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Chinese silk industry needs comprehensive risk management
26
Dec '13
The silk industry sees the most frequent price fluctuations and volatility in the entire textile industry, mostly because its raw material production depends on several factors.
 
The years 1995, 1998, 2002, 2005, 2008 and 2011 saw high ups and downs in silk prices. In this sense, the volatility in prices has become a reality, and hence it becomes difficult for enterprise development, which requires a stable environment.
 
When prices fall, silk producers and traders suffer losses on goods held with them. As market competition intensifies, the pressure of price fluctuations is increasingly felt by companies, whose purpose is to earn stable profits through sale of the product, rather than through speculative gains.
 
From macro point of view, the world economy is still in an adjustment phase after 2008, and developed countries are yet to return to the past era of excessive consumption. From microeconomic point of view, the appreciation of the RMB affects silk exports. So, overall both the macro and micro fundamentals are unfavourable for the smooth development of the Chinese silk industry at present.
 
In addition, there is a problem of excess silk processing capacity. The Guangxi factor also plays a very important role as it has at least two-thirds of China’s silk processing capacity.
 
In such a situation, enterprises should attach great importance to the quality of their business, and they need to adopt comprehensive risk management to survive and flourish.
 

Fibre2fashion News Desk - India


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