China Policy Institute: Analysis


Business and Management

How Uber crashed in China

Written by John Colley.

Uber has announced its exit from the Chinese taxi market by merging with arch-rival Didi Chuxing in a US$35 billion deal. Uber is selling its operations to Didi, with Uber China investors receiving a 20% stake in Didi, according to reports.

It represents a major defeat for the San Francisco-based tech giant after a long and hard-fought battle to dominate China’s ride hailing market. Uber tried to succeed where other Western companies had failed in China but, like Google and Amazon before it, found that Chinese markets tend to be enormously competitive with very narrow margins. On top of this, Uber found itself the victim of the business model that is behind its own success in numerous other countries – the network effect. Continue reading “How Uber crashed in China”

“Made in Italy” by Chinese in Prato: The “Carrot and Stick” Policy and Chinese Migrants in Italy, 2010-11

Written by Gaoheng Zhang.

Historically, Italian industry in Prato focused on textile production, a famed “Made in Italy” trademark with a pan-European clientele. Following their arrival in the city during the 1980s, Chinese migrants gradually developed the niche market of ready-to-wear fashion. By the late 2000s, Chinese businesses in the city ranged from fabric dyers, fabric tailors, and fashion designers to garment manufacturers and wholesaler distributors of finished products – although fabric production and design remained limited. In the late 2000s, the Chinese operated between 4,000 and 5,000 firms in the city, and one out of four companies in the city was Chinese owned. By then, the Chinese were the dominant migrant community in Prato, officially constituting about 50 percent of the city’s foreigners during the 2000s. Although in 2010 Prato had the second largest Chinese community in Italy on official records (11,900), scholars and police reports estimated that illegal migrants constituted between 20-43 percent of Chinese migrant workers. Chinese migrants had transformed a relatively small provincial town into the largest concentration of their enterprises and factories in Europe. Prato in effect became the foremost European exporter of low and middle-end “Made in Italy” fashion made by Chinese migrants.

In late 2000s, Prato’s local government forcibly intervened in Chinese migrant entrepreneurship. The municipal elections in 2009 made Roberto Cenni, supported by PDL (The People of Freedom) and Lega Nord (Northern League), the first conservative mayor in the city since WWII. Once in office, Cenni implemented policy that worked on the level of both Chinese-Italian conflicts – Italian legality vs. Chinese illegality – and cooperation – promoting the use of Italian fabrics for Chinese ready-to-wear fashion manufacturing.

In late 2009, Cenni endorsed frequent police raids on Chinese factories in Prato, particularly those in the industrial district of Macrolotto, provoking acute social tension. Police raids climaxed on January 19, 2010. Aided by a helicopter, 120 Italian agents from various institutions entered “in a grand style,” into Via Rossini, the heart of Chinatown just outside the city’s medieval walls. This raid was called the “largest anti-clandestine operation ever carried out in Tuscany” by the local newspaper La Nazione and, “the most imposing [raid] that the city has ever witnessed in the war against illegality during these years” by Italy’s national business daily Il Sole 24 Ore.

Meanwhile, Cenni proposed the concept of an Italian-Chinese collaboration that could attract large fashion brands such as Zara and H&M to Prato. Cenni’s vision would ostensibly create a win-win situation; Italians in Prato would sell their fabrics to Chinese migrants who would then manufacture authentic “Made in Italy” fashion for a secured distribution among these global companies.

To my mind, Cenni’s strategy was an incarnation of the “carrot and stick” policy that combines business pragmatism with institutional repression, a strategy carefully calculated to win a wide spectrum of media endorsement. In order for this strategy to work among Italian and Chinese migrant workers and entrepreneurs, and potential international employers and customers, Prato’s local specificity and its pan-European impact must be cogently argued and conveyed in the media.

Insofar as his “stick” policy was framed as a way to curb local illegal Chinese and Italian factories, it appealed to their legal counterparts through creating a common platform from which cooperation might be facilitated. Cenni astutely realised that Prato could not, and should not, shun Chinese migrants who were now major players in its economy and international reputation. Therefore, raids on illegality would mitigate the ire of Italian industrialists in the city without alienating legal Chinese migrant elites, who controlled the bulk of investment capital and backed up much of the Chinese migrant media.

