NCTO – China is Textile Industry’s Superpower

On 30 October 2007, NCTO (The US National Council Of Textile Organizations) detailed 73 subsidies which the Chinese government offers to its surging textile industry and urged US Congress to pass meaningful currency legislation, among other steps. 

Regarding the 73 subsidies, NCTO stated that 24 of those subsidies contained illegal export requirements, 16 are subsidies for technology upgrades and research and development, 11 offer income tax reductions or holidays while eight subsidize loan costs or offer loan forgiveness. Other subsidies include land grants, lower utility costs, brand development grants, VAT exemptions, raw material rebates and worker benefit exemptions.  

NCTO noted that with massive amount of government financial support, China’s textile industry is now growing so quickly that within five years it would employ more people than the entire U.S. manufacturing complex.  Among the key facts NCTO related: 

Size of China’s Textile and Apparel Export Sector

• China is a superpower, the likes of which the world has never seen before. With four times the size of any other country’s exports, China’s textile and apparel exports are growing at an annual rate of 20 percent.  

• China’s $12 billion gain in apparel exports in 2005 was greater than total exports of 46 of the top 50 apparel exporters in the world.

• China’s textile industry has invested $85 billion during the last ten years, with the biggest increases coming in 2006 and 2007. 

At current trends, China will surpass 50 percent of the world trade in apparel within the next four years. Today, China exports nearly four times as much apparel as the next largest exporter (the EU) and that gap is widening rapidly.  

During the last ten years, the Chinese textile sector has purchased 65 percent of all knitting machines, 62 percent of all weaving machines and 46 percent of all spinning machines sold in the world. To put this in another context, Chinese manufacturers buy an average of ten times more knitting, weaving and spinning machines than their next largest competitor.  

Resulting Chinese growth has been stupendous. Chinese textile and apparel exports climbed 16% in 2002, 28% in 2003, 21% in 2004, 21% in 2005 and 25% in 2006. Chinese textile industry production and output statistics reflect the same dramatic increases with capital assets, employment and sales up double digit and in some cases (sales), triple digits.  

Impact of Upcoming U.S. and EU Safeguard Removal

NCTO warned that with the China safeguard expiring soon in the U.S. and EU, textile and apparel producers around the world are in jeopardy. NCTO noted if China merely follows past history, it will take 65 percent of the U.S. and EU apparel markets once the remaining safeguards are removed. In dollar terms, this means China will take $44 billion in export trade currently held by other countries.  

These quantitatively safeguards cover roughly 50 percent of the apparel trade, including the big “bread and butter” categories such as trousers, woven shirts, knit shirts, underwear and t-shirts. These safeguards will be expiring soon - in 2008 in the EU and in 2009 in the United States.   

In the US, China’s share in apparel categories that have been removed from quota for more than three years has increased from 19 percent to 65 percent. Chinese exports in these categories have increased by 436 percent in just the past five years. These categories include a wide range of apparel products, including children’s clothes, gloves, pajamas, ties, winter jackets and silk and linen clothing.  

In apparel categories where quotas were removed in 2005, China’s share has increased at a similar pace, rising from 15 percent to 52 percent during the last two and half years and is continuing to increase. These categories include an even wider variety of products, including cotton and man-made fiber dresses, coats, skirts, blouses, nightwear and all wool apparel except suits and trousers. At current trends, China’s market share will hit 66 percent sometime in 2009. 

China’s share in the EU non-safeguard categories is similar. China’s share of the EU market in apparel categories that have been quota free for more than three years increased from 25 percent to 66 percent from 2001 to 2006. China’s exports in these categories increased by 404 percent. In apparel categories where quotas were removed in 2005, China’s share has increased from 24 percent in 2004 to 41 percent in 2006 and is projected to hit 50 percent in 2007. If current trends continue, China’s market share will hit approximately 66 percent sometime in 2009.  

According to UN trade figures, in Japan and Australia, China’s share of their apparel market is an astonishing 89 percent. This poses the very real possibility that over time China could eventually take an even larger share of the U.S. and EU and establish a virtually monopoly in the world’s two largest consumer markets for these products.  

At a 65 percent share of the U.S. and EU markets, China will be positioned to increase its apparel exports by nearly $45 billion over a five-year time frame. 

Logically, these enormous Chinese increases mean equally enormous decreases by other exporters. These “donor” countries are already known: the major suppliers in the Western Hemisphere (Mexico, the CAFTA countries, the Andean countries), the AGOA countries and a large number of Asian exporters (particularly Pakistan, Sri Lanka, Korea, the Philippines and Indonesia). In addition, recently created preference zones for Egypt, the Gaza Strip and Jordan will come under severe threat.

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