1/ The Status on China's Textile Industry

After entering the post-quota era will Chinese textile constitute a threat to other countries because of its large export to the international market. It is true that the Chinese textile has not been walking toward marketization.

Development is driven mainly by domestic consumption

The textile industry operated well in 2004. Sales of the whole industry reached 2.64 trillion yuan in 2004 increasing by 22.79 percent year on year. The development of the textile industry was still driven by domestic consumption. According to statistics export of textile and apparel accounted for 30.25 percent in 2004 while domestic sales represented 69.75 percent. Export of processed fiber contributed to 24 percent while domestic sales accounted for 76 percent. Chinese are becoming increasingly rich and spending more on the consumption of textile and apparel. The development of textile industry is driven by the development of the national economy.

The opening up and development of China's textile industry also creates opportunities for the global textile industry. According to statistics in 2003, of the capitals actually received by textile companies of scale in China foreign investment and investment from Hong Kong and Macao accounted for 33.6 percent. Within the growth of textile export the proportion of foreign investment was also very large. Statistics from the customs in 2004 show that of the textile export the three forms of foreign-invested enterprises accounted for $33.5 billion, which was over a third - 34.4 percent.

On the other hand, China imported large amounts of products such as textile raw materials and machinery. For example, import of chemical fiber exceeded 10 million tons last year. Cotton import reached 1.8 million tons. These were in addition to other imports such as dyeing chemicals and textile machinery etc. Particularly, China imported more than $12 billion worth of textile machinery each year during the three years spanning from 2002 to 2004, which accounted for 50 percent of domestic investment in equipment. Many of the textile industries need large amount of import.

The textile industry has been fully marketized

The textile industry was among the first to be marketized in China and is also among the most successful. That this is true is shown by: first, the textile industry was among the first to be opened in aspects ranging from products to the prices of capital goods. Since the resources have been allocated by the market rather than by administrative orders the non-state-owned economy in the textile industry developed rapidly. State-owned capitals actually received by enterprises of scale were 13 percent in 2003. Each year the proportion of state-owned enterprises is declining. Among small enterprises 100 percent is of non-state-owned capitals. Now textile enterprises are no longer protected and subsidized by the state and has been fully marketized.

Second, the regional distribution pattern of China's textile industry is developing according to the laws of market and is concentrating in regions where the conditions of market resource allocation are relatively good. For example, textile and apparel industrial concentration zones have formed in the southeast coastal regions, from Shandong to Guangdong, from the Bohai Sea region to the Yangtze Delta and Pearl River Delta. Output value from these regions accounts for 80 percent of total production of the textile industry. This is different from the pattern in the planed economy, which was formed according to regions and required each region to form a complete set. Now the pattern is formed according to the laws of market. This is a manifestation of marketization.

Providing high-quality products to the world

China's textile industry would put emphasis on industrial upgrade depending not on expanding market share with quantity, but on adapting to the market through improving quality, increasing its original technologies and brands and establishing rapid response system. Therefore it would guide large textile companies to the establishment of research centers and the increase of independent patent products and exclusive technologies. The small and medium-sized companies would continue to do a better job in works such as industrial innovation. In a word, the goal of the Chinese textile industry is to turn all the companies' attention to industrial upgrade and brands development.

For instance, China cotton output in 2004 was 6.32 million tons, reflecting year-on-year increase of 1.46 million tons, up by 30.1%. The 2004 cotton output makes new record in history. In 2004, China cotton planting are was 5.69 million hectares, increasing by 580,000 hectares on previous year, with the growth rate of 11.3%. The following regions saw the rapid planting area growth. Shandong grew by 178,000 hectares, Hebei by 88,000 hectares, Xinjiang by 81,000 hectares, Hubei by 53,000 hectares and Jiangsu by 40,000 hectares. The unit output increased greatly. In 2004 China average cotton unit output was 1,111 kg per hectare, up by 160 kg year on year (16.9% up).

Since January 1st 2005, China has started to levy export duties on some garment exports. According to the latest statistics from the Shanghai Customs, it has processed 12,580 items of taxable garment exports within a week, with a total tax levy of 21.89 million yuan, since the export duties were imposed. The quota abolishment is absolutely not a good chance for China to blindly expand the existing processing scale. The conflict of supply over demand in the world market will be obvious after Jan. 1, 2005. The risk of over competition is very dangerous for the low and medium products manufacturers. The winners are not those who have low-cost labor, but those who have core technology and products of high quality, high taste and credit.