While the “stick” policy based on raids was locally oriented, the “carrot” policy addressing the meaning of “Made in Italy” – with which the other policy must work in tandem – elucidated the global significance of the Prato case. Cenni’s “carrot” policy was a newsworthy item for Italian, other European, and American media outlets, which were eager to know how Prato could globalise its native Italian industry by keeping it local and thereby preserving its unique geographical and cultural identity.

The Chinese migrant press generally viewed police raids as an arrogant show of an economically weakened and yet politically dominant local government that exerted executive power over the economically-powerful but politically insignificant Chinese community. Calling the raids “carpet-style inspections,” Xinhua Lianhe Shibao employed a Chinese approximation of the Italian “rastrellamento” to highlight (unlike the focus on illegal migrants in La Nazione) legal migrants who were treated unfairly. During one raid, one man was made to stand in the courtyard, “shivering from winter cold” for hours while Italian agents conducted the investigation. “In the end, seeing that we had permits to stay, the agent shook his shoulders and sent us away without a word of apology.” Many legal migrants also had no place to sleep because the warehouses that contained the sweatshops and living quarters were cordoned off. Indeed, according to Cina in Italia, Italian authorities tended to “hurt the feelings of Chinese migrants” during these raids, despite its justifiable aims (No. 63, March 2010).

Appearing in late 2010 and in 2011, matured responses to Cenni’s “carrot” policy in the Rome-based Chinese migrant newspaper Xinhua Lianhe Shibao/La Nuova Cina suggested two ways of redefining the “Made in Italy” label by Chinese migrants that went beyond his prescriptions. The first suggestion concerned the need for the community to form a legal, coordinated, and complete production and distribution chain among themselves in order to effectively minimise business risks. The second suggestion proposed in this newspaper recommended that Chinese migrant factories refocus from low-end and counterfeit garments to high-end fashion. This switch, it was argued, could avoid the damage caused by frequent raids that specifically looked for mislabeled “Made in Italy” products. It could further present Chinese entrepreneurs with an opportunity to grow their businesses in a high-profit market.

As the only Chinese entrepreneur member of the Confindustria (The General Confederation of Italian Industry) in 2010 when he entered in 2004, Xu Qiu Lin became the most well-quoted example of an accomplished Chinese entrepreneur in Prato in Italian and other European media. For The Guardian, while most Chinese migrants used fabrics from mainland China for their “Made in Italy” fashion, thereby running counter to Cenni’s urge to migrants to purchase fabrics from local Italians, Xu’s company was an exception, and as such, a harbinger of future developments. A BBC News video service jettisoned the cliché of poor-quality merchandise made by the Chinese, stating that among the five thousand or so Chinese factories in Prato, many produced garments that matched “Italian quality” and beat “Italian prices.” This service opened and ended with images of Xu in conversation with his Italian designers in his factory. Xu was again singled out as the “symbol of a future reconciliation between the two worlds” by Le Monde. For Der Spiegel, Xu Qiu Lin represented the future of globalisation, in which Chinese entrepreneurs in Italy were beginning to “go back to producing their goods inexpensively in China”.

As Xu owned his self-created fashion brand “Giupel,” founded in 2000, the use of his story in the media countered the provincialism of Cenni’s “carrot” policy that attempted to keep the Chinese confined to manufacturing for Italian and other European brands. On the other hand, without the international media enthusiasm of the Prato case, which was crucially fueled by Cenni’s policy and explicitly favoured by Cenni – the shrewd businessman-mayor, it was unimaginable that Xu’s international profile could be built.

Gaoheng Zhang is Assistant Professor of Italian Cinema for the Department of Italian Studies at the University of Toronto. His upcoming book is “Italian-Chinese Cultural Encounters: Chinese Migrants and Globalization in Italy, 1992-2012”. Image Credit: CC by Edwin Lee/Flickr.

