In the second half of 2007, from the perspective of corporate earnings, fixed asset investment growth, export growth and domestic clothing consumption, we believe that the boom of the garment industry is declining. This is closely related to the acceleration of the RMB appreciation, the reduction of export tax rebate and the rapid increase in labor costs. We believe that in the context of accelerated appreciation of the renminbi, this downward trend will not change in the short term, and the overall investment opportunities of the industry in the second half of this year are not large.

The export tax rebate rate will be raised, and the short-term benefits will not be changed. The long-term prosperity downward trend will not be changed. The market rumors say that the export tax rebate rate of the garment industry will be raised from 11% to 15% in July 2008.

According to our calculations, if the policy is promulgated, it will increase the total profit and net profit of the industry for 08 years, respectively, 13 billion 792 million yuan and 10 billion 344 million yuan RMB, and increase the net sales interest rate by 1.18 percentage points. This will undoubtedly alleviate the internal and external environmental pressure of the garment export enterprises in the second half of the year to a great extent, and improve the profit situation.

But we are cautious about this rumour, but we can confirm that the export tax rebate rate of garment industry will not be lowered in the second half of the year. Even if we raise the export tax rebate rate, we believe that the garment enterprises will only make short-term profits and will not fundamentally change the declining trend of the garment industry.

Concerned about the fast growing brand and channel clothing enterprises: Although the investment opportunities of the whole garment industry are small, we are optimistic about the growth of consumption demand of domestic brand clothing under the background of consumption upgrading. It is believed that under the worsening export environment, clothing enterprises with good brand image and multi-level retail channels show good growth and pressure resistance, profitability is prominent, monopoly advantages of brands and channels are difficult to break in the short term, and it is suggested that the fast growing brand and channel clothing listed companies in the second half of the year.