Textile & Garment Industry: The Golden Decade May Has Already Gone
Author: Oct 27, 2011 10:46
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Zhangyu, an old man who had engaged in garment industry for 17 years in Guangzhou, but now he plans to be fresh man of a new field by establishing a biological science company.
He confided that, now it is the most helpless period he has ever felt.
In 1994, Zhangyu, a Hong Kong man, came to Guangzhou and started his garment manufacturing business.
In 2001, China joined WTO, and he owned a garment plant in Guangzhou. For the following years, every thing seems so good and he kept busy with making money.
Until 2009, for the influence of economic crisis, China textile and garment export growth began to slow down, in addition with a labor shortage in Pearl River Delta and Yangtze River Delta, Zhangyu and the industry colleagues suffered a lot at that time. They try hard to keep the business and even move the plants into China mainland, but yet, days are becoming hard. “I am not optimistic about the industry and so are the other textile friends. In 2008, most of us wanted to get over of the matter, but now, we do not have any confidence. ” he said.
Textile and garment industry sees in the biggest challenge in the tenth year of China joined WTO.
Eventful Years
Zhangyu comes from Hong Kong. In the 1980s, textile industry in Hong Kong is just as now it is in the mainland.
When he was 18, Zhangyu began to work in a Hong Kong garment company. “At that time, I was just a little attendant. May be I have some gift in business, after four years in the company, I started my own business. I had accumulated a lot of resources during the work, and when I became brave enough, I quitted the job and started my own. My business is not always good, but really, I get the original business experience, then I began to invest in the stock market for quick money.”
In those two years, industries were not good in Hong Kong, mainly because a turmoil of the stock market, and that is comparable with what is now in the mainland, with no body wanted to do business.
Just like that, I stepped into my 30s, I was caught up with the Persian Gulf Crisis, and years of my accumulations lost over the night. “There was no one willing to invest in the industry when the stock came down, and many textile and garment enterprises started to move out. And I was also forced out at that time.” Zhangyu said.
In 1994, Zhangyu came to Guangzhou. He did not buy land to build factories immediately, but by renting and hired some workers to process.
After the reform and open up of China, the first come in industry among the non-state-owned capital is textile and garment industry. During 1980s-1990s, light textile industry developed in the east coastal area. For the main reasons are, firstly, the admittance threshold is low and also the investment is low. Secondly, there is a big demand among people. Thirdly, it has the most difficulty among the state-owned-industry. At that time, the government policies were mostly helping the enterprises and labor workers were obedient.
Business at that time were really easy, he said, “People in the same field were so young, I was 30 and beyond to the old group. I mainly do some Hong Kong orders. And as for people do exportation, there was import quota in Britain and America. At that time, province with the biggest quota is Guangzhou, as far as I know.”
Zhangyu felt that he had miss a good opportunity when he recalls, “1993, 1994, many people began a sale in the domestic market, build a brand and make it privately, and the domestic sale is hot. Maybe it is attributed to the economy was just take off and people began to have some requirement on clothes and food. Plants that did well may deliver 10 thousand to 20 thousand pieces of clothes, making 10CNY for each garment, you can consider about the total profit.” “At that time, the mill was rented from the state enterprises, and the rent is quite cheap. I had four lines, and the total rent was just 20-30 thousand China Yuan per year, which equals to no expenses.”
In 2000, non-state-owned textile enterprises takes a part that over 90%, becoming the main body of the industry.
WTO Comes
It was in 2000 that Zhangyu determined to buy some land and build his own mill in Guangzhou.
“When we heard the news that in 2001, China may join WTO, and the 2008 Olympic game will be held in China, we made a judgment that during the period, China’s economy should be stable. Yet I have not forecasted the 2008 economic crisis.” Zhangyu felt his forecast is so accurate when he recalls.
Before the round tariffs and trade negation of Uruguay in 1994, textile trade is free from the WTO system, among the international industrial products trade. Textile trade was under the regulation of MFA mechanism, which goes against WTO rules. MFA is an agreement that restricts importation of developed countries or automatically restricts exportation of developing countries. China had officially joined MFA in 18th Jan, 1984. In those years, China’s textile industry was always suppressed by the rule.
