China won't dominate textile market in 2005

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Last updated at: (Beijing Time) Monday, February 16, 2004

China won't dominate textile market in 2005

China will not rise to monopolize the global textile market by 2005 even if quotas curbing the free flow of textiles and apparel are lifted, a local industry leader observed.

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China will not rise to monopolize the global textile market by 2005 even if quotas curbing the free flow of textiles and apparel are lifted, a local industry leader observed.

Cao Xinyu, deputy director of the China Chamber of Commerce of Import and Export for Textiles, the largest chamber in the field with more than 4,000 members, said it will be impossible for China to dominate the market in 2005 as many have forecasted.

Under the Agreement on Textiles and Clothing (ATC), all quotas restricting textile and clothing trade between World Trade Organization (WTO) members will be eliminated by December 31, 2004.

Some foreign counterparts have predicted Chinese textile goods, supported by cheap labour costs, will swamp the world market and force them out of the market.

"This prediction is sensational. China is a major player but will not sweep the world," Cao said.

Becoming the world leader is not attainable, he explained, if the industry in China continues its focus on low-end products and on an increase in production quantities.

He said this would create a huge demand for cotton and drive up the price of cotton imports.

"The surging prices will cut China's edge on cheap and large quantities of textile goods and push foreign buyers to other countries," he said.

"It also cannot be achieved if local makers shift to higher-level products because they will naturally and gradually quit the low-end market and give it up to other developing countries," Cao said.

Cao believes entering the higher-end market is a must for Chinese textile manufacturers as labour costs will go up with China's quickly growing economy.

People want to live better and will ask for more income in a more prosperous economy, Cao said.

And a developing economy will produce a boom in the service industry, which will absorb more labour, and in turn, increase the labour cost, Cao added.

A report by the US International Trade Commission (ITC) examining the competitiveness of foreign textile and apparel suppliers following the 2005 quota lift stated that China is expected to become the "supplier of choice" for most US textile and apparel importers after 2005."

The report said US importers should expand trade relationships with other low-cost countries, such as India, Bangladesh and Pakistan, to reduce the risk of sourcing from only one country.

Cao said China will voluntarily give up the low-end market as former textile giants have done.

"History always repeats itself. China is now rotating to become the textile giant after the United Kingdom, United States and Japan," Cao said.

"And China will shift part of the production to other countries at some point much like what US, EU and Japanese companies have done to China," he added.

China is keen on developing a capital- and technology-intensive textile industry rather than the current labour-intensive one, which requires a lot of work but creates little profit in return, Cao said.

The US report also said it believes that although Chinese shipments will expand after 2005, the pace of growth will be tempered by the uncertainty over the US use of the textile-specific safeguard provision contained in China's WTO protocol of accession.

At this time, the US Government has decided to re-impose quotas on Chinese imports of knit fabric, dressing gowns and bras.

Cao said there is no need for the United States to bar the free flow because production in China is actually the end result of the global chain.

By Cao's observation, distribution accounts for 50-60 per cent of profits created by the textile flow, branding 30 per cent and manufacturing 10-20 per cent. Even in its 10-20 per cent manufacturing share, Chinese manufacturers do not dominate but share with foreign investors, Cao said.

Foreign-funded textile producers totalled 22,000 by the end of 2003. Their exports accounted for 40 per cent of the country's total textile exports.

Foreign companies also undertook many co-operation deals with China, like the establishment of research and development centres, creation of design bases, and offering of training classes.

Source: China Daily

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