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Textile restructure a must to stave off crisis

By Qin Xiaoying (China Daily)
Updated: 2009-02-18 07:43

The State Council, China's Cabinet, passed in principle a program to rejuvenate the country's textile and machinery manufacturing industries after reviewing it at a meeting chaired by Premier Wen Jiabao early this month.

Related readings:  Tax rebate hike for textile export effective from Feb 1  China raises garment, textile export tax rebate rate  China to discuss machinery, textile plans  Textile firms likely to feel the squeeze

It came less than a month after the central government launched an enormous stimulus package aimed at reviving the slackened auto and steel sectors. The latest move, according to economists, will help the suffering textile and machinery industries survive the prolonged economic winter through a long-expected industrial upgrade.

As the oldest labor-intensive industry that closely relates to ordinary people's livelihoods, the textile sector has long served as a traditional pillar of the national economy. It has played a crucial role in national economic development in recent decades. In particular, since its accession to the World Trade Organization (WTO), China has been the largest textile manufacturer and exporter in the world and enjoyed an overwhelming advantage over other countries amid fierce international competition.

The textile industry has played an important role in promoting the country's market prosperity, export and employment expansion, growth of farmers' income and urbanization. It comes as no surprise then that the State Council included it in the Feb 4 stimulus program. In the context of the global economic crisis, nearly 70 percent of the country's textile enterprises, however, suffered a 0.19 percent decline in profits in the second half of last year, with two-thirds suffering business hardships to varying degrees.

On the other side of the coin, some 30 percent of China's textile enterprises above a certain scale achieved more than 30 percent growth in profits last year, in sharp contrast with the gloomy picture facing most of their foreign counterparts. The good performances can be attributed to the development of advanced technologies and innovative capabilities. Also, branding and ever-growing competitiveness in sales networks have contributed much to their achievements.

China's colossal textile industry may be forced by the economic crisis to accelerate desperately needed structural adjustments and upgrades, even as the global downturn hammers the country's external economic environment.

China's textile industry has long maintained a low-cost and low-price development model. It has also proved a big polluter and voracious consumer of energy. Such a development model has not changed despite the country's great efforts to press for industrial upgrades in recent years.

Some textile producers have complained that the central government didn't commit enough to boost the industry in its stimulus program, citing the one percentage tax rebate increase for textile and garment exports from the 14 percent to 15 percent as inadequate. Such complaints ignore the central government's intention to rejuvenate the country's textile industry through its own structural adjustment and upgrades.

Facing shrinking outside demand, the textile industry should take practical measures to push forward structural adjustments to consolidate its role in expanding the country's employment.

Only in this fashion can the industry develop into a really powerful and competitive body internationally.

As far as the manufacturing industry is concerned, the central government has also revealed its latest industrial revival plan, which is the best indication of the central government's intention to promote innovation amid the global economic crisis.

Major machinery manufacturers are encouraged to merge to develop a large enterprise group with obvious advantages in project contracting, international trade and financing.

To this end, the textile and machinery manufacturing industries should first do their utmost to press ahead with long-overdue structural adjustment under the robust aid of the central government.

The author is a researcher with China Foundation for International and Strategic Studies.