Migrant children in China: Identity and Stigma

Written by Mingchao Zhou.

Established in the 1950s, the hukou system still controls and regulates the settlement of rural migrants in cities. Children of people who have migrated to cities are targeted by specific school policies and subject to categorization and segregation in specific schools. In order to understand how this school segregation is implemented at the local level, between 2010 and 2012 I conducted ethnographic fieldwork in an urban primary school that specialized in receiving rural-to-urban migrant children in Hangzhou. With my official status of trainee teacher at school, I had the opportunity to conduct home visits and observe housing conditions; indeed most of my interviews with the students’ parents were conducted in their homes. Among the fifty-two students between 11 and 13 years’ old who I studied, thirty-five lived in “villages within the city” (chengzhongcun) and seventeen lived in flats or in storage rooms (chaipeng jian) in urban residential areas (xiaoqu). When students would take me to their homes I used the time together to try to understand how they perceived their places of residence.

Based on these informal discussions I found six “identity strategies” used by migrant children deaing with the image of their place of city residence. by distinguishing those who live in “chengzhongcun”, subject to spatial stigma due to their neighbourhood bad image (which is also due to the social representation of migrant workers, main inhabitants of this type of neighbourhood), and those who live in “xiaoqu” and are surrounded by city dwellers in the neighbourhood.

For students who lived in “chengzhongcun” (“bad” areas with a social stigma attached to them, including by some of the people who live there), some got defensive and rebuilt a world by using their imagination resources. They admitted some of the house’s inconveniences but reinterpreted them as advantages. The fact that the house was located far from the city centre was presented as a voluntary choice that yielded precious quietness and privileged access to nature, and particularly compared to the benefits of the their home towns. For example, one of my students lived in a village that had to be demolished soon. The majority of residents had moved, leaving the houses abandoned. Despite the transformation of this environment into a slum, the student depicted her house as “a princess hut in the forest”. The state of abandonment of the village was sublimated through the emphasis of an almost rural environment, extremely rare in the city, and the invasion by weeds was presented in terms of access to nature. Confronted with a residential context that crystallizes their marginality, these children mobilize their creative resources to re-imagine a tolerable image of their homes for themselves.

Stigma can also be neutralized through humour, irony or detachment. Some children voluntarily described the darkest aspects of their village and they have their own stigmatizing expressions to designate these places. Referring to the dirtiness and vulgarity of his neighbourhood, one student enjoyed laughing at the name hehuayuan, which literally means “the lotus yard”. He said: “This name is really misleading. I don’t see any lotus but I do see garbage cans, plenty of them. It isn’t ‘the lotus yard’, but rather ‘the ringworm flowers yard’”. The dialect expression “ringworm flowers” (lalihua) refers to the infectious skin disease.

In a third case, stigma can be diverted to ‘the closest Other’. When children felt exposed to spatial stigma, they often indicated some of their classmates as a substitute. Some children described their peers’ housing conditions as inferior to their own. When I commented on the long distance between a student’s house and their school, there were always some students who were reported to live even further away. When students admitted the filth and disorder spread around their own village, there was often a “but” leading to the denouncement of a classmate’s situation. Through this type of speech, we can notice both the proximity and emotional distance between the migrants’ children: proximity, because it is a question of relatively deep knowledge of one another, of a “us” which relies on comparable living conditions; distance, because the stigmatization itself pushes them to detach from this “us”.

As for rural-to-urban migrant children who lived in “xiaoqu”, some of them seemed to have established good relationships with their neighbours. One student admired his neighbourhood and described it in terms of discovery: the underground parking, the garbage receptacles, the concierge service where cars were controlled and checked on their way in. He got on well with urban children. He willingly welcomed me to his home and was proud to show me his house. In his opinion, his neighbourhood was presentable compared to his classmates’. He was aware and proud of it and he maintained a kind of superiority over them. On the other hand, he had a tendency to present himself as an outstanding child of “people coming from outside” (waidi laide ren): he indicated which bus to take to go to a specific place in order to show me that he “knew the city well like locals”. He told me he hung out with urban children and played games with them “unlike his classmates”, and he wanted to learn the Hangzhou dialect with his local friends. In front of me, he controlled the impression he produced, in order to show me the image of someone well integrated into the city.

