Lessons from China
Arvind Singhal
Published : November 1, 2003
Last week provided yet another first hand insight into how rapidly the Chinese juggernaut has been rolling in recent times and how far-sighted and pragmatic its political leadership has been when it comes to matters of business and commerce.
The occasion was the annual conference of International Textile Manufacturers Federation (ITMF) held this year at Dresden, Germany.
Notwithstanding the fact that China is not even a member of the ITMF, it dominated almost all the plenary sessions at the conference.
There was, of course, good reason for it to do so. At about $ 60 billion in exports in 2002, China is now the single largest exporter of textiles and clothing products to the USA and Japan, and a very significant one to the EU.
Since its entry into the WTO, its exports to USA have increased by over 125 per cent in the last one year, even as quotas still hamstring its true potential to take up an even greater market share.
It is now the largest producer of cotton, and amongst the largest consumers of all categories of fibres — both natural and man made.
In the process, the Chinese textile and clothing industry has almost decimated its counterparts in the USA, Japan and many EU nations.
However, these statistics are not the insight I am referring to. These are well known to most who track global trade. It came at the fag end of the conference at a session titled ‘Lessons from China’.
The speaker presented some very interesting data on the progress of China vis-à-vis other textile & clothing producing and trading countries.
Tracking the last 20 years, the speaker eloquently highlighted the incredible advance China has made in these years and the amazing momentum it has recently built up.
The Chinese textile and clothing sector was a pale shadow of the more vibrant Indian one in the beginning of the 1980s.
The Chinese had practically no strength in the textile end of the business, and hence they started first by focusing on leveraging their best strength: low cost abundant manpower that could churn out millions of pieces of labour intensive garments by using both their locally produced basic and more versatile imported fabric.
The Chinese set up large scale garment sewing plants to meet the growing global demand for most cost-effective clothing even as the Government of India continued to move in exactly the opposite direction by bringing in garment making to the preserve of the small-scale sector (and concurrently, single-mindedly destroying the organised textile sector supposedly to protect the handloom and the powerloom sectors).
Even as agreements were signed in 1994, to give a 10- year time window for developed and developing countries to prepare for a freer trade in clothing and textiles by the end of 2004, the Indian government chose to totally disregard the tremendous opportunity India had and continued to shackle it, finally waking up only in 2002 to see the irrationality of its textile sector policies.
China modernised its textile sector at a frantic pace and has been accounting for over 50 per cent of almost all categories of modern textile machinery global shipments while the Indian textile sector remains woefully obsolete (barring a few exceptions e.g. cotton spinning).
Still — where is the insight? At the end, there was a lively Q&A session. An Italian delegate made a forceful argument mentioning that China gained a lot by opening its own domestic market to imports of fabrics, apparel (and many other consumer goods) besides encouraging retailing while he (correctly) pointed out that India does not even have a retail policy at present!
While some members of the Indian contingent (including myself) tried to ‘defend’ India, it was very clear that we had no case against the vociferous and well articulated arguments and examples cited by delegates representing nationalities as diverse as Italy, Turkey, Germany & Taiwan.
It was even more ironical when one considers that these delegates were themselves getting hurt by Chinese exports to their own markets! However, data very clearly showed how well China has been playing its cards.
It now imports $ 12 billion of textiles every year (about the same as the entire textile and clothing exports of India) making it the single largest importer of textiles in the world.
Shanghai and Beijing boast of swanking global retail chains selling the latest international products while India continues to ban FDI in the retail sector.
China gets an FDI of $ 3 billion per year in its textile sector alone whereas the Indian textile industry attracted a pitiable $ 52 million last year!
The insight was that despite it being the scourge of the textile industry in most of the EU, USA and Japan, China finds (in absentia) enough supporters for it at global forums while India will continue to fight a losing battle in trying to defend its own meaningless industrial and commercial policies!
Arvind@ksa-technopak.com
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