In the first five months of 2026, China's textile industry delivered a performance that appears stable on the surface but reveals underlying divergences. According to data from the China National Textile and Apparel Council's Industrial Economy Research Institute, industrial added value of enterprises above designated size grew 4.8% year-on-year, while apparel retail sales turned positive to 3.2%. However, a closer look at various indicators shows uneven recovery—profit growth was only 2.5%, chemical fiber investment slowed to 6.1%, and export growth decelerated.
Domestic Demand Recovery: Apparel Retail Finally Turns Positive
The turnaround in apparel retail data is one of the biggest highlights of the first half. From January to May 2026, retail sales of apparel goods at units above designated size grew 3.2% year-on-year, compared to a 0.8% decline in the same period last year. This reflects a marginal recovery in consumer willingness to spend, particularly in offline consumption scenarios. However, the 3.2% growth still lags behind the overall retail growth of 4.5%, indicating that apparel consumption recovery remains relatively weak.
From an industrial chain perspective, the recovery has begun to transmit upstream to raw materials. Prices of intermediate products such as yarn and grey fabric stabilized in the second quarter, with some conventional grades seeing slight increases. But end-branders have limited tolerance for cost hikes, leaving fabric buyers in a relatively strong bargaining position.
Export Resilience: Slowing Growth, Changing Order Structure
Export data offers another dimension worth watching. From January to May 2026, China's cumulative textile and apparel exports grew 1.9% year-on-year, but the pace slowed from 3.5% in the first quarter. By category, textile exports (intermediate goods like yarn and fabric) grew 2.8%, outperforming apparel end-products at 1.2%. This suggests that while global apparel demand remains sluggish, overseas processing links still rely heavily on Chinese intermediate goods.
Regionally, exports to ASEAN grew 5.1%, continuing as the main driver; exports to Europe and the US grew only 0.6% and -0.3%, respectively. The destocking cycle in Western markets has not fully concluded, with orders dominated by short-term, small-lot transactions, constraining capacity utilization at domestic factories.
Investment Divergence: Chemical Fiber Cools, Home Textiles and Dyeing Expand
Fixed asset investment data reveals structural adjustments within the industry. From January to May 2026, textile industry fixed asset investment grew 8.2%, but chemical fiber investment slowed from 12.5% in the same period of 2025 to 6.1%. Overcapacity pressures in chemical fibers have begun to curb new investment, with some small and medium enterprises facing cash flow strains.
Meanwhile, investment in home textiles and dyeing maintained double-digit growth at 11.3% and 9.8%, respectively. Home textiles benefit from lagged demand from property completions, while dyeing investment is driven by environmental upgrades and capacity replacement. For equipment suppliers, these two segments are currently the most promising.
Profit Pressure: Cost vs. Price Game
From January to May, revenue of textile enterprises above designated size grew 3.8%, but total profit increased only 2.5%, with profit margins edging down 0.12 percentage points to 4.1%. Cost pressures come from two sides: raw material prices for cotton and chemical fibers rose 5%-8% year-on-year; and labor costs continue to climb. Meanwhile, downstream brands and retailers tightly control procurement budgets, causing ex-factory price increases for fabrics and garments to lag far behind raw material rises.
For companies, the most effective strategy is not to passively wait for price hikes, but to enhance value through product differentiation (e.g., functional fabrics, recycled fibers) or reduce costs through digital transformation.