Some children were engaged in confrontational situations with urban inhabitants and protected themselves even more aggressively. On our way to one student’s home, he was quiet and barely responsive to my attempts at conversation, but suddenly became malicious as soon as we entered the neighbourhood. He did not hesitate to walk on the grass where the sign indicated “do not walk on the grass”; he stopped in front of public sports facilities and used them in a violent and destructive way, while yelling and laughing out loud, until I asked him to stop. He seemed rather happy to see me angry. It was after the interview with his parents and deepening contacts with him that I managed to interpret these behaviours. In fact, Hu’s family was in conflict with their neighbours, especially with the next-door neighbours, because of noise problems. As a carpenter, Hu’s father and his colleagues transformed the apartment living room into a workshop and the noise they made caused problems with the neighbours. The next-door neighbour came to remind them of the rules of civility in urban neighbourhoods, which made Hu’s father and his colleagues very angry. Later during my fieldwork, Hu confided to me that, after this incident, he would sometimes voluntarily make “uncivil” gestures as a way to “vent his resentment toward the people in the neighbourhood”.

Other children tended to lay low as a way of protecting themselves. A student living in an urbanites’ neighbourhood where her parents own a grocery responded to my attempts at conversation with monosyllables and head bent down. According to her father, they chose to live in a neighbourhood to run the grocery store and to provide a healthier environment for their children. According to her father, as the daughter of the grocery store boss, she is well known in the neighbourhood. Almost every inhabitant recognizes her face, not to mention the neighbourhood kids who come to buy snacks after school. When the neighbourhood children started calling her, the “grocery store lady” (xiaomaipu daxiaojie) she started to keep a low profile so as not to attract the urbanites’ attention.

Mingchao Zhou is a PhD Fellow in Political Science at the Aix-Marseille University. Image Credit: CC by Micah Sittig/Flickr.

HS2: the trouble with relying on China for high-speed rail

Written by Michael Synnott.

George Osborne has made a major commitment to investing in UK infrastructure with the announcement of a new independent commission to oversee it. In particular, he has emphasised the role of railways in making Britain “great”. But, as with Osborne’s plans for nuclear energy, he will be turning to China for help in building this costly infrastructure.

Osborne’s recent overture to the Chinese to bid to build the first phase of a new high-speed rail system between London and Birmingham (HS2) has left many in the UK perplexed and dismayed. The charge of kowtowing to the Chinese to take on this £11.8 billion project has been made and the UK chancellor has also been accused of acting in contempt of the country’s legislature – as legislation enabling HS2 to proceed has yet to be formally signed off by the Queen.

Underlying complexity

Inevitably, the headlines understate the underlying complexity. On the one hand, the chancellor seems keen to link the UK with the newly-created Chinese Asian Infrastructure Investment Bank. Such is Osborne’s commitment to this bank that he overrode strong objections from the Foreign and Commonwealth Office as well as the US president, Barack Obama, and the World Bank when he made the decision to join it.

Through this source the chancellor is also hoping for Chinese investment in the new nuclear power station at Hinkley Point, which carries a price tag of £25.5 billion. High-speed rail is, however, a more popular investment prospect than nuclear power. Canadian pension funds, for example, have already heavily invested in high-speed rail – it was only a few years ago that one acquired HS1. And these funds have signalled strong interest in further investment opportunities, including HS2.

Yet there is a possible technical link here between the HS2 project and a new energy source like Hinkley Point. Quite simply, if the HS2 scheme achieves its design goal of an operating speed of 250mph, it will require access to a significant new power source. So there is some urgency to steer finance into both projects.

