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    China’s influence on the specialty fabrics industry

    Uncategorized | | By:

    Over the last 20 years, China’s consumption of specialty fabrics and nonwovens has increased annually by about 15 percent and 30 percent, respectively. In 2008, the total output of China’s specialty fabric industry was more than 6 million tons. Currently, the proportion of specialty fabrics in the textile industry in developed countries ranges from 30 to 40 percent; in China this proportion is approximately 15 percent.

    In the first eight months of 2009, many exports of specialty fabric products declined. Overall, during this period China’s exports of specialty fabrics were about 1.1 million tons, an increase of .53 percent over the same period in 2008. Wadding, nonwoven cloth, and coated fabrics showed a growth trend.

    The stimulus plan

    The demand will only increase as the Chinese government’s Revitalization of The Textile Industry Adjustment Plan (launched with $586 billion in Nov. 2008) works to promote specialty fabrics as an important component of its textile industry. The plan outlines efforts to speed up their development over the next 3–5 years, and will focus on water conservancy, transportation, construction, agriculture, medical and environmental protection markets. The plan has provided stimulus for ten designated industries in China, including automobiles, iron and steel, textiles, equipment manufacturing, shipbuilding, electronics and information technology, petrochemicals, light industries, nonferrous metals, and logistics.

    Protectionist actions

    China has adopted a number of mercantilist actions designed to increase its market share and exports to the U.S. textile sector, despite a pledge it made at the April 2009 G-20 summit in London not to take any protectionist actions through the end of 2010. For example, since July 2008 the Chinese government has provided some $10 billion in export subsidies to its textile sector, largely accomplished by increasing its value-added tax rebate rates from 11 percent to 16 percent provided to textile and apparel exports. In fact, in mid-June 2009 China raised the tax rebates on exports of textile and apparel products from 15 percent to 16 percent, the fourth time the government has raised the rebate since August 2008.

    Monitoring developments

    China’s subsidy structure lacks transparency, which makes it difficult to determine the subsidies actually provided to domestic producers. Also, according to many economists the Chinese yuan is undervalued by as much as 40 percent, providing enormous financial support to Chinese exporters.

    But China, too, has experienced unprecedented challenges during the global recession. In a recent survey of 800 Chinese textile industry entrepreneurs, managers, and professionals, more than 70 percent said they have been negatively impacted with sales and exports down, rising costs, currency fluctuations and difficulties securing financing. Yet, about 60 percent of respondents expect it to return to firm footing within the next two years.

    Meanwhile, the Obama Administration has vowed to pursue a more robust trade enforcement agenda, but at the same time is not interested in starting a trade war with China or placing additional burdens on businesses or consumers as the U.S. economy continues to gain forward momentum.

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