CNTAC Vice President Wang Tiankai.   by Wang Lei

Textile businessmen contend with lessened customer counts at a foreign-trade apparel fair. CFP

Expansive textile operations, like pictured, must adapt to a changing market, according to Wang Tiankai. CFP

Wang Tiankai (left) attending an apparel expo.

According to many Chinese econo-mists, while the US was suddenly and seriously wounded in the onset of the crisis, in China the negative scenario is unfolding more slowly, allowing government and industry to evolve a more effective long-term market strategy.

The Chinese government has adopted a series of measures, including the Ten Industries Revitalization Plan, put in motion earlier this year. The textile sector, substantially addressed in the plan, is a major element of the overall national equation, and the challenges facing the industry are a central focus of attention. To better understand what is a complex and important issue, we visited Wang Tiankai, vice president of China National Textile and Apparel Council (CNTAC).

China Pictorial: What do you see as being the overall impact of the financial crisis on the textile industry in China? Is it true that many enterprises in the sector have ceased production, or are on the verge of bankruptcy?

Wang Tiankai: Even before the crisis, the industry already felt pressure from the appreciation of the Renminbi (yuan), the cut of export rebates, the rising cost of production materials, and other factors.

The appreciation of the Renminbi, cut of export rebates and the rising price of raw materials have reduced profit margins, but as long as there is a market, enterprises will manage to survive with more efficient management. But the problem is that the crisis has cut market demand, and this cannot be remedied by the industry itself.

At the end of last year, we conducted a survey, and many of the entrepreneurs responding agreed that the financial crisis had a great or relatively great impact on their enterprises.

In February, we organized an investigatory 100-member task force to conduct research into 145 industrial groups based in 18 provinces, municipalities and regions. 80 percent of the groups remain operating after the Spring Festival. Among these, more than half are operating at 90 percent of their capacity and 10 percent are operating at half of their capacity. After the Spring Festival, more than 80 percent of migrant workers returned to work. That situation was not as serious as it was described by some in the media. I should say that the overall situation in trade has remained stable since the beginning of 2009.

CP: So, you believe that the current challenges facing the textile industry are not as serious as many thought?

WTK: During our investigations we found that two issues loom large. One is a lack of orders; and the second is a reduction in profits. For instance, typically in mid-February they may have already received May and June orders, but now they only have orders for March and April. In one sense this reflects that the market demand is deficient, and in the other sense it reveals that enterprises are not so confident – that they are more cautious in their operations. At the same time, some high-end commodity manufactures are transitioning to middle and lower range product markets. This may make the existing competition in the market more competitive.

To address the problem, the govern-ment has adopted a series of measures, for example, the export rebates and textile industry revitalization policies. With the launch of policies to maintain economic growth and expand the domestic market, demand will gradually stabilize. As to the specific time when it will rebound, that may become clearer in the latter half of this year.

CP: The export rebate rate for six industries is set to be raised on April 1, 2009. The textile and apparel sector, for example, will be raised to 16 percent. In your view, will this move benefit the textile industry across the board?

WTK: I will say the policy will bring substantial benefit to the textile industry, but the export rebate cannot solve all the problems facing the industry. Many enterprises are anticipating more effective measures to support them. In addition to paying a close attention to the comeback of the international market, we expect a stable and sustained expansion of demand in the domestic market. The latter is the key to the overall revitalization of the textile industry in China.

CP: What is your view on trade protectionism?

WTK: The financial crisis stimulates trade protectionism in each country, and this can only make the situation worse. The smooth execution of international economic and trade activities can only be guaranteed on the basis of collectively beneficial cooperation. In respect to this problem, we encourage enterprises to enhance their operation and management while abiding by international standards applying to environmental technology, social obligations, intellectual property rights, and more. At the same time, we also encourage them to transform the adverse situation into a dynamic power for upgrading. On the other hand, unfair trade protectionism will be resolved through negotiations via proper channels, based on international conventions.

CP: What development strategy should the Chinese textile sector undertake?

WTK: Some say that the sector should follow either the road of mass production, or focus on high-end products, but I don’t agree. It is not that simple.

As to mass production, it is true that with an increase in the scale of production, the cost will be reduced. But is there a market large enough to consume the products? Once the market becomes unstable, those enterprises which increased capacity too far will fall victim. As to the high-end strategy, the market has also shrunk.

Now the question turns to who prospers in the market? Obviously, it will be those enterprises which adhere to a diverse strategy. Huafu, a group based in Ningbo City, in Zhejiang Province, plies the market with its unique environmentally-friendly products. During the financial crisis, it actually expanded its investment, instead of cutting production.

I believe that enterprises should evaluate their ability to react quickly in a changing market, and consider that to be an important criterion in judging whether they have become a modern enterprise with core competitive power.

CP: Besides the negative impact, has the crisis also brought opportunity to the textile sector? And, if so, how?

WTK: Before the financial crisis, the textile sector contended with negative issues like a lack of innovation, slow structural adjustment, lagging brand development, and other limiting conditions. Since the enterprises were profitable, regardless, they didn’t sufficiently focus their energy and resources to addressing such ongoing concerns. Now, facing difficulties exacerbated by the financial crisis, they are more focused on finding long-term solutions.

Survival of the fittest is an important principle of the market economy. In this sense, while the financial crisis may mean a period of hard times, it also offers an opportunity for the fittest to positively evolve and advance in the years to come. I believe that after the crisis subsides there will appear many more viable enterprises, and the textile industry in China will look to a prosperous future.