The report in Textile Outlook International casts doubt on China ability to maintain the momentum. China has a number of weaknesses which could undermine its ability to hold on to its leadership after quotas have been eliminated at the beginning of 2005. .
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China textile industry has witnessed an unprecedented influx of foreign investment and imports of new machinery. But a large amount of the technology and equipment in the industry remains undeveloped. In weaving, for example, only 20% of looms are of the more advanced shuttleless type, which compares poorly with China rivals. .
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China also finds it difficult to compete in product innovation, branding, or rapid reaction capabilities – all of which are essential in modern textile and apparel markets. And China textile and clothing industry is too focused on quantity rather than quality. .
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The huge increase in exports from China since 2002 has been based mostly on cheap, low quality items. These are the kind of mass export items which attract defensive action. In late 2003, for example, the USA reimposed quotas on a number of textile and apparel product categories. The quotas were imposed under a special safeguard clause included in China WTO accession agreement. .
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The current Chinese Five Year Plan (2001-2005) aims to increase the added value of textile and apparel exports. But the reverse appears to be happening. In the case of Chinese textile and apparel exports to the EU and the USA, average prices are falling. .
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At the same time, production costs are rising. Wage costs are China traditional competitive strength. But in 2002 wages in large scale textile enterprises – defined as concerns with a turnover of over Rmb5 mn (US$604,000) – were double what they were in 1980 and are currently increasing by more than 5% a year. .
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Government efforts to distribute textile and apparel manufacturing more evenly throughout China regions do not appear to be working, the report says. In 2002 over 60% of all employment in the industry was concentrated in the five Eastern coastal provinces – Jiangsu, Zhejiang, Guangdong, Shandong and the Shanghai municipal region. These five regions were responsible for 74% of the gross output value and 81% of the export value of the industry. .
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China has made massive gains in world markets since it joined the WTO in late 2001, whereupon quotas were eliminated on a number of Chinese export items. But to maintain its leadership position in the more liberal, quota-free environment which will prevail in 2005 and beyond, it will need to speed up its transition from a large-scale textile industry into a strong one, according to Textile Outlook International.
Date:5/29/2004
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