SHANGHAI — China has unveiled a new plan for its domestic textile industry that emphasizes the importance of moving manufacturing operations from coastal regions to the country’s interior and increased spending on advanced technologies in order to make the sector more globally competitive.

This story first appeared in the February 6, 2012 issue of WWD. Subscribe Today.

The 12th five-year plan, released by the Ministry of Industry and Information Technology just before Chinese New Year in January, indicates the country’s textile industry is more or less caught in the middle between developed and emerging markets and that it is trying to find its place.

While the nearly 40-page-long document says Japan, the U.S. and Europe will remain key export markets, it acknowledges that the financial crisis, combined with rising labor and raw material costs, as well as the appreciation of the yuan, has not left the sector unscathed. Strengthening regional markets, including India and Southeast Asia, where labor remains cheap and currency rates favorable, are also indicating the end of a low-priced Chinese textile industry as Western countries look elsewhere to source low-cost fabrics. The plan states that China’s aging population, combined with already severe labor shortages in coastal areas where most of the textile sector is situated, are both cause for added concern.

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“Competition will only become more fierce,” the document states. “There will be advantages for us to develop diverse markets.”

To combat the problem, the government is seeking a massive technological overhaul of the industry, calling upon fabric makers to upgrade everything from manufacturing technologies to producing more chemical fibers in order to “internationalize” the sector. The aim, it seems, is for the sector to be able to compete directly with more advanced textile industries in the West.

Yet there is also substantial emphasis in the plan on shifting textile production toward the domestic market in order to tap into the country’s expanding and increasingly affluent urban population seeking “civilized, fashionable lifestyles.” While 54 percent of China’s residents still live in rural areas, they make up only 18 percent of the total domestic consumption of textiles, indicating a potentially massive and untapped market.

The plan calls for the establishment of between five and 10 internationally recognized Chinese brands and at least 100 nationally recognized brands by 2015. It said more education should be implemented in brand management and brand building in order to bolster China’s fashion industry.

The government is encouraging fabric firms to open factories in the interior to take advantage of cheaper labor and abundant resources. For example, the plan states that greater investment should be devoted to bolstering the textile sector in the far Western province of Xinjiang, which is a major cotton producer for the country. More than 80 percent of Chinese textile manufacturers are located in Eastern coastal regions. The plan also calls on manufacturers to implement energy-saving and recycling technologies.

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