2/ The Expotr & Import in 2004

Reported by Statistic Center of China Textile Industry Council, China gross imp. & exp. value of textile and apparel in 2004 reached 114.189 billion dollars, increasing 18.86% compared with the same period of last year, and taking up 9.89% of China gross imp.&exp. value of foreign trade. Gross export value of textile and apparel in China was up to 97.385 billion dollars, increasing 21.01% compared with the same period of last year, and taking up 16.41% of gross export value of foreign trade in China. Among them, textile export was 35.769 billion dollars, increasing 25.21% compared with the same period of last year; and apparel export was 61.616 billion dollars, increasing 18.69% compared with the same period of last year. Gross import value of textile and apparel reached 16.804 billion dollars, increasing 7.81% compared with the same period of last year, and taking up 2.99% of gross import value of foreign trade in China. Among them, textile import was 15.273 billion dollars, increasing 7.69% compared with the same period of last year; while apparel import was 1.531 billion dollars, increasing 9.07% compared with the same period of last year. Through Jan.-Dec., favorable balance of textile and apparel trade reached 80.581 billion dollars.

Among main export countries and areas of textile and apparel, Hong Kong, Japan and U.S. became top three. Through Jan.-Dec., China export to Hong Kong reached 17.379 billion dollars, increasing 12.95% compared with the same period of last year; export to Japan was 17.153 billion dollars, increasing 12.70% compared with the same period of last year; export to U.S. was up to 11.786 billion dollars, increasing 21.92% compared with the same period of last year. Total value of export to the three countries reached 46.318 billion dollars, taking up 47.56% of total export of textile and apparel. Export to EU reached 12.146 billion dollars, increasing 12.05% compared with the same period of last year. Export to restricted countries reached 25.815 billion dollars, increasing 17.12% compared with the same period of last year. Export to non-restricted countries reached 71.57 billion dollars, increasing 22.47% compared with the same period of last year.

Among main import countries and areas, Japan, Taiwan, and South Korea become top three. Through Jan.-Dec., import textile and apparel from Japan, Taiwan, and South Korea was 3.506 billion dollars, 3.298 billion dollars, and 2.600 billion dollars, increasing 12.77%, 3.15%, and 3.60% separately. 

The levying export duties starting from 2005 on certain textiles & garment exports was a significant step that China has taken towards the globalization of the textile trade. It was also a clear signal to enterprises that China was encouraging exports of high-quality products and promoting a change in the pattern of its textile exports growth.

Based on the experts' analysis, from January 1st this year, with the abolition of the global textile quota system that has been in place for many years, China's textile products and garments could have free access to international markets and enjoy a bigger slice of these markets. Although China's textile exports are competitive in terms of pricing, they are mostly exported under designated brands or by original equipment manufacturers (OEM) and lack independent branding. As the biggest textile exporter in the world, simple quantitative growth should not be the major objective for China's textile exports. By way of levying export duties on certain garments, China intended to raise the prices of its textile exports accordingly to prevent and avoid the scenario of having an increase in textile exports and a drop in prices at the same time. It also hoped to raise its international competitiveness by accelerating technology reforms and structural adjustments within the textile industry.

China, approved by State Council, will levy export tariff on some textiles since Jan. 1, 2005. The taxes levy covers 148 products in 6 categories of coats, skirts, trousers, non-knitted shirts, knitted shirts, nightwear and underwear. The table below shows the products and tariff rate.

3/ The Near Future

According to a new report published by Hong Kong-based Global Sources, more than 91 percent of summer garment suppliers in China are expanding production capacity in anticipation of increased orders following the elimination of textile quotas.

The report said among the 205 suppliers surveyed, 92 percent anticipate higher sales for the summer 2005 season compared to 2004. More than 60 percent of respondents expect sales to increase by more than 10 percent, with 24 percent preparing for increases of more than 25 percent.

More than half of the survey’s respondents indicated plans to increase capacity by 20 to 50 percent by hiring more workers, purchasing additional machinery and/or expanding existing factories. Additionally, one-third are currently planning or building new garment plants.

Seventy-five percent of suppliers see the European Union as a post quota growth market, while 68 percent regard the United States in the same light. As a direct result of increased concentration on Western markets, exports to Asian markets are expected to decrease.

The report includes manufacturers from the major production hubs of Guangdong, Zhejiang, Jiangsu, Shandong, Fujian provinces, and the Shanghai and Beijing/Tianjin municipalities.