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Chinese Textile Firms See Little Relief in Gov’t Plan

Chinese textile producers criticized the stimulus plan for their industry as inadequate to deal with the challenges they face.

SHANGHAI — Chinese textile producers criticized the stimulus plan for their industry as inadequate to deal with the challenges they face.

This story first appeared in the May 12, 2009 issue of WWD.  Subscribe Today.

“The plan is too general and only focuses on the production,” when the real problems are dwindling demand, oversupply and quality, said Feng Guoqing, general manager of the China Textile Network. “What is more important is circulation and stimulating consumption.”

The plan outlines a series of specific targets for the domestic textile industry, including a 10 percent annual increase in production, raising the output value of large producers to 1.2 trillion yuan by 2011, from 850 billion yuan last year — equal to about $176 billion by 2011 from $125 billion last year at current exchange — and export value by 8 percent each year to $240 billion by 2011, or about 1.64 trillion yuan.

China’s National Textile & Apparel Council president, Du Yuzhou, told state-owned financial portal Caixun those goals would be accomplished through accelerating the restructuring and modernization of the industry. Other strategies outlined in the policy are promoting the purchase of cotton and filature silk, and raising the export tax rebate rate while streamlining the rebate process.

“The export tax rebate rate will at least increase to 17 percent, which is welcomed by textile companies,” Jin Xingquan, president of Zhejiang Yuehong Holding Group Co. Ltd., told WWD.

He added that textile manufacturers support state purchases of cotton as encouraging more farmers to produce it and stabilize the price.

Other goals of the plan include bringing about half the nation’s textile facilities up to advanced international standards and increasing labor productivity by 10 percent. It aims to reduce per unit energy consumption across the industry by 5 percent and water consumption by 7 percent, decreasing average waste water emission by 7 percent annually.

The policy also envisions expanding the textile industry in central and western China by an estimated 20 percent through focused training of about 100 brands and enterprises in those impoverished regions. It specifically aims to enhance silk production in China’s western-most Islamic autonomous zone, Xinjiang, once the hub of the Silk Road, by boosting cooperation with the Mainland in hopes of transforming the area again into a regional international trade for Central Asia. The support plan calls for consolidating and developing 200 silk production bases and developing 50 more independent silk enterprises.

However, the plan is viewed by some Chinese textile producers as throwing money at the problem rather than addressing the systemic issues their industry faces.

“The plan is of course welcomed by people working in the textile industry, but it cannot solve our problems completely, and companies and factories should pay more attention to R&D and marketing,” said a chief officer surnamed Wei of a Zhejiang Province textile company who did not want her business or given name to be disclosed.

The average R&D in China’s textile industry is 0.3 percent, with one-third of companies spending 1 to 2 percent of budgets and only the largest companies reaching 3 percent, according to the textile and apparel council.

In 2007, China’s textile industry, which employs 20 million people, as of 2007 contributed an industrial added value of 81.26 billion yuan or about $11.91 billion, representing 3.3 percent of China’s gross domestic product. However, last year the industry saw annual growth of only 7 percent, down from 20 to 30 percent in preceding years.

“The problem is that, in China, there is no division between traditional textiles, high-tech textiles and fashion textiles,” said Texhong Textile Group product manager Guo Min. “That is why the industry can not attract talent, hence it has poor management, which accounts for the current situation the industry is in.”