Zhejiang Zongheng Group collapsed, and the textile industry was in danger one after another and became insolvent, with a loss of 2 to 3 billion.

Zhejiang Zongheng Group collapsed, and the textile industry was in danger one after another and became insolvent, with a loss of 2 to 3 billion.

Oriental Net News on December 9: The negative effects of rising costs and declining demand on textiles are gradually emerging. Following the suspension of production by Hualian Sanxin, a large Asian PTA company, at the end of September, recently, the capital chain of Zhejiang Zongheng Group, another leading enterprise in the textile city of Shaoxing, was broken, and the company’s chairman was placed under residential surveillance. Some textile companies in Zhejiang and Jiangsu said in interviews that although the country has repeatedly increased textile export tax rebates and the RMB has shown signs of depreciation, the “winter” of the textile industry may have just begun due to the sharp drop in export orders.

Zhejiang Zongheng Group Co., Ltd. started out by producing polyester chemical fiber. After 2003, it became involved in steel, real estate, water and electricity, and finance. Yuan Boren, the company’s chairman and general manager, was listed on the Hurun Rich List in October with a wealth of 7 billion yuan. However, just 15 days later, Zongheng Group fell into financial crisis. On December 5, the reporter saw many people at Zongheng Group who came to ask for goods and debts. On that day, a working group composed of the three-level governments of Shaoxing City, Shaoxing County and Doumen Town was established and worked on-site at Zongheng Group. Preliminary capital verification shows that Zongheng Group is insolvent and has a deficit of 2 to 3 billion. The economic situation at home and abroad fluctuated greatly, liquidity was suddenly tight, and financial leverage was too high, causing the “Zongheng Empire” to suddenly collapse.

In fact, Zongheng Group is just another typical case of the textile industry in trouble. According to relevant information, the proportion of national textile and apparel exports accounts for 40%, with a profit margin of only 4%. In the first half of this year, the RMB appreciated against the US dollar by more than 6%. Some places where the textile industry accounts for a relatively large proportion, such as Shaoxing, Zhejiang, and Tangqiao Town, Zhangjiagang, Jiangsu (the textile industry accounts for more than 60% of the local economy), have had their economies severely affected. Some companies with important influence in the industry, such as Hualian Sanxin and Jianglong Holdings, were once shut down.

Since August 1 this year, the country has adjusted the textile export tax rebate rate for three times, rising from 11% before the adjustment to 17%. At the same time, the yuan showed signs of depreciation. However, the textile industry has not seen improvement for the time being. Since September and October, corporate orders have dropped by 50% to 60% compared with the peak this year. Many industry insiders have said that at present, the decline in export demand in 2019 is a foregone conclusion, and the industry situation may further deteriorate.

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