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China not the only beneficiary
2004-04-06
Business Weekly
Walk along shopping streets in the world's cities known for fashion, like Paris, New York, London and Milan, it is easy to see why the world's producers of apparel and luxury accessories are nervous.
From clothes, socks, caps, and scarves to handbags and shoes, most labels read: "Made in China."
Already a leading player in the lucrative clothing industry, China is regarded as a big threat to the world, as the World Trade Organization (WTO) Agreements on Textiles and Clothing are to be fully implemented on January 1, 2005.
That day will mark the final step in the 10-year process of phasing out all quota restrictions in the textile and apparel trade between all 146 WTO members.
Producers from around the world, and across the fashion spectrum, have been sounding alarms about China's potential advantage in the new free trade regime and move into a thoroughly dominant position.
But Chinese officials said the quota elimination not only benefits China, but also the rest of the world.
"Extensive complementary advantages of both countries in different stages of development will become the basis for a new type of international labour division," said Du Yuzhou, president of China National Textile Industry Council.
He said during the First Global Textile Economic Forum held in Beijing last week that China's export growth would bring an increase in imports of advanced equipment, cotton and chemical fibre.
In 2003, China imported US$16.36 billion worthy of cotton, wool, chemical fibre and textile machinery.
"We cannot expect a balanced international trade volume in all sectors, as every country has its own advantages and disadvantages in different sectors," Du said.
He cited an example the price for a Boeing 747 airplane is equal to 300 million square metres of gray clothe.
"China bought 30 Boeing airplanes from the United States last year, but we never say it is an unfair trade between the two countries," Du said.
In addition, while China is a major player, it is not a giant in the global textile and garment industry, according to Du.
Long Yongtu, secretary-general of Boao Forum for Asia, supported Du's comment.
"The only advantage (for China) is cheap labour," Long said.
According to statistics published by the WTO regarding textile workers' per hour salaries throughout the world, it is 69 US cents in China, which is 4.8 per cent of that of the US, 5.4 per cent of Britain, 31.4 per cent of Mexico and 25.7 per cent of Turkey.
Meanwhile, China is lagged far behind the world's level in terms of branding strategy, consciousness of property right and technology upgrading, said Long.
"There is no Chinese brand entering the global market so far," said Rong Jianyin, director of China Famous Brand Promotion Committee.
More than 80 per cent of Chinese apparel exports comes from international joint ventures, which means China is splitting the profits of that business with its foreign partners, said Rong.
China exported 16 billion garments last year, with the export revenue of US$80.48 billion.
That indicates China only earns US$5 on each exported piece.
"Chinese workers are doing what their counterparts in developed countries would not like to do," Rong said.
However, garment producers in developing countries are worried that China will be a big challenge after the quota is eliminated.
"It will be very difficult (to compete with Chinese producers)," said M M Sheth, managing director of Sheth Investments & Trading Co Ltd, an Indian garment exporting company.
He told China Business Weekly China's fabric processing is much stronger than in Indian, and only through working with Chinese companies will they be able to survive in the fierce competition.
All the same, Chinese producers are looking forward to 2005. Since they now have to pay the government for quota allotments, the new quota-free regime will produce savings right away.
"It will mean an instant reduction in our overall costs and immediate stimulation to our overall competitiveness," said Tan Ju, executive director of Guangzhou Conlia Co Ltd, an underwear producer.
Chinese makers are also preparing for the challenge from globally-known producers.
Dalian, an important apparel production base, has been holding international garment exhibitions for 15 years, to learn advanced foreign experiences.
"We have to improve our competitiveness, otherwise foreign brands will take our territory after the quota is eliminated," said Yan Shuhua, media manager of exhibition.
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