Global leaders

Certainly, the HS2 project appeals to Chinese interests in purely business terms. The Chinese government is keen to position itself as a global leader in the field after developing the technology domestically to link its widely dispersed nation of 1.5 billion people. Beginning in the 1990s, Chinese engineers bought trains and technology from foreign firms such as Japan’s Kawasaki, Germany’s Siemens, the French Alstom, and Bombardier in Canada. They then adapted and reverse-engineered the imported technology until they evolved their own. Since 2003, China has laid more than 16,000km of high-speed track – more than half the world’s total – with 9,000km more planned by 2020.

But this rapid development has come at the cost of human life. First, in 2008, 72 people died when an express train from Beijing to Qingdao derailed. But in July 2011, in eastern Zhejiang province, another high-speed train crash killed 38 and injured 192. Failures in the signalling system caused a derailment of two trains and resulted in four carriages falling off a viaduct.

In a bid to stifle news or comment about this tragedy, officials ordered the burial of the derailed cars. People became reluctant to use the service as public confidence in high-speed rail eroded and China’s reputation in high technology faced international scrutiny.

Learning from experience

China claims to have learned from these accidents and now wants to build foreign earnings and influence using its hard-won experience in building the fastest high-speed rail systems in the most challenging conditions. Already Chinese rail builders have been selected to build a high-speed rail line between Belgrade in Serbia and Budapest in Hungary, as well as a new route to link Mombasa and Nairobi in Kenya. There is even a possibility of China’s participation in California’s high-speed rail project.

Plus, it is difficult to think of another source which could meet the strict specifications for rail tracks, rolling stock and signalling set out in the plans for HS2 – which bring the total cost to around £50 billion.

Yet there is something which both the UK and China may need to consider as Chinese companies are persuaded to sign up for the HS2 scheme. As we have seen in Africa and South America, Chinese businesses seeks to present themselves as scrupulously politically neutral when working overseas. It would be naive in the extreme to imagine that the progress of work on HS2 will not be attended and affected by local demonstrations and occupations. The prospect of middle-class protesters chained to mechanical diggers while dismayed Chinese project managers look on and police seek to clear the way for a very time and cost-sensitive project, is not one Chinese PR managers will want to see on the British tea-time news.

 is Senior Teaching Fellow in Strategy and International Business, University of Warwick. This article was first published on The Conversation and can be found here. Image Credit: CC by 10 10/Flickr.

Why did George Osborne visit Xinjiang?

Written by Michael Reilly.

This week the UK Chancellor of the Exchequer (Finance Minister), George Osborne, made a flying visit to Urumqi following the meeting of the China-UK Strategic and Economic Dialogue. In doing so, he became the first British Minister to visit China’s restive Xinjiang Autonomous Region.

According to the Financial Times, in March this year Osborne ignored both Foreign & Commonwealth Office (FCO) objections and US opposition, and had the UK apply to be a founding member of China’s new Asian Infrastructure Investment Bank (AIIB). The newspaper quoted a former head of the IMF’s China division as saying that “apart from gaining favour with China it is not immediately obvious what the UK interest is in joining this bank.” Did he also ignore any concerns the FCO raised about this visit? Even if that is the case, he surely cannot have been unaware of the widespread unease about the human rights situation in Xinjiang. Inter-ethnic tension in Xinjiang is not new.

One western traveller in the region in the 1930s summed up Han attitudes towards the Uighurs as “invariably contemptuous and invariably afraid”, a description that continues to resonate today, including in aspects of policy.1 The current Chinese government policy response was set out by President Xi Jinping in a speech in Urumqi in May of 2014, in which he called for tighter state control over religion and greater assimilation of Uighurs into Chinese society, including by moving them to other regions of China.

Specific aspects include a prohibition on men under 70 years old from growing beards, female government workers from wearing veils, and government officials from fasting during Ramadan. Random police spot checks on the streets of Kashgar and Urumqi are a common sight. The government appears unwilling to tolerate any dissent or criticism of this approach. For example, late last year, Ilham Tohti, a moderate Uighur academic who advocated greater dialogue and mutual respect, was sentenced to life imprisonment.

