Cotton spinning enterprises: domestic and foreign income is very different.

Business News Agency, May 21-Not long ago, the author learned in an interview with Hengtian Heavy Industry (formerly Zhengzhou Textile Machinery Factory) that in 2011, they had the largest export volume of chemical fiber equipment and many orders. In 2012, their cotton spinning and carding equipment was also being exported. To this day, enterprises are still working overtime to make orders. "It is mainly because large foreign companies are ordering equipment. For example, Tianhong Group has a lot of orders. In recent years, they have been taking a differentiated path to achieve industrial upgrading". On the second day after the author interviewed Liu Yanwu, deputy general manager and chief engineer of Hengtian Heavy Industry, he had already embarked on a trip to Vietnam.

The reporter saw such a clear industrial chain-China's textile enterprises set up factories abroad, and most of them purchase relevant equipment at home, thus driving the export of textile machinery enterprises.

However, the cotton textile enterprises domestic and overseas production of one step difference, the result is thousands of miles away. Since 2011, the price of cotton in China has been at most about 6000 yuan per ton higher than that in the international market, which gives Tianhong textile, a Hong Kong listed company with a factory in Vietnam, an enviable cost advantage. The 2012 annual report released by Tianhong Textile shows that the company's turnover in 2012 was 7.3415 billion yuan, the profit during the year increased 7 times to 0.4863 billion yuan, and the profit per share also jumped 7 times from 0.07 yuan in 2011 to 0.55 yuan. The company's overall gross profit margin increased from 8.1 per cent in 2011 to 15.3 per cent in 2012, a performance that has amazed domestic cotton textile companies. Influenced by China's cotton purchasing and storage policy in recent years, the domestic cotton price is stable at about 19000 yuan per ton, while Tianhong Textile has a factory in Vietnam, and the cotton purchased in the international market is 3000-4000 yuan cheaper than that in China. Due to the huge cost advantage, the price of yarn processed with cotton is about 3000 yuan lower than that of domestic textile enterprises, Therefore, the performance is better than that of domestic counterparts.

It is reported that when Hong Tianzhu, chairman of the board of directors of Tianhong Textile, decided to invest in the construction of a textile factory in Dong Nai Province, Vietnam, near Ho Chi Minh City, in 2006, he not only considered the free import of cotton in the international market, but also considered that the wages of local workers were only about half of China's. In addition, in order to attract foreign investment, Vietnam stipulates that foreign investment companies will be exempted from income tax for 3 to 4 years from the first profit-making year, and then the income tax will be reduced by half (about 12.5 per cent) for 7 to 9 years, which is far more favorable than China's "two exemptions and three halves. Tianhong Textile, which has tasted the benefits of overseas investment, has further increased its investment in Vietnam. In addition to the southern Tongnai base, Tianhong Textile's new factory in northern Vietnam began construction in July last year, with a total investment of about 1.1 billion yuan and an increase of about 400000 spindles. In addition, Tianhong Textile also plans to invest 0.4 billion yuan to build a textile factory in Uruguay, South America. It is estimated that after the completion of all projects, the processing capacity of Tianhong Textile will increase from the current 1 million spindles to about 1.5 million spindles.

Lutai is one of the largest cotton spinning enterprises in China. In 2012, the European debt crisis led to the continuous increase of cotton price difference at home and abroad, the continuous increase of domestic labor costs, and customers gradually transferred orders to Southeast Asia. In 2012, Lutai's total operating income and net profit attributable to shareholders of listed companies showed a downward trend year-on-year. Bailong Dongfang, another domestic listed company, is also a cotton spinning enterprise greatly affected by the difference between domestic and foreign cotton prices. In 2012, the company's profit decreased by more than 55% year-on-year.

It is not difficult to see that Tianhong Textile, which "went out" earlier, has the first-mover advantage. Under the background of the huge price difference between domestic and foreign cotton, the overseas layout shows the cost advantage. Hong Tianzhu believes that the price difference between domestic and foreign cotton will exist for a long time due to policy differences, and enterprises with overseas production bases will have more space. Gao Yong, vice president and secretary general of the China Textile Industry Federation, believes that "from the current point of view, it is better for enterprises with export orders to build factories in Southeast Asia. And this trend of being forced to 'go out' will remain for several years".

There are also industry experts believe that the price of cotton inside and outside the upside down may be a short-term phenomenon. The reason is that the cotton storage policy may be adjusted, or will not be implemented for a long time. In the long run, the wages of labor in Vietnam and other places are also rising rapidly. Once the cotton purchasing and storage policy is adjusted in the future, domestic and foreign enterprises will stand on the same starting line in terms of cost. Domestic textile enterprises still have strong competitiveness, and they do not have to go overseas to build factories to survive.

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