group8 gpe final

8/6/2019 Group8 GPE Final

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A tour to the worlds largest

Textile and Apparel Workshop


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China history of silk more than 5000 years old

First to invent the science of sericulture and silkproduction

LucrativeChinese silk trade during the Han

Dynasty (206 BC220 BC)

Silk Route: a symbol of the cultural andeconomic exchange between the East and the

West


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GDP: US $4.33 Trillion

Third largest Economy (exchange-rate ) Second Largest (PPP Basis)

5th Fastest Growing Economy

Largest Trading Nation Traditionally Driven by Agriculture and

Industry


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Largest in the world

Cotton-Largest Producer, but, not thebiggest exporter

Long Staple Cotton (90%)

Constitutes 78% of the exports from China. Employs 19 million people.

Textile Clusters


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China faces shortage of Labour?

Textiles- special focus area for Chinese

Govt.? Relationship of Nonwoven industry

growth and Growth of GDP


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Enhancement of export tax rebate

Ensure the tax rebates come to enterprisesin time

Adjusting Industry Structure includingrelocation.

Enlarging Domestic Demand.


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Initial textile mills in China: a mere extension ofthe Lancashire and Japan Textile industry

Privileges like Cheap Labor,Security,FavorableClimate and Extensive Markets : Attractedforeign Management andCapital (esp. from

WesternCountries)

Increase in domestic investment owing to lesserrisks


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Downfall of British Textile Industries

Defeat of Japan in Sino-Japan II war (1937-1945)

China gaining ownership of many well equippedand efficient manufacturing units

China lost Experienced Management and

Technical Skills


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Loss of 2 million spindles-approx. 40% of the

1937 total of 5082000 spindles

Loss of productivity of upto 35% (of pre war)

owing to shortage of skilled labor anddeterioration of plants

Still 3 million spindles operating at 70% of

prewar efficiency


11/47The story begins.


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China pursued an inward-looking developmentalstrategy, free of foreign direct investment (FDI)

Between 1950 and 1960: Chinas foreign loanswere provided by the Soviet Union

Foreign Capital in China: Mostly a down payment

for sellers credit to purchase equipment fromWestern Europe and Japan

Foreign capital equated with Foreign Exploitation and

Economic Imperialism


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From late 1978 onward,Deng exerted a critical role in Chinesepolitics and the opening of China.

First political hurdle: stern political opposition at the national

levelconservative ideologues Chose to open up a few places first as experimental zones where

measures for attracting foreign direct investment would betried out and foreign capital, technology would be usedeffectively for local development

Experimenting with liberalization and demonstrate theeffectiveness of the Open Policy and encourage other areas tofollow suit

A defeat the decades-old autarky legacy


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In the early 1980s, fourSpecial Economic Zones (SEZs),namely,Shenzhen,Xiamen,Zhuhai, andShantou


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The designated SEZs enjoyed geographicproximity to neighboring advanced economies

Inexpensive land and labor here would attractinvestors fromHong Kong, Macao, Taiwan, aswell as Singapore, Malaysia, and Thailand andlater prompt Japanese, Korean, and Western

investors to follow suit

Also to attract successful overseas Chineseentrepreneurs who had strong sentimental bonds

with theirChinese home towns.


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SEZs enjoyed a number of special policies until April1984

Joint ventures and foreign-owned enterprises were

allowed in the SEZs

Prices and distribution of goods were regulated bythe market within the SEZs

SEZs had jurisdiction in approving much largerinvestment projects than non-zone localities

SEZs enjoyed preferential treatment in tax and

tariffreductions and exemptions


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Deng and other reformists carefully appointed

leaders with political experience to head the majorSEZs to accomplish different tasks for reform

They were also loyal cadres the communist partytrusted politically

Technical difficulties were resolved and

marketization was implemented.


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By the end of 2002, a total of 6866 industrial

parks had been set up inChina, including state-

level,

provincial,

municipal and county-levelindustrial parks

However, since 2003,China has launched

rectification for the industrial parks in order tonormalize the land usage, and cut the amount

of industrial parks to 1568 by the end of 2007.


