Post on 08-Apr-2018
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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
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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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