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China marching forward to dominate global textile business

M D Dewani

China seems determined to dominate the global market for textiles and apparel. Currently its share in this business is of the order of 20 per cent. It was wants to jack it up to 40 per cent by 2010. This is the impression gathered by the Texprocil delegation headed by its chairman B K Patodia which visited China in March 2005.

The main objects of the delegation’s visit were

1. to identify areas to enhance bilateral trade;

2. to understand the structure of its textile industry;

3. to gain insight into rapid growth of China’s textile industry;

4. to explore possibilities to increase investment in this sector for mutual benefit;

5. to explore ways of cooperation to exploit the business potential in the post-quota era;

6. to exchange information with the industry, government agencies, trade associations etc on relevant matters.

The delegation also visited several textile industry centres there and quite a few individual manufacturing units. The delegation found that China had made massive investments on the modernisation and expansion of its textile industry to realise its dream. Between 1993 and 2004, it had effected huge imports of textile machinery worth US $29.63 billion for the purpose, though it had its own textile machinery industry which exported some equipment to countries like Bangladesh, Pakistan, etc.

Already its textile industry is equipped with 67 million spindles, over 250,000 shuttleless looms, 1.01 million rotors and 668,100 shuttle-looms whereas the Indian industry has 37.5 million spindles; 0.5 million rotors 30,000 shuttleless looms and 19,92,000 shuttle-looms.

China produced in 2004 as much as 11 million tonnes of spun yarn against 3.50 million tonnes by India in 2003-04. It exported 0.43 million tonnes of cotton yarn in that year against Indian exports of 0.72 million tonnes in 2003-04. China seems determined to step up its yarn exports to 0.80 million tonnes by 2010. On the whole, however, it is more interested in exporting value-added products like fabrics and apparels.

So far as exports of textiles and clothing are concerned, China is already far ahead of India. Its aggregate exports of textiles and clothing were already as high as US $80.48 billion in 2003 and soared to US $97.38 billion on 2004. Compared with this, Indian exports of textiles and clothing were just of the order of US $13.19 billion in 2003-04 and US $14.50 billion (estimated) in 2004-05. The gap between these exports by the two countries is quite big and is expected to widen further in the coming years.

The delegation was able to find that labour productivity in China had improved sharply from RMB 4841 per person in 1980, to RMB 38226 in 2003. The power cost was around RMB 0.45 to 0.50 per unit, against Rs 2.40 - 2.65 per unit in India. Wages in China ranged from US $1200 - 1700 per annum. The interest rates charged by banks were around 6 per cent.

Land was available on lease basis, but no lease-rent was charged if the investment exceeded a certain limit. New units enjoyed tax-holiday for the first two years and 50 per cent concession in tax for a period of another three years. Export incentives amounted to a refund of 13 per cent of the FOB value.

Looking at all these facts, the Indian delegation was convinced that China was pursuing with determination its target to grab 40 per cent of the global textile and apparel business by 2010.

Before visiting China, the delegation was under the impression that the spindleage in China was of the order of 60 million. However after reaching China and holding discussions with the China National Textile and Apparel Council, the delegation came to know that the spindleage in China and already reached 67 million and it was expected to go up further to 75 million in another three years as the industry was being rapidly expanded. As a result, its spun yarn production was expected to rise to 16.5 million tones from the present level of 11.5 million tonnes. This was expected to give further boost to China’s fabric and apparel exports.

India on the other hand has just 37.5 million spindles, but only around 30 million are in actual operation. In the course of visit to various textile centres located at different places, the delegation also found that China had build up impressive infrastructure in terms of roads, highways, airports, and sea-ports in order to support investments and ensure lower operating costs, by ensuring quick turnaround cycles of production and delivery. The delegation travelled over 2000 kms by bus and the trip was entirely on express highways linking various small towns as well as larger cities. Through out the travel not a single hole was sighted. Besides, most of the roads were at least 8 line highways with international signboards both in the Chinese and English languages. The delegation also found that although there were extensive regulations covering issues ranging from maximum working hours to minimum wages, enforcement of these remained weak and deceptive.