In the absence any statement to the contrary, we must assume that the Chancellor did not raise any concerns about such practices during his visit. His avowed purpose in going to Xinjiang was to promote bilateral trade and investment, but this too seems an odd choice given alternative possibilities. China is indeed spending large sums on infrastructure in the region, especially in connection with its new Silk Road projects. But it has need of neither foreign capital nor foreign construction companies in pursuing these projects, so it is not obvious what the UK might offer.

Energy is one area where China would, and does, welcome foreign companies to Xinjiang, given its considerable oil and gas reserves and the need for foreign technology to help exploit them. But policy decisions in this strategic area are taken at central government level. (In December of 2014, Nur Bekri, a former long-serving and respected governor of Xinjiang, was promoted to head the National Energy Agency.) Discussions about this would therefore be better conducted in Beijing. In any case, foreign oil companies, including Shell, already have well-established joint ventures with their Chinese state-owned counterparts to pursue such projects.

Other business opportunities undoubtedly exist and the Xinjiang authorities have been anxious to promote them, not least through the China-Eurasia Expo, a major trade fair-cum-conference, held annually in Urumqi since 2011. But until now, UK involvement has been left to quasi-non-government organisations such as the China-Britain Business Council (CBBC) and Confederation of British Industry (CBI); UK government officials from neither the British embassy nor UKTI have seen fit to attend. That hardly suggests that UK companies are thirsting to sign business deals in the region and are waiting only for a high level politician to jet in, either to confirm the deals or unblock political obstacles to them.

So the justification for Osborne’s visit remains a puzzle. It also raises questions about the coherence of UK policy. Arguably, this has now become too wide-ranging and complex to be managed by FCO career diplomats. If so, perhaps the UK would benefit by following the US practice and appointing a senior political figure as ambassador to China—someone with the clout and influence to persuade UK political figures to listen, but also the seniority to command the respect of Chinese leaders.

As for Mr Osborne, presumably his aim is to build the bilateral relationship. If so, he would do well to heed China’s own experience in Myanmar, Afghanistan and increasingly in Africa, which shows that a ‘values-free’ approach to diplomacy can all too easily come unstuck in the long-term.

Michael Reilly is a non-resident Senior Fellow at the CPI, a former Director of the British Trade and Cultural office in Taipei and until recently the chief representative in China of a major international aerospace company.
 Image credit: CC by HM Treasury/Flickr.

1 Peter Fleming, News from Tartary (London: Jonathan Cape, 1936), 200.

Where is China’s Textile and Apparel Industry Going?

Written by Sheng Lu and Marsha A. Dickson.

China is well known as the largest textile and apparel (T&A) producer and exporter in the world, yet China’s T&A industry is also under-going tremendous restructuring and transformation. This article intends to shed light on the broad landscape of China’s T&A industry in the years ahead. Capturing where China’s T&A industry is going from the macro perspective is critical for shaping meaningful future research agendas and identifying new research opportunities associated with the sector.

Common misunderstandings about China’s T&A industry

More or less, China’s T&A industry is commonly misunderstood in the following aspects: 

Misunderstanding 1: China’s T&A industry is export-oriented. On the contrary, the export dependency ratio of China’s T&A industry, i.e. the percentage of exports within the value of total industry output, has significantly declined from over 30% in 2000 to less than 17% in 2011 (CTEI, 2012). This means that over 80% of T&A “Made in China” today actually are consumed domestically. As China’s apparel retail market starts to boom, expanding domestic sales will become an even more important priority for China’s T&A industry in the future. Not only are domestic sales growing, the International Labour Organisation cites statistics from UNIDO that suggest the increased domestic demand is contributing to growing value added by the industry in China, which will likely bring increased interest in production for local markets versus export.

Misunderstanding 2: China dominates the world T&A market. Although China is still the world’s single largest T&A exporter, it should be noted that China’s market share in some leading T&A markets is gradually declining. For example, Chinese products accounted for a 39.7% share of the EU T&A import market in 2013, down from shares of 41.4% in 2012, 43.9% in 2011 and 45.5% in 2010. Chinese products are also losing momentum in the U.S. T&A import market where Chinese market share dropped from 41.2% in 2011 to 38.9% in 2014. The grave concerns about China’s dominance in the world T&A market when the quota system was eliminated in 2005, are now proven to be unnecessary.

