China’s increasing domestic consumption has become a major driving factor behind the continued growth of the country’s textile industry, as textile companies export market is squeezed due to appreciation of Renminbi and export rebate cuts.

Industry experts say the growth of the industry in the future is certain but the growth rate may be lower as external factors comprising Renminbi appreciation, export rebate cuts, higher labor and material costs and environmental pressures are all negative.

Researches by the Guotai Junan Securities, a leading Chinese securities brokerage, show that fixed-asset investment in the sector has been growing at paces much slower than that of the country’s total fixed-asset investment for months and the profit of the sector has been dropping for six months in a row. That happens against a backdrop that textile export is slowing down, as shown by customs statistics.

As it is increasingly hard for textile companies to seek growth in export, they are forced to pin hopes on domestic consumption. In the processes, competitions are expected to heat up and an industry-wide reshuffle is unavoidable, as widely believed by analysts.

In January-February 2007, the country’s retail consumer good consumption rose by 14.7 percent year on year, with that of clothing and footwear up by 27.9 percent to a historic high.

Analysts with the Galaxy Securities point out that consumption on textile products usually accelerates after a country’s per capita GDP exceeds US$1,000 and China is exactly at this juncture.

In China, urban residents expenditures on clothing are roughly 5.6 times that of rural dwellers. As the country is experiencing urbanization acceleration, China’s textile industry still faces a huge growth room in the future.