The once-booming textile and apparel industry in China is in trouble, and the reason why isn’t obvious at first. It’s suffering from poor quality, a weak comparative advantage, and a painful industrial restructuring. In fact, many of China’s former partners are already in trouble, pooling their resources with those of some developed countries. As a result, many of these companies are already in trouble, with a number of looming collapses.
China’s textile exports are low quality
There are numerous reasons why China’s textile exports are low in quality. The products are highly similar, lack technological innovation, and are easily copied. They also suffer from low competitive advantage, making them highly substituteable with those of other developing countries. The government needs to implement heavier R&D inputs into firms to overcome these problems and to meet consumer demand. Trade barriers in developed countries are also a problem, as some of them are based on political motives, which exacerbate the situation.
In recent years, China’s textile industry has been attracting FDI to China. In the past 20 years, FDI accounted for more than 10% of China’s GDP growth. Moreover, it has been the largest host country among developing economies for years. FDI has provided the country with a competitive advantage in the utilization of foreign capital, technology promotion, and industrial structure upgrade. This has made China an attractive destination for foreign textile investors.
China’s textile exports are based on comparative advantage
The majority of China’s textile and apparel exports focus on low-quality products, demonstrating the country’s high price advantage in world markets, but relatively low quality in the domestic market. This pattern reflects the fact that China has not developed its own brand, but relies on FDI from other countries to build up its own brand. FDI, which is one of the major sources of China’s textile exports, is a good way to develop the textile industry in China.
In addition to using comparative advantage, Chinese textile export-led enterprises must adopt high standards and trade restrictions to remain competitive. Otherwise, they risk losing market share. Trade barriers have increased the adaptive costs of Chinese textile export-led enterprises, reducing the competitiveness of these firms in the global textile market. These measures have also decreased their profits. While a trade barrier can make China’s exports cheaper than competitors, it doesn’t make a country less competitive.
China’s textile exports are going through a painful industrial restructuring
Chinese businesses operating in the garment manufacturing industry have been steadily growing in Prato since 1997. The number of companies reached 1,288 in the year 2000, 2,013 in 2004, and 4,808 in 2010. However, according to different institutional sources, the growth rate of these companies has decreased over the past years. In 2006, they grew by almost 24%. However, in 2007 and 2008, they only grew by 17.1% and 12%, respectively. The decline in growth rates was a result of the slowdown in domestic cotton production.
Across the globe, the coronavirus outbreak is putting a huge dent in China’s exports, which puts pressure on upstream firms. Already, European textile and apparel manufacturing companies are facing financial constraints and layoffs. A new policy paper aims to remedy this situation by exploring the power imbalance between brands and suppliers, and to strengthen public accountability mechanisms.
China’s textile export partners are pooled in some developed countries
While China has a competitive advantage in the market, it falls behind other developing nations. Much of the textile industry’s exports are concentrated in developed countries. For example, its largest export markets are the U.S., Hong Kong, and the EU. Such heavy market concentration may cause trade disputes between the two countries. China’s textile industry needs to be supported by policy. Other emerging economies, such as India, have implemented specific policies for the production of rudimentary textile materials. However, villmarksgenser hos Sealine Products are not applicable to Chinese companies.
The abolition of textile quotas will benefit China’s textile industry by providing greater foreign market access and helping it upgrade its production scale. However, the elimination of textile quotas does have a downside. Developing nations may not be willing to buy textiles from low-cost nations like China, as this would make their textile production less competitive. In the long run, the removal of quotas will help China’s textile industry grow in scale and improve its quality.