Chapter 16   The Textile Industry

China¡¯s WTO commitments concerning the textile industry include: reducing or eliminating the tariff on imported textile products and lifting the quota restriction on the import of cotton, wool and chemical fiber; lifting the quota restriction on the export of long thread and semi-finished silk; enforcing laws on the exterior design of textile products; canceling the bidding mandate for the import of textile machinery; re-examining the ratification of cotton, wool and chemical fiber capacities; liberalizing the textile logistics; expanding the rights of enterprises to export their products; and limiting the scale of export growth.

In order to fulfill the above-mentioned commitments, the Central Government and relevant ministries of China have enacted and implemented quite a few new laws, regulations and policies during the year after the accession to the WTO. These new laws, regulations and policies have served as a strong administrative and legal guarantee for the fulfillment of the commitments, and at the same time increased the transparency of the process to fulfill these commitments. In addition, as the quota restriction the import of textile products will be lifted as of January 1, 2005, the textile and clothing industry will have to cope with a new market situation. In Shanghai, the textile industry has reported a total sales volume of RMB 59,637 million for the period from January to November 2004, which represents a year-on-year growth of 11.4%. The accumulated profits amount to RMB 2,212 million, marking a 15.0% annual growth.

 

I. The Implementation of Relevant WTO Commitments and the Effects

1. The WTO commitments regarding the textile industry have raised the threshold for textile exports. For example, the industry has to overcome three barriers in the future, namely, the Special Clauses of Restriction on Textile Products, the Transitional Guarantee Mechanism for Specific Products, and the Clauses of Price Comparability to Determine Subsidy and Dumping.

In fact, in accordance with these clauses, the US Department of Commerce issued the special restriction process and measures on the import of textile products from China on May 21 last year, and imposed quota restriction on the import of knitted cloth, bras and garments from China. These three products are among those exports to the US that have grown most rapidly after the removal of export quota restriction as of January 1, 2002 (See Table 16.1).

Exports to the US Market

              Unit: Pieces                   

 

2001

2002

2003

2004 (Jan. - Oct.)

Knitted Cloth

1,839,100

3,018,800

1,990,400

1,366,800

Garments

5,750,000

15,000,000

18,350,000

25,460,000

 

2. In addition to the special WTO commitments and restrictions, the economic globalization will give rise to some non-tariff trading barriers, such as the ECO-LABEL, 0EKO-TEX STANDARD 100 and SA8000. They will come gradually to replace the tariff barriers and exert certain influences on the international trade, especially export, of China.

 

II. Development of the Textile Industry in Shanghai

During the three years after the accession to the WTO, the textile industry in shanghai has achieved tremendous growth. As the captain of the textile industry in Shanghai, Shanghai Textile Holding Group has presented a most outstanding performance in export and a most obvious growth in general corporate performance.

1. Scale of export and profitability have increased by the year.

The total volume of export reached $ 1,482 million in 2002, which was 12.19% higher than the figure for the same period of the previous year. The total volume attained in 2003 was $ 1,836 million, marking a 23.86% growth in the annual term. The figure for 2004 will make a record in history, for the volume of export for the period from January to October this year has reached $ 1,699 million which represents a 7.21% annual increase, and the volume is expected to reach two billion US dollars by the end of the year and the annual growth may come to 9.17%.

Along with the growth in scale, the profitability of textile exports has also improved remarkably. The total profits amounted to RMB 167.35 million in 2002 and RMB 175,51 million in 2003. The figure has reached RMB 145.62 million for the period from January to October 2004, RMB 15.88 million more than that for the same period of the pervious year.

2. Regarding the modes of export, general export makes the overwhelming majority and is growing rapidly while job processing and processing on imported materials have declined by the year.

 

Table 16.2

 

General Trade

 

Job Processing

 

Processing on Imported Materials

 

Value

Proportion

Value

Proportion

Value

Proportion

2002

107,911

84.95%

7,885

6.21%

7,685

6.05%

2003

149,023

88.10%

6,920

4.09%

7,180

4.24%

2004

121,423

87.08%

6,662

4.78%

5,378

3.86%

3. The export of non-textile and clothing products has also gained increase in both volume and their proportion in the total export. In 2002, the export volume of non-textile products reached $ 153.01 million, accounting for 12.04% of the total export; in 2003, the total volume came to $ 227.26 million, accounting for 13.44% of the total; and the volume stands at RMB 211.96 million from January to October 2004, accounting for 15.20% of the total reported for this period.

III. Predictions of the Post-Quota 2005 and the Countermeasures

As the new International Trade Law has been enforced in 2004, and the quota restriction will be lifted in 2005, the international trade and especially export of China will come to an age of free competition and fierce challenges. That will on the one hand create favorable conditions for the growth of export-oriented enterprises and the export of the country as a whole, but will on the other hand give rise to chaotic competition and low price selling, spurring new international trade restrictions on exports from China or even anti-dumping measures or denial of market entry.

Although the Central Government has taken 0.4 percentage points off the tax refunding rate and added 0.27 percentage points to the bank interest rate in 2004, export has maintain a strong momentum. Therefore, the Government will continue to adjust the tax rates, the interest rate or even the foreign exchange rate in 2005. Or it will impose custom duty on sensitive commodities as a measure of macro control to prevent possible chaos in export competition.

Countermeasures to cope with new situations in the post-quota age include:

1. Studying the global resource distribution and achieving balance between import and export while paying close attention to the changes in foreign markets;

2. Studying the laws of operation in the context of economic globalization, paying close attention to the influences of the changes in foreign exchange rate, tax rate and interest rate in the country, reducing the use of long-term credit and utilizing more of foreign exchange securities and hedging;

3. Giving play to technical supervision of the trade to improve and enforce necessary international standards, and changing the current terminal administration in favor of early or whole process management;

4. Preventing competition by low prices among enterprises in the same sector, and studying and formulating solutions to possible problems; and

5. Resolving possible disputes concerning trade in goods, trade in services and intellectual property rights through the WTO comprehensive dispute settlement process and rules, and prevent attempts to resolve such disputes on the basis of domestic rules or processes or those of certain individual nations.