China's current adjustment of textile industry will focus on adjustment of technical structure and raising added value of products.

It is different from structural adjustment of other industries, textile industry shall give priority to sharpening the edge of competition of the whole sector, not simply stressing the overcapacity of production, said an official with the Economic Operation Bureau of the State Development and Reform Commission (SDRC).

For this purpose, ten Chinese state departments including SDRC, the Ministry of Finance, and the Ministry of Science and Technology have jointly issued the Circular on Stepping up Structural Adjustment and Promoting Industrial Upgrading of Textile Industry.
Together with several other industries, textile industry has been listed by the state with potential overcapacity, mirroring the true competition on the market.

According to the circular, the textile industry shall attach great importance to the following issues:

The restriction by resources and environment has brought the deep-rooted problems of the industry to the surface, mainly demonstrating the weak capability in independent innovation and structural contradictions.
China's textile industry has made insufficient investment in research and development (R&D) to account for merely less than 1% of the total sales, and high-tech and high-end textile equipment largely depends on import. The products are processed with imported brands.
On the other hand, the slow development of raw materials has led to expansion of shortage of such raw materials as cotton and chemical fibers. Due to the different degrees of law enforcement on labor security and environmental protection, there exists unfair competition among different regions and enterprises.
The circular requires the industry to step up structural adjustment of raw materials to realize diversified supply of raw materials, and development of textiles for medical, auto, construction and filter use.
Meanwhile, the country will make efforts to optimize regional distribution of textile production to control expansion of production capacity of cotton and chemical textiles in coastal areas and central cities, and to shift them to central and west regions by making use of local resources.
The country will give strong support to fostering a group of enterprises with advantages in brand designing, technical R&D and market channels, and encourage development of brands, trying to form several brands of China intellectual property rights with international influence.
The circular says that economic, legal and necessary administrative means will be used in the adjustment of the textile industry.
First is the taxation policy to encourage enterprises to carry out technical innovation, direct enterprises and the public to increase input of funds in science and technical development, support enterprises to set up technical R&D centers.
Second is to continue giving support to textile projects encouraged by the Indicative Catalog of Industries for Structural Adjustment, strictly control and ban investment in those that shall be restricted and rejected, and step up rejection and ban relocation of outdated equipment.
Third is to speed up construction of textile raw materials bases under the preconditions of ensuring the national oil security to increase supply of the raw material.
It is reported that SDRC will set up a dynamic monitoring system for key industries and enterprises to release trend on investment, market supply and industrial operation in a bid to strengthen guiding and pre-alarming for the industries.

According to the 11th Five-year Program (20026-2010), China's processing of textile fiber will reach 36 million tons by 2010, rising about 35 per cent over the end 2005; per capita productivity will increase more than 60 per cent; energy consumption for production of per 10,000-yuan added value will drop 20 per cent; and water consumption of per ton fiber will go down 20 per cent.