Nimble China in pole position for global recovery race20 November 2020
The Year of the Rat promises rays of hope amidst Corona virus blues. China is on the move and may yet win over the ‘weˉi’ (Chinese for menace) that is Covid-19, writes Penny Wilson.
There’s a tough if realistic message to the global textile care industry: the novel Coronavirus isn’t going away until someone, somewhere comes up with a vaccine that works. Better times are at least a year away. So, look to China for good news. It is the only economy which will show positive growth of 1.7% this year, says the Economist Intelligence Unit (EIU).
China, with its 1.4 billion population, has been bludgeoned by Covid-19 along with everyone else. But lockdown and travel restrictions had been lifted at time of writing, and China is now jump-starting its vast, $14 trillion economy. Chinese officials said that the world’s second largest economy shrank 6.8 percent in the first three months of the year compared with a year ago. But based on a batch of activity data published on 15 September, China is on track to expand by roughly 5% in the third quarter compared with a year earlier, slightly below the 6% growth rate that it reported in the second half of 2019. That puts it in pole position against other economies in the globe’s recovery race.
So what of China’s textile care industry? If the Economist Intelligence Unit (EIU) in its newly released Global Textile Services Market Analysis, commissioned by the US-based trade body TRSA, is correct, then the future is not black. Let’s look back to look forward. In 2019, says the China Laundry Association, industry sales totalled RMB127.8b ($20.3b) – 6.5% higher than the year before. Total operating revenue of China’s public textile services was RMB63.9b ($9.4b) last year. The growth rate of output value of washing and dyeing industry slowed from around 16.67% to 6.5%. But that, says the CLA, is “much more stable than past (unrealistic) high speeds.” The CLA splits textile care into: Public Textile Services embracing services to hospitals and hotels and Textile Cleaning representing the laundering of clothes and fabrics for families and individuals. The pandemic, Pan Wei, executive chairman and secretary general of the CLA told a recent webinar hosted by US-based trade body TRSA, had brought overall “panic, change and adjustments”. But positives emerged too. Washing hygiene improved, along with better worker protection and PPE. But now the “cost of washing is so much higher,” says Wei. Operating revenue in 2020’s first quarter has decreased by 44.6% compared to the same period in 2019 and although laundry services have basically returned to normal, they and their supply chains have lost what he calls “economic vitality.” Still, Wei said, there are trends to note. “The task of green development is arduous,” he states, but the Chinese Government is paying more attention to environmental protection. Meanwhile, the textile care industry is well aware that energy savings and consumption reduction improvement will be the core of its future success. “Elderly laundries are being rearranged,” Wei says. And he advocates the building of large centralised laundries in regions to match demand and service volumes.
Still, China has much to do on the environmental frontline. The Netherlands Enterprise Agency, part of an EU-China co-operation project which has scaled up sustainable consumption and production practice for Chinese industrial SMEs, has reported that in Nanjing, 1,000 SMEs within the laundry industry contribute to 25% of industrial wastewater emissions and 5% of industrial energy consumption. Textile wastewater emissions are responsible for 46% of total industrial wastewater emissions in Jingzhou, although all these SMEs work within existing legislation. China is still powered by carbon coke belching smoke. Solvent pollution and microplastics remain a problem. PERC is still widely used.
Reforms, though, have been massive within the last two decades in the fields of medical infrastructure and insurance, and in the opening-up of China’s healthcare market. Focus has been laid on not only developing urban areas, but also continuously making healthcare more accessible in rural China, boosting development and the number of hospitals, doctors and medical equipment. Healthcare has celebrated a 10% growth and China now has one of the world’s fastest growing per capita healthcare expenditures whilst new nursing and elder care homes mushroom. Demand for flat linen is likely to skyrocket, industry pundits predict.
Jesse Healthcare Linen Services operates a laundry in Shanghai – arguably one of China’s most advanced and automated. It chooses international standards to be judged upon and is RAL-GZ 992/2 certified by the German Hohenstein Institute. It has boldly invested in top tier laundry equipment and enjoys growing success. Jensen, one of its equipment suppliers, says it has been “honoured” to be a part of Jesse’s – and China’s - success story.
