Sharpen Competitive Edge to Meet New Challenges
China's textile industry will further accelerate
its restructuring step

State Textile Industry Bureau of China

March 31, 2000

The textile industry is a traditional pillar industry in China. Before the 1980s, the gross value of industrial output of this industry accounted for more than 15% of the country's total. Since the 1990s, the under-restructuring textile industry has sustained faster growth. From 1990 to 1998, the average annual growth rate of the gross industrial output value was 9.4% and that of foreign exchange earning by exports was 15.1%. In 1998, the gross value of industrial output of the textile industry covered 10.8% of the country's total; the textile and garment exports covered 23.3% of the country's total commodity exports and 70.6% of China's net foreign currency earning.

China is a large textiles and garment producer in the world. In 1998, the total production of fibers amounted to 10 million tons, covering 1/4 of the world total. Cotton spinning, weaving, woollen spinning, silk reeling, garment processing and chemical fiber processing all rank first in the world in term of production capacity. For example, the garment sector produced 20 billion pieces of garments, which means it offered more than 3 pieces of garments to each citizen on the earth.

China's exports of textiles and garments also rank first in the world. The exports amounted to US$ 45.6 billion in 1997, setting the historical record, covering 13.7% of the world total textiles and garment trade; it dropped to US$ 42.9 billion in 1998 due to the negative impact of the Asian financial crisis and recovered to US$ 43.1 billion in 1999, still covering more than 13% of the world total.

Due to irrational structure arising from the planned economy that China had adopted for a long time, duplication of projects and sudden change of market environment, a certain number of State-owned textile enterprises are not prepared to gearing up themselves to the market economy. They are suffering from inflexible operation mechanism, insufficient technical innovation ability, heavy debts and mammoth burden of welfare payments, excessive redundant personnel and sharp shrinkage of economic benefits. In 1996, State-owned textiles enterprises bore a total loss of 8.3 billion yuan and the textile industry had the biggest deficit and heaviest burden among all State industrial sectors.

To revitalize the textile industry, in 1997, the central government decided to bail out State-owned textile enterprises first, so as to provide experience to the reform of State-owned firms of other industries in trouble. The reform scheme includes eliminating 10 million obsolete cotton spindles and laying off 1.2 million workers within three years, targeting to turn the textile industry from a loss-maker into a profit-maker. By hard efforts in 1998 and 1999, the central cities-based restructuring campaign that took spindle-cutting as a breakthrough point and aimed to promoting the strategic restructuring of State textile sector and strategic reorganization of State-owned textile enterprises through eliminating spindles, reshuffling, cutting down the number of employees and increasing surpluses has made significant progress. By the end of last year, the nation had eliminated 9.06 million cotton spindles and laid off 1.16 million textile workers, State-owned textile enterprises realized a net profit of 800 million yuan and reached the three-year goal one year ahead. At the same time, the textile industry had effectively stopped the duplication of projects of low technological level, made substantial progress in restructuring, most large- and medium-sized State-owned textile enterprises had improved their performance and the operation of State-owned textile economy showed a remarkable turn for better.

Although the textile industry has fulfilled its three-year tasks of reform and extricating itself from difficulties, it has made the first step of restructuring and arduous tasks still lie ahead, especially, China's entry to the WTO will bring new challenges and opportunities. From this year, the textile industry in China will take intensive measures on restructuring. While finishing the restructuring task of the cotton spinning sector, the textile industry will initiate the restructuring of woollen and silk sectors. It will accelerate the reform on reorganization of textile enterprises by centering on readjustment of product structure. On regional readjustment, the textile industry will exert more efforts to revive difficulty-stricken State-owned textile enterprises in the middle and west inland areas of China, so as to establish a rational and sound industrial structure in which the textile industry in inland areas and that in coastal regions can give full play to their own advantages, cooperate with each other and be complementary to each other.

At the same time, China's textile industry will quicken its step of upgrading its technology. The industry will adjust itself according to the demand on market and its own technical conditions. Stress will be put on developing import-substitute clothing fabrics and enlarging exports. To reach the goal, the textile industry will carry out technical reform on related textile production links including dyeing & finishing, weaving, fiber processing and garment design, so as to make textile enterprises more efficient and innovative. The industry will continue to adhere to its fundamental principle of “quality, variety, efficiency and expanding exports”. This year is the year of management. Textile enterprises will continue to strengthen their internal management, so as to improve the economic performance of the whole industry.

Moreover, China's textile industry will further tap the domestic market while positively enlarging exports. Textile and garment enterprises should find a foothold on the domestic market, because the domestic market is a large consumer market with a large population of 1.3 billion. The domestic market, especially the rural market has great potential. With regard to the international market, the textile industry will pay close attention to the changes of market environment after China's entry to the WTO, positively suit itself to the international trade rules, keep track of the latest development trends, improve the quality and grade of textile products and sharpen competitive edge in international market.