A 61% year-on-year surge in total profits might turn heads in any manufacturing sector. But when paired with a revenue growth of just 1.3% and a razor-thin operating margin of 2.27%, the half-year report reveals a deeper truth: the cotton textile industry is stuck in a 'growth without profit' rut, with internal fractures far more pronounced than the headline numbers suggest.
Structural divergence beneath profit surge
According to public data from the National Bureau of Statistics, from January to June, the total profits of above-scale cotton textile enterprises rose 61.0% year-on-year, decelerating by 8.5 percentage points from the January-May period, as the low-base effect fades. More telling is the stark divergence between sub-sectors: cotton spinning profits soared 191.6%, while cotton weaving fell 19.8%—a gap of over 210 percentage points. This implies that the industry-wide profit boom is almost entirely driven by spinning, while weaving remains mired in weak demand and cost pressures.
Weaving enterprises, despite a lower loss ratio (23.4% vs. 28.7%) and faster revenue growth (2.1% vs. 0.9%), saw profits plummet. Their higher gross margins suggest better cost control, but insufficient capacity utilization and weak order prices are eroding profitability. For buyers, this signals a potential window of lower prices in weaving products, while improved spinning margins may support upstream cotton demand, underpinning prices.
Weak domestic and external demand, Xinjiang's scale trap
Demand-side pressures are most evident in export data. From January to June, export delivery value fell 6.5% year-on-year, with weaving down 9.6%, though the decline narrowed from the January-May period. Overall textile and apparel exports grew just 1.4%, far below the 17.6% growth in total goods exports, and cotton product exports even dipped 0.1%—external demand is losing its pull, while retail sales growth of only 1.3% indicates fragile consumer confidence at home.
Regional divergence is equally striking. In the first half, Xinjiang's above-scale textile industry value-added grew 23.3% year-on-year, 20 percentage points higher than the national average, ranking first among 41 major industrial sectors. However, from January to May, Xinjiang's textile sector posted a loss of 432 million yuan, widening by 246 million yuan year-on-year, also the largest loss among major sectors. This 'scale expansion with deep profitability pressure' paradox reflects a mismatch between rapid capacity buildup and market absorption. For inland enterprises, Xinjiang's capacity expansion intensifies competition, especially in cotton yarn, potentially squeezing margins further.
Inventory and cash flow signals
Operational efficiency metrics reveal more. At end-June, finished goods inventory turnover days were 2.5 days higher than the textile industry average, while accounts receivable recovery period was 6.1 days shorter—indicating faster collections but more severe product accumulation, meaning destocking pressure remains unresolved. In July, reserve cotton auctions saw 100% daily turnover with an average premium of around 1,000 yuan per ton, with a high share of foreign cotton, reflecting strong demand for imported cotton due to insufficient sliding-scale quota—a sign of cost-side disturbances from the domestic-foreign price gap.
For exporters, negative growth in cotton product exports is a clear warning: relying on low-price, high-volume models in traditional markets is no longer sustainable. For spinning mills, the current profit surge is built on a low base; as the base normalizes and demand weakens, growth will likely decelerate in H2. Short-term profitability should not be mistaken for a long-term trend.