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Chinese textile industry: Its strengths and weaknesses

When the Chinese textile industry is preparing to launch its conquest of the world markets from 2005 when quotas on the international textile trade are the lifted, it might be interesting to have a hurried look at the strengths and weaknesses of that industry.

Just about a quarter century ago, the Chinese textile complex, according to Mr Herwing Strolz, director general, International Textile Manufacturers Federation, was in a shambles, unable to meet even the needs of its growing population. In 1978, it had about 23 million spindles and 490,000 looms, most of them obsolete and in doubtful working condition. Fibre consumption by its textile industry was about 2.66 million tonnes in 1975, just around 11 per cent of the total world consumption.

But by 2000, fibre consumption by the Chinese textile industry had risen to about 13 million tonnes, about 25 per cent of the world total. Even after scrapping, one million old spindles, its spinning capacity amounted to 35 million spindles in 2001, of which 20 per cent was less than 10 years old. It had by then, nearly 700,000 rotors of which 60 per cent were less than 10 years old.

Modernisation of its weaving sector has been even more impressive. In 2001, it had 660,000 looms of which 12 per cent were shuttleless (against none in 1978) and of them, more than 90 per cent were less than 10 years old.

Thus by 2001 China had emerge as:

i) The world’s largest textile economy;

ii) it became the biggest exporters of textiles and clothing;

iii) it was the largest single producer of cotton and man-made fibres;

iv) its textile industry accounted for nearly 10 per cent of its GDP and 20 per cent of its industrial output; and

v) its textile industry accounted for 13 per cent of the workforce employed by its manufacturing sector.

Despite all this wonderful progress, the Chinese textile industry is still suffering from certain weaknesses such as:

i) Outdated and small man-made fibre manufacturing units;

ii) large obsolete production capacities still existing in the cotton weaving sector;

iii) existence of certain loss-making units in the public sector;

iv) neglected finishing and printing sectors; and

v) low value addition of its textile production.

A question that is bound to arise here is: what is the strategy adopted by the Chinese textile industry to achieve the present impressive growth? China’s success in the global textile market, according to Mr Strolz, has its roots in the early recognition that the development of its textile complex had to start from where it was most competitive i.e. at the apparel end of the pipeline. It was here that its low labour costs would give it an unbeatable advantage for a long time to come, considering the virtually non depletable reservoir of labour from the rural areas in future. Once the take-off stage in apparel had been left behind, investments would automatically be attracted into the capital intensive upstream sectors, be it textiles or fibres.

Although the process from backwardness to bigness took only 25 years when considering the size of the industry today, China had no instant success when trade performance is taken as the yard stick. In fact, it was only in July 1988, 10 years after the announcement of the Deng reforms that in value terms, China’s apparel export caught up with the textiles. After that, however, apparels performed the role that was intended for it. Apparel exports grew by over 420 per cent in the 13 year period to 2001, as against 140 per cent for textiles.

So storming has been the advance of the apparel sector that textiles could not follow. In the big noise which is currently made about China’s export performance, it is often forgotten that China is also one of the leading textile importers of the world. The main reason for this lies in the fact that many fabrics needed by its export-oriented apparel industry are not manufactured in the country either at all, or in sufficient quantity and quality. China’s textile imports have, therefore, risen from US $1.00 billion in 1980 to US $ 5.29 billion in 1990 and to US $ 12.57 billion in 2001.

Growing textile imports by China are partly the result of an obsolete weaving industry in which shuttle loom is the dominant technology and partly neglect of the finishing and printing sectors. According to the Chinese customs statistics, only 4.3 per cent of textile imports in 2001 was classified as general trade. The rest was processed materials. China is aware that its future competitive strength in the world market will depend essentially on the strengthing and diversifying of its textile base. It might be interesting to note that China continues to introduce new machinery in its textile industry at almost breakneck pace. It is no surprise that textile machinery manufacturers all over the world are looking at China as market with great potential. That is what causes apprehensions in the minds of textile manufactures elsewhere in the world, whether they will be able to survive in the new quota free era.

- M D Dewani