Part One - Home Ownership and Its Impact

Few people realize that 22 years have passed since the Chinese government began to allow urban citizens to buy their state-owned flats. Today, China has one of the highest rates of home ownership in the world, and this will likely expand under the new property laws passed by the National People’s Congress earlier this year. In urban areas, home ownership has reached up to 80 percent, which actually surpasses the U.S. average of 69 percent.

The expansion of home ownership has changed the Chinese people’s way of life, spending habits and the country’s economy. Nowhere has the impact been greater than in the domestic offtake of home textiles and furnishings, with private estimates placing the value of this market at 45 to 50 billion U.S. dollars and growing. The growth of this market has kept most Chinese home textile manufacturers concentrating on the domestic market instead of export. The continued expansion in the construction of new apartment complexes in a wider block of cities is keeping growth rates at phenomenal levels. The dilapidated apartment blocks of old are being rapidly replaced, even in the smaller cities.

Home ownership also appears to be part of the new emerging middle class strategy to modernize their lives. This includes purchases of additional branded apparel items, with the domestic market for textiles and apparel sales, collectively, doubling every four years at a pace unequaled before.

The market growth for home textiles could also mean that China could become an importer of home textiles if there is any significant slowdown in the country’s expansion of textile manufacturing. Fixed asset investment in China’s textile sector has been growing at a record pace since 2003, but this rate of growth is likely to slow in late 2007 if the government’s efforts are successful at reining in the excessive bank lending. This could mean that China would become a major new market for Bangladesh, Pakistan and Indian exporters of home textiles over the next five to six years.