numbers of stores will overall decrease.

The chains Vistula, Bytom and Monnari are expanding domestically only, where they expand their retail spaces annually by 10 to 25%. Since only one third of the by Vistula and Bytom sold collections are being settled on a USD basis, they are not hurt as much by the strong upvaluation of the US currency as LPP, the manufacturer of mass-products. This company buys almost its entire collection in the  
Far East in US currency. In the case of the footwear chain CCC, the proportion is 40 to 50%.

Source: Bisnode

CCC strives towards west

The retail chain CCC (http://ccc.eu), which is also represented abroad including in Germany and Austria, has acquired for more than ZL 200 million the online shop for shoes eobuwie.pl (http://www.eobuwie.pl). By 2016 a further strong expansion is planned, for which it wants to raise about PLN 140 million. The sales area should become 27% net bigger with at least 100,000 square meters. This was announced by the deputy chairman of CCC, Mr. Piotr Nowjalis.

The majority of the new area (77,000 square meters) is planned abroad, where 110 stores should be opened. In the focus here are Germany, Austria and Romania. Domestically CCC is planning a new sales area of 23000 square meters for 40 stores. These plans represent an acceleration compared to 2015, when the total sales area had increased by 66,000 square meters net (+ 22%). At the end of 2015 there were at home and abroad 773 CCC stores with a total of 372,000 square meters. 

*) Forecast of the press agency Bloomberg, February 2016
Source: Newspaper Rzeczpospolita

According to a forecast of Bloomberg, the most important apparel and footwear companies will improve their results in 2016. Leader LPP supplies with its brands Reserved, Mohito, Cropp, House and Sinsay a wide audience. To the upscale segment belongs the new brand Tallinder, which is being offered since February 2016 in a first store in Gdansk (Danzig). Beginning in 2019 there should be 30 sales stores for the brand Tallinder, which then will compete with Vistula, Bytom and Prochnik.   

Source: Newspaper Rzeczpospolita

In 2016 LPP wants to increase its retail space at home and abroad by 11 to 13%, that is about 90,000 square meters. End of the year thus 1,716 shops could belong to the company. To date, 23% of the sales area of LPP is in the Russian Federation and Ukraine. The profits there were again impacted by the devaluation of the local currencies against the Zloty.

Foreign trade increases

The Polish imports of clothing exceed the exports. Especially Asian countries could increase their deliveries in 2014, but also Germany belongs to the leading suppliers and attained growth. Among the importing countries Germany plays by far the most important role. The followers are the Netherlands, Czech Republic, Austria, Sweden and other, mostly European countries.

Source: Central Statistical Office GUS

Although Poland supplies clothing to Germany at a large extent, it is not easy for the companies to settle in the western neighboring country with own shops and their own brands. LPP opened its first store in Germany in September 2014, in spring of 2016 there were already twelve. In three years there should be 30 stores. In 2015 the German LPP stores generated approximately 94 million PLN, but probably without profit because of investment costs and advertising.

Source: Central Statistical Office GUS

In 2015 Polish exports of apparel, accessories and other textile products and footwear continued to rise.

Source: Central Statistical Office GUS