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China's Textile Industry: From Becoming Profitable to Upgrading
China's textile industry has recovered since the beginning of this year. The entire industry earned 8 billion yuan in profits during the first half, three times more than the same period last year.
Analysts say that starting now, the major task of China's textile industry has changed from becoming profitable to upgrading the industry.
The textile industry used to be a major contributor to China's economic growth, but by the end of 1996, the state-owned textile enterprises lost 8.3 billion yuan, earning it the notoriety of being the biggest money losing SOEs.
Since 1998, China's textile industry decided to reduce the number of cotton spinning operations that were lagging behind. More than 9 million cotton manufacturers were eliminated, workers were laid off and many enterprises went through restructuring, which improved management and brought in newer technologies. This formed the basis for the high growth in profits for the state owned textile enterprises today.
The achievements of the textile industry were hard earned. Since 1998, due to fiscal difficulties in the industry, the central government gave textile companies subsidies for decreasing the number of spindles in operation. For every 10,000 spindle eliminated, the company would receive a government subsidy of 3 million yuan and 2 million yuan worth of loans at a discounted rate. Moreover, during these two years, the reserves designated to cancel bad debts were mostly used on the textile industry, to save it from going bankrupt. At the same time, this policy received a boost when the state raised the rate taxes were reimbursed for textile exports.
The international textile market has rebounded since the start of this year and international orders have skyrocketed. At the same time, the state has adopted a policy to expand domestic demand, which also helps create a good environment for the recovery of the Chinese textile industry. Many factors have contributed to the Chinese textile factory becoming profitable.
Although the overall Chinese textile industry is doing well, there are still certain areas which have not developed as quickly. There are sixteen provinces and cities along the eastern coast, as well as in central and western China, which still have textile factories losing money.
Experts say that these areas should control the quantity of textiles produced and turn the focus from quantity to quality.
Currently, the main goal of the Chinese textile industry is to upgrade its technology in order to prepare it for international competition. After the upgrade, it is expected that production could rise to 1.4 billion meters of textile per year.
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