“The total turnover of China’s laundry business has been reaching E15.30b billion ($18.10b) with a 6.70% annual increasing since 2018. Because of the Covid-19, it stopped,” says Kenny Diao, managing director Christeyns China. But Christeyn’s cleaning and disinfection services within hospitals are now seeing sharp rises in demand and Diao predicts hygiene will be one of the top industries in China. Likewise, Ecolab has witnessed 15 times above normal demand for its hand sanitizer and surface disinfectant products. Ecolab recently shared the importance of chemo-thermal disinfection among laundry processes at October’s 2020 China Textile Hygiene Service Expert Forum in Shanghai – the first major event since lockdown. Both Christeyns and Ecolab among others heavily push their water and energy saving technologies and expertise in China amidst growing demand.
The drycleaning and laundry services market? Worldwide it is projected to grow by US$18.9b, driven by a compounded growth of 4.2%. China exhibits the potential to grow at 5.8% over the next couple of years and add approximately US$3.7b, says the Dry Cleaning and Laundry Service Market Analysis, Trends and Forecasts report released in June.
Marco Niccolini of Italy’s Renzacci, though, believes drycleaners are in steep decline and says the only way forward is to position themselves as all-round ‘housekeepers’. He says machines used in China’s outlying towns are old, and there seems no commitment from the Chinese Government to outlaw PERC’s use. “But the drive will come from increasingly eco-aware youth who realise sustainability means business,” Niccolini says. In China, Renzacci advises its drycleaner customers to push the sanitisation of clothing and accessories, to urge their clients to empty their pockets and handbags of items like wallets and to have them sanitised in a Renzacci-Genius 2.0 Ozone Cabinet – technology developed in tandem with the Microbiology Institute recently installed by the Italian Navy which is making masks for the Italian public. The heavy promotion of alternative services and disinfection, with machines to match, will revive the drycleaning trade, Niccolini believes.
Renzacci has always supplied China direct from its plant in Italy but is one among many western manufacturers hit by negative economic forecasts. Most report big franchising chains shrinking and hotel projects, especially five star, put on hold. Pre-Covid, such projects heaved in China. There’s a danger that Chinese-made machines made in big centralised factories become more viable along with tightening budgets. But machines with Western-made technology are perceived as investment goods. Witness Hangzhou Kaiyuan which targets four to five-star hotels and became one of the first laundries to purchase a tunnel washer in China when it bought one from Jensen back in 2011. Now, despite hospitality’s downturn, it recently purchased an automatic flatwork line – a Jenrail connected to a JensenF8 feeder, Flexchest ironer, and Classic-design folder. Such equipment offers both investment and operational security. Jensen’s Xuzhou factory fills demand for locally made machines with European technology.
Back to the Economist Intelligence Unit’s new Global Textile Services Market Analysis which, unsurprisingly, says those servicing a beleaguered hospitality sector will suffer. The EIU adds that while non- traditional disruptors like Airbnb have challenged growth in hotels worldwide, they also provide opportunities for smaller textile services companies. Although hotels will struggle particularly in China and the likes of South Africa, the crisis will wane by the end of 2021 says the EIU, with rapid pickup in 2022. And as hotels seek to assure customers about strong hygiene and disinfection practices during Covid-19, awareness and demand for professional textile services will expand after 2022. China will not prove an exception. Prepandemic, high-tech solutions to clean up hotel laundries were already sweeping the country. Witness Wuhan Kunteng Laundry service, contracted to many hotels in touristy Wuhan, central China. It announced implanting microchips, with a QR code, into linen which can be read by guests’ cell phones to reveal the date of their last clean. The water-resistant chips withstand high temperatures, so will survive plenty of washes.
Tiantian, a laundry brand since the early 90’s, boasts it has the “largest centralized smart laundry factory in the world.” In April 24Tidy (Shanghai) Network Technology Inc. announced its RMB950m ($139.9m) acquisition of Tiantian. 24Tidy has provided professional online washing and disinfection services for more than 1.5 million families with a remarkable growth performance since the outbreak of Corona virus. The average daily active users of 24Tidy App increased by 200% compared with the same period of last year, much due to lockdowns, home working and increased online demands. The founder of 24Tidy, Yao Zongchang says the outbreak of Covid-19 “accelerated our pace to restructure the whole industry.” 24Tidy has poured investment into technology to analyse data on customer and consumer behaviour, giving it a competitive edge over China’s estimated 4,000 traditional laundry shops.
