Textiles and Apparel in China: Preparing for Quota-Free Markets in 2005 and Beyond

February 17, 2007 (Press Release) -- Chinese textile and apparel output and exports rose dramatically in 2002. In value terms, garment exports increased by almost 13% and textile exports by 23%. Volume growth was even higher. The US and European industries view the surge as a foretaste of what will happen when all quotas restricting trade between WTO members are eliminated on January 1, 2005. Significantly, 2002 was the first full year of Chinese membership of the World Trade Organisation (WTO), and in January 2002 quotas were removed from a wide range of Chinese export items. The China National Textile Industry Council (CNTIC) admits that the freer trading environment in 2002 played its part in the surge. But it also points to a more buoyant home market, capital investment in new equipment, and foreign direct investment. Also, reforms have freed China’s industry from strict government control and enabled enterprises to respond more easily to market demand. But CNTIC also points to weaknesses which could undermine China’s leadership in world markets, and weaken its ability to face intensified competition in 2005 and beyond. The industry is still geared to quantity rather than quality. The surge in 2002 was mainly in cheap, low quality items which attract anti-dumping suits and other defensive measures. Plans to raise added value are unfulfilled. Export prices have dropped. And wage rates, China’s traditional advantage, are rising by 5% a year. About a fifth of larger enterprises are inefficient and piling up losses. According to CNTIC, China must change its textile and apparel industry “from a large industry into a strong one

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