In 1994, textile and garment trade finally come back to the regulation of WTO, reaching an Agreement on Textiles and Clothing (ATC). The agreement specifies: the decade since 1995, will be divided into four periods, aiming at abolishing the quota restraint among WTO member countries, finalizing real free trade. 1st Jan 2005was the last lap, and all the quota restraint have been abolished.
Su Huaibing said, “there is a implicit problem. Namely, China had must to be the WTO member that can enjoy the freedom of textile and clothing trade.” Zhangyu said with a fresh memory, “I did two things in 2000, the first thing was buying land to build plants, and the second thing was buying some sales store to do some domestic sale.”
He said, “As every one knows, when we joined WTO, we mainly do foreign businesses. The previous plant is small and old that will not be a good impression for foreign buyers. For I had experienced such things in Hong Kong, so now I made the decision to build the plant.”
Looking back on the days when China had just being a member of WTO, Zhangyu said, “At that time, a factory hot was carried out in many regions of China. You can have a factory only with 100 thousand China Yuan. In a period of time, our workers are not stable.”
But that was only a brief interlude, which did not cause any obstacles to us.
Sun Huaibin recalled, the performance of China has testified the craze act. I remembered, textile exportation that year hit a new peak of the history, breaching 60 billion amount.
The Best Time
Over the years, Zhangyu thinks, the best time was 2005~2007. He said, “I had only 4 lines when began renting a mill, and there were 12 lines in 2003, and during the prosperous three years, from 2005~2007, we had a full operation of the 12 lines, and even subcontracted many orders.”
2005 was a year of land mark meaning, we may have different feelings, but people inside the matter would have a deep memory.
According to the rule of ATC, the global quota era should be sentenced to be over. China textile industry had kept an accelerated growth rate in the later quota era, which had caused a panic among the European Union that they strongly calls for export barriers on some kind of China textile products.
23rd Feb, 2005, the EU said, a special safeguard mechanism may be taken on China’s textile exportation. After then, a series of special safeguard surveys were carried out one by one. And this gradually exacerbated the trade disputes between China and EU. “The problem was up lifted to a political level at that time.” Sun said, “Finally we had to make a negotiation with the U.S.A. and the EU, resetting a quota on some products, with three years for the U.S.A. and the Europe respectively.”
But the event also made Chinese people realize, joining WTO has given China a big trade growth room, but the so called free trade will not be absolutely free.
Switch Industry
In 2009, a labor shortage comes in the Pearl River Delta and the Yangtze River Delta. Once again, Zhangyu stepped ahead of others, building a plant in the mainland, where labors were abundant.
He said, “I chose Huangshi, Jiangxi province, where is not far away from Guangdong. I build a mill that has 50-60 workers. And I assigned a team leader there to take the charge, for his hometown is right there.” It turned out a total failure, in less than half a year, the mill was closed. Because I found they took in private orders, and after that, they do my work. But if you build a mill in that area, you had to use a local people to make the management. Things like this is inevitable.
In 2010, Zhangyu also investigated some places inland, trying to make some investment, but there was no success for kinds of reasons.
Now he has an idea of leaving, after playing in the industry over 30 years. He said, in 2008, most of us wanted to get over of the difficulties, but now, we do not have any confidence. And friends of the same field mostly have the same idea with me.
This year, scholars began to guess, China’s Lewis Turn Point has began to appear, that is turning from labor surplus to labor shortage. And this point is considered as the most important turn point, which will redefine China's growth mode
With such changes, domestic need becomes the next hotspot. Many people have chosen to create a brand sale in the domestic market. But Zhangyu insisted that, the best time for creating a brand is in 1990s, and now it seems too late, for the channels have already been captured by the former people.
There are about 150 people in his mill, and he refused two groups of people. He said, “There are not so many orders, why I need so many people?”
Now, it is the time that everyone should think about how to do next. Textile and garment industry: the golden decade has gone.
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Editor: Candy From: 168Tex.com
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