As the world’s second largest economy and the new game changer in global markets, China signals rich pickings for western manufacturers, despite the pandemic and an escalating trade war with the United States. The Girbau Group recently announced the acquisition and complete control of its Chinese joint venture Girbau Shenguang Laundry Technology (GSLT) in Shanghai. GSLT is now a subsidiary completely controlled by the Girbau Group, positioning it well for future business across Asia. GSLT is the result of the joint venture established in 2017 by the Girbau Group and Shenguang, the Chinese laundry machinery manufacturer.
The likes of Renzacci have injected cash into R&D, logistics and technical support and two years ago opened a spare parts/ educational/customer support centre in Shanghai. Alliance Laundry Systems, has a 1,000sqm facility in Shanghai. Kannegiesser’s sales manager in Asia and Middle East, André Tienemann, says whilst 2020 - the year of the rat - promised a creative, strong and fruitful future, the big ‘wei’ (Chinese for menace) in the form of Covid-19 “suddenly curbed any great euphoria”. He adds: “ The capacity utilization in the laundry business, especially in the hotel sector, declined to 20-30%, suppliers changed their program to mask production and hospitals started to burn their linen, because of the unclear situation, instead of washing. “Now, though, Tienemann says, with restrictions lifted, projects are burgeoning, like the recent opening of a complete Kannegiesser equipped laundry in Xiamen.
Xeros Technology Group has a licensing contract with Jiangsu SeaLion Technology Development, a wholly owned subsidiary of the Chinese commercial washing machine manufacturer Jiangsu SeaLion Machinery, which integrates Xeros’ technologies into its own machines and sells them. When asked about sales and supply chains in China, Electrolux Professional said things were “still under control” despite Covid-19. “We have strong confidence in business recovery in 2021,” it stated.
About 20-30% of China’s clothing and textile produce gets exported, representing a third of global textiles exports. “The textiles industry has … taken an absolute hammering,” International Commodity Intelligence Services (ICIS) senior Asia analyst, John Richardson said in an April ICIS report, and China will feel the brunt of the sharp decline in external demand. “China is at the very heart of the global polyester chain. It is the world’s biggest importer of PX [paraxylene] and ethylene glycols, the world’s biggest producer of PTA [purified terephthalic acid] and is always a net exporter of polyester fibres.” Recent Euromonitor figures show China’s adult garment market was worth around RMB2,185.4b in 2019, an increase of 5.2% year on year. While it has contracted this year, Euromonitor expects the garment market to increase to RMB2,256.5b in 2021.
China is the world’s largest importer and exporter of goods and is also among the largest manufacturing economies in the world. Industry and construction account for almost half of China’s GDP. Fifteen years ago, there were no billionaires in China. Today, there are 315, according to The New Fortune 500, an annual list published by a Chinese finance magazine. The combined fortune of China’s richest 500 people totals more than RMB 10 trillion ($1.46 trillion).
Not bad for a country which, just over 40 years ago introduced major economic reforms to lift hundreds of millions of people out of poverty to become the world’s second-largest economy.
New Global Report
The new Global Textile Services Market Analysis by The Economist Intelligence Unit (EIU), commissioned by the TRSA, covers 13 countries spanning six regions, representing over 70% of global GDP. Just released, the report assesses the linen, uniform and facility services industry, explores market demands and forecasts market, service and product opportunities. It was recently presented by Claire Casey, EIU’s global managing director, public policy consulting, to key industry panels via a TRSA-hosted webinar.
China Laundry Association
The 1,000-enterprise strong China Laundry Association (CLA), formed in 2004 to instil disciplines, training, development and knowledge-sharing of the country’s textile care trade, also runs the China Laundry Expo. The CLA has done much to represent the industry to the Chinese Government and to forge relationships with trade bodies worldwide.
Population growth: 0.3%
Official currency: The Renminbi meaning ‘people’s money’. International symbol is CNY, abbreviated to RMB with the symbol ¥.
Exchange rate at time of writing: 1 CNY = 0.14726 USD
Official language: Mandarin Chinese, the world’s most widely spoken language
Unemployment: The IMF forecasts 4.3% in 2020, dropping to 3.% in 2021.
Government: The Beijing-based Communist Party presides over 22 provinces, five autonomous regions, four municipalities, plus Hong Kong and Macau.