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Post-crisis era can jump out of the price trap
In the post-crisis era, the global economy has entered a more stable phase following the relaxation of the international financial crisis. However, experts warn that this stability is fragile, as the root causes of the crisis have not been fully resolved, and uncertainties still linger in the world economy. During the early stages of the crisis, although order volumes were low, some leading enterprises managed to maintain or even grow their exports due to a stable RMB exchange rate and lower raw material costs. This period, often referred to as the "post-crisis times," has seen a gradual recovery in demand, but companies remain cautious about taking on more orders, fearing that increased exposure could lead to greater losses.
For export-oriented hemp-spinning enterprises, the situation has been particularly challenging. In the initial phase of the crisis, many companies had to lower prices to clear inventory and improve cash flow. Now, as the economy shows signs of recovery, rising production costs make it difficult for them to raise prices again. Xu Jixiang, president of the China Hemp Industry Association, pointed out that once prices start to fall, it becomes extremely hard to bring them back up. He emphasized that pricing is a complex process, and once a downward trend begins, reversing it is no easy task.
Many business leaders have adopted strategies such as energy-saving measures and technological innovation to cope with the crisis. However, fewer have admitted to lowering prices to secure market share. The biggest risk during the crisis was shrinking demand, which led to oversupply and falling prices. When faced with liquidity challenges, some companies had to sacrifice profits to keep operations running. As one linen company manager explained, "Even if we made little profit, we still had to sell products to keep the capital flowing; otherwise, the company would go bankrupt."
Under these conditions, many flax enterprises turned to price reductions to boost sales. From January to February, export volumes increased, but unit prices declined. The average profit margin in the hemp textile industry is around 3%, leaving little room for further cuts. Meanwhile, the post-crisis era brings additional pressure, as rising production costs deepen the challenges facing the sector.
Labor shortages have also become more severe, especially in the hemp spinning industry. Production conditions are tough, with high humidity and temperature levels in factories. Many workers prefer jobs in restaurants over those in the textile industry, where wages and working conditions are less attractive. Additionally, the cost of raw materials has risen sharply. European flax prices have shown strong upward trends, and experts predict another round of increases. This aligns with global trends in natural fiber prices, including silk, cotton, and wool, all of which have seen significant price hikes in recent years.
Despite these challenges, there is hope for companies to escape the trap. One effective strategy is to focus on producing differentiated products. For example, Changzhou Meiyuan Group recently secured an order for high-count linen yarn at an exceptionally high price—over 380,000 yuan per ton. This product, which exceeds the price of a Mercedes-Benz E300 by weight, highlights the potential for premium pricing when quality and uniqueness are prioritized.
The financial crisis forced customers to adopt a wait-and-see attitude, placing higher quality demands on suppliers. Companies that can deliver superior products gain the leverage to charge more. As Zhou Hui, chairman of Changzhou Meiyuan Group, noted, "Because other companies cannot produce such high-quality yarn, our products command a higher price." This demonstrates that differentiation is key to breaking free from the cycle of price competition.
Producing unique, high-quality products allows companies to regain control over pricing. Whether through high-count yarn or premium-grade regular yarn, the goal is to elevate the perceived value of the product. Ultimately, raising prices starts with building a stronger brand identity. When companies can consistently deliver exceptional quality, they can move beyond price wars and reclaim their pricing power. This shift is not just possible—it's essential for long-term survival and growth in the post-crisis era.