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China continues to buy

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Chinese New Year celebrations are over and wool mills in China continue to buy large at Australian wool auctions, putting upward pressure on prices for all wool types.

It seems that protracted negotiations between China and the US, and high prices, has not dampened demand for Australian wool in China. The ban on South African wool to China, due to foot and mouth disease can be held partly responsible for this increased buying.

The long term picture is a little complicated. According to some reports out of China the present trade tariff issues between the USA and China has made a dent in consumer confidence in China. No one knows how long and how severe this will be. As consumers stop spending the impact has definitely been felt in the textile sector in China.

However the woven sector is holding reasonably well. This is in part due to demand driven by uniform orders by Chinese government departments.

But the knitting sector is feeling the pinch. There is very little government involvement in this sector and unless Chinese domestic consumers start spending again this sector will continue to suffer.

Looking at the first auctions of 2019, prices have held reasonably well. 80% of wool is bought by China, so there is obviously still demand, particularly for fleece wool.

Textile exports from China to the USA have been captured in these trade tariff issues, but not withstanding this, exports to the USA, Japan, and Europe continue to see steady growth.

Mr Wen of Tianyu sees the future positively. He comments that ‘reforms started in China over 40 years ago, and we have matured during this 40 years. This trade war with the USA will force Chinese companies to restructure and be more competitive. Companies will need to be more innovative and be better and do business in new ways’.  He notes that 30 years ago 2% of the population in China had tertiary education, today it is 30%. ‘We need to teach this next generation how to lead, not to follow. This trade war has triggered this focus to innovate and so it is a good thing for them’.

Other sources within China point out that a further important fact to consider this year is China’s 70th anniversary of the establishment of the Republic. The government will want to ensure that everything looks good and will prop up industry to reflect this. So, some industry players expect a stimulus of some sort.

If trade tariff issues can be sorted out reasonably quickly, and consumer confidence improves a steady performance should be the result.


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