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The textile and apparel clusters are mainly located inthe cities or towns of the coastal regions, particularlyin the Yangtze River Delta (YRD), the Pearl River

Delta (PRD) and the Bohai-rim region

Hundreds and even thousands of textile and apparelmanufacturers have clustered together

In most cases, specialized wholesale markets arealso presented to act as trading platforms for thefinished products


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38 major textile clusters and 48 major apparel

clusters inChina

Each of these clusters specializes in theproduction of one or more textile or apparel

products.

All of these clusters are located along the

coastal provinces of Guangdong,Zhejiang,Jiangsu,Shangdong and Fujian.


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Strong linkages with the outside world

Extended production chain

Existence of wholesale market/commodityexchange market in/near the cluster

Concerted marketing efforts among enterprisesin the cluster

Governments role in the textile and apparelindustry

Clusters act as the main sources of raw

materials and other processed apparel products


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Movement out from the relatively high-cost

coastal areas to the inland regions

Continual surging land and labour costs

Rising costs of raw materials and energy in the

coastal regions

Some enterprises even move their production to

other lower cost countries in Asia.


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Rank Country Export Value (Billion

USD)

YoY Change (%)

1 US 16.1 18.9

2 Japan 15.7 7.43 Hong Kong 9.0 33.2

4 Romania 5.0 838.9

5 Russia 4.0 -25.4

6 Germany 3.6 17.7

7 Korea 3.2 31.9

8 UK 2.8 31.2

9 Canada 2.6 52.9

10 Italy 2.3 27.8

Data: 2006


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QUOTA SYSTEM and Environment issues


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2/3rd of enterprises affected

Net losses: $ 1.17 bn

15% ofChinese products cant enterAmerican market: $ 8bn products affected

Nitrogen dye prohibited: influenced 70% ofapparel enterprises


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Heavily dependent upon developed nations Cant appeal to WTO Have to abide by their regulations to continue

trade Restructuring industry structure Focus on better technology Emphasis on innovation and R&D Shift from OEMs to ODMs & OBMs Thus offer highest quality goods to them Thus arises need for other avenues


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New foreign policy target Africa as a newmarket and resource base

Continuously building relations- Diplomacy- Trade Deals- Debt forgiveness- Aid packages

Major motive: Investment in Africa as a newmarket (Aid always follows trade)

Trade by 2008: $ 70 bn


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Specialized in low cost mfg

Still many small and medium textile firms in

China operate at low costs No stringent laws in these LDCs

Politically unstable: bribe officials

No quotas


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Offer cloth at much cheaper rates

Companies all import this cheaper cloth

Cheap due to low-quality No restrictions to prevent such practices

Carry & imitate local designs

Increases unemployment


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ATL and GTP shut down spinning & weaving

plants

Import cheapChinese wax prints Much less durable than Ghanaian textiles

Unemployment level high

Ghanaian designs imitated

The cheap imports are slipped in at theborder and ports


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Nigeria

1996 2006: NTMA employees: 250000 to

30000 One-fourth cos shut down

Cumulative production: 1.5bn to 400mn mtsof fabric per yr

South Africa

Textile Imports fromChina: 40% to 80%


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Joined WTO on 11 December 2001

Why??

China felt discriminatory policies by its tradingpartners

Anti-dumping and countervailing measures

Determination of dumping and its margins based on

third country reference prices, instead ofChinesedomestic costs

Textiles - Anti Dumping duties ranged from 54-500%

WTO Dispute settlement mechanism


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Textile industry profits

Phase 3 of ATC 51% of quotas eliminated

Tariff reduction Stability in External Economic Relationships

Firer and Speedier Economic Reform

Reduction of barriers forChinese exports


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ATC(Agreement on Textiles andClothing)-Quotas as specified in bilateral agreements

Successor to The MFA(Milti Fibre Arrangenment)

Exceptions to GATT and WTO rules

Restricted the absolute level of textile andclothing imports of individual countries for a

variety of product categories Global trade figures for clothing provide partial

confirmation of the experts predictions for gains

forC

hina in post-ATC

trade


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On how to start business


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Speed of reforms and restructuring

FDIs

Currency Management Timing of joining WTO

Supportive Infrastructure

Liberal Labour Laws

Removal of textiles and clothing exportsquota system.


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Quality of Governance

Focus on Value Addition

Technology Up-gradation Capacity Building

Building Clusters

Human Resource Development

Accreditation and Certification

Reducing the cost of doing Business


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group8 gpe final

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