Enhance The Awareness Of Risk Prevention And Control, Fully Analyze The Leverage Ratio Of Textile Industry In The First Half Of 2020

Textile industry is a consumer goods manufacturing industry, with the characteristics of long industrial chain and high degree of marketization. The number of small and medium-sized enterprises and private enterprises accounts for more than 95% of the whole industry. In recent years, the textile industry has been basically stable, but the development environment is facing a significant increase in various risk and challenge factors. While promoting the transformation and upgrading in depth, maintaining the overall stability of leverage ratio is not only an important aspect of the textile industry to implement the national risk prevention task, but also the inevitable requirement for the industry to promote high-quality development. Since 2020, in the process of actively responding to the impact of the new pneumonia epidemic, the enterprise's awareness of asset risk prevention and control has been significantly improved, and the industry's asset liability level is generally in a reasonable range.

The asset liability level of the industry is in a reasonable range, showing a slight increase in stability

Since 2020, the asset liability ratio of the textile industry has remained at a reasonable range below 60%, showing a slight upward trend. According to the data of the National Bureau of statistics, from January to June, the asset liability ratio of 33000 Enterprises above designated size was 56.4%, which was roughly the same as that of the same batch of enterprises in the same period of last year, a slight increase of 0.4 percentage points compared with the first quarter of this year. The asset liability ratio of textile industry has not increased significantly. On the one hand, it is related to the state's centralized introduction of a number of policies to ease the financing pressure of small and medium-sized private enterprises, on the other hand, it is also related to the current lack of market demand, which leads to the decline of enterprise investment scale and the reduction of debt demand.

The asset liability ratio of most sectors of the industrial chain was flat or decreased compared with the same period of last year, while the debt ratio of a few industries increased. Among them, the asset liability ratio of hemp textile, wool textile and textile machinery industry increased rapidly, accounting for 55.8%, 58.6% and 57.9%, respectively, which were 5.6%, 1.9 and 1.3 percentage points higher than the same period of last year. The asset liability ratio of home textile and cotton textile industry decreased significantly, lower than 1.3% and 0.8% respectively in the same period of the year. Although the asset liability ratio of chemical fiber, filament weaving and printing and dyeing industry is flat or decreased compared with the same period of last year, it is still higher than 60%. There is a certain operational risk pressure, which needs to be paid attention to.

Figure 1: change of asset liability ratio of textile industry (Enterprises above Designated Size)

Source: National Bureau of statistics

Figure 2: changes in asset liability ratio of textile sub industries in the first half of 2020

Source: National Bureau of statistics

The survey of key enterprises was basically stable, and the feeling in the second quarter was better than that in the first quarter

In the first quarter of 2020, due to the impact of the new crown pneumonia epidemic, the production and operation activities of textile enterprises are hindered, and the benefits are greatly reduced. In addition, the high cost burden of water, electricity and other expenses and the wages of employees, as well as the limitation of financing channels, the problem of tight capital chain of enterprises has been highlighted. Therefore, the asset liability ratio has been improved. According to the survey results of China Textile Federation in the first quarter, only 75.1% of the enterprises whose asset liability ratio is within the reasonable range of 60%, and 39.9% of the enterprises whose asset liability ratio is lower than 50%, which is 6.1 and 15.9 percentage points lower than the survey results in the fourth quarter of 2019, respectively. 28.3% of the enterprises reported an increase in the asset liability ratio, which was 19.2 percentage points higher than that in the fourth quarter of 2019.

Entering the second quarter, with the steady progress of resumption of work and production, the business activities of enterprises have accelerated to recover. The survey results show that in the second quarter of 2020, 77.5% of the surveyed enterprises have an asset liability ratio lower than 60%, and 46.4% of the enterprises have an asset liability ratio lower than 50%, respectively, which are 2.4 and 6.5 percentage points higher than those in the first quarter; only 13.2% of the enterprises reflect an increase in the debt ratio.

From the perspective of enterprise scale, the asset liability level of small and medium-sized enterprises is higher than that of large-scale enterprises. In the second quarter, 80%, 76.9% and 74.2% of large, medium and small-sized enterprises with asset liability ratio lower than 60% accounted for 81%, 72.7% and 73.8% respectively in the first quarter. From the perspective of industrial chain structure, the asset liability level of cotton textile, printing and dyeing and textile machinery industry with capital technology intensive characteristics is relatively high, and the number of enterprises surveyed reflecting asset liability ratio higher than 60% accounts for more than 20%; the number of enterprises surveyed with asset liability ratio more than 60% in terminal home textile industry accounts for 30.3%, an increase of 0.7 percentage points compared with the first quarter.

Figure 3: survey on asset liability ratio of key textile enterprises

Data source: Industrial Economics Research Institute of China Textile Industry Federation

In the investigation of the causes affecting the change of the asset liability ratio of enterprises (multiple choices), the main reasons are the feedback from key enterprises participating in the survey, "increase and decrease of accounts receivable" and "uncertainty of market expectation, fluctuation of investment in capacity expansion and technological transformation". According to the survey results, 54.9% and 34.7% of enterprises chose these two items in the first quarter, and 44.7% and 37.9% in the second quarter, respectively. In addition, "limited financing channels" is also the main reason for the fluctuation of asset liability ratio. The number of enterprises choosing this option accounted for 15.2%, an increase of 1.3 percentage points compared with the first quarter.

According to the statistical data and the survey of key enterprises, the leverage ratio of the textile industry is basically stable and the operational risk is controllable. However, it is worth noting that due to the impact of the epidemic, the financing needs of textile enterprises are more based on the short-term liquidity demand of relief nature such as paying workers' wages, rather than for the expansion of long-term production and operation activities. There is a certain degree of mismatch between the stable rising asset liability ratio and the economic activities significantly lower than in previous years, which indicates a certain degree of asset risk. Under the situation of high degree of leverage, it is suggested that enterprises should pay attention to the stability of capital chain and enhance the level of comprehensive risk management. Since 2020, the asset liability ratio of the textile industry has remained at a reasonable range below 60%, showing a slight upward trend.