Misunderstanding 3: ‘Made in China’ is losing price competitiveness. It is a common argument that China’s fast rising labour cost is mainly responsible for its loss of shares in the world T&A export market. However, trade statistics suggest otherwise. For example, from 2006 to 2014, the average unit price of U.S. T&A imports from China only slightly increased from $1.45/square-meter-equivalent (SME) to $1.46/SME (up 0.7%), whereas the average unit price of T&A imports from the rest of the world increased from $1.97/SME to $2.13/SME (up 7.9%). In fact, total landed cost of T&A ‘Made in China’ remains one of the lowest in the world, thanks to China’s more efficient supply chain management, more modern infrastructure, and workers’ higher productivity than key competitors such as Vietnam and Bangladesh (OTEXA, 2015). Nonetheless, Chinese factories still face challenges in complying with the country’s labour laws regarding payment of social insurance benefits. Full compliance may increase costs but should help address growing labour activism in a country where workers are increasingly resorting to strikes and work stoppages in order to obtain these benefits, and other improvements in working conditions.

Misunderstanding 4: T&A is a pillar industry in China. Three decades after its economic opening-up and growth, China has passed the development stage which heavily relies on the T&A sector for creating jobs and generating foreign reserves. Instead, with a more diversified industry base, especially the emergence of other more advanced and capital and technology intensive sectors, T&A industry is playing a much less critical role in China’s economy today. By 2012, the T&A industry had only accounted for 3% of employment and 3.5% of industry output in China. Moreover, it won’t be too long before the total size of China’s T&A industry starts to shrink. As a matter of fact, more and more low-end and resource-intensive segments of the T&A industry, such as apparel assembly, are leaving the country and moving to other less-developed Asian economies.

Future of China’s T&A industry: policymakers’ vision

In addition to the market forces, another important factor that will shape the future of China’s T&A industry is government policy. Different from many western countries, government in China has preserved a significant role for the state in the economy.

According to the 12th Five-Year Plan, a key document which lays out policymakers’ blueprint for the development of China’s T&A industry from 2011 to 2015 (CTEI, 2011), critical changes are happening in the following four areas:

  1. Industry upgrading. Two aspects are particularly emphasised: one is the structure of industry output – China intends to gradually move towards more production of textiles and less of apparel. For example, by the end of 2015, apparel is expected to account for 48% of total T&A industry output, down from 51% in 2011, whereas the share of technical textiles is expected to increase from 20% to 25%. Another aspect is moving up in the value chain – China is eager to engage in more high-value added functions such as design, product development and distribution. The government is pledging financial support for the building of indigenous Chinese fashion brands and further sets the goal to have indigenous-branded products account for no less than 50% of China’s total T&A exports by the end of 2015.
  2. Building a “greener industry”. Recognising the rising awareness of environmental protection in the country, China ambitiously sets the compulsory goal to reduce the consumption of energy, water and emission of pollutants per GDP output in the T&A industry respectively by 20%, 30% and 10% annually (or cut by 67.2%, 83.2% and 41% cumulatively from 2011 to 2015). China also plans to double the consumption of recycled textiles from 2011 to 2015 (or nearly a 15% annual growth), hoping to reduce demand for natural resources in the process of making T&A. Already we see examples of leading Chinese manufacturers such as the Esquel Group, TAL, and the Crystal Group emerging as leaders in improving environmental performance within their factories and also taking active roles in global industry initiatives focused on sustainability.
  3. Moving production from the east coast to the west. To keep as many jobs in China as possible, the Chinese government encourages T&A manufacturers in the east coast to move factories to the inner part of China where the local economy is still at the nascent stage of industrialisation and cheap labour is still relatively abundant. By the end of 2015, the Western region is expected to account for 28% of China’s total T&A output, a significant increase from 17% in 2010. However, some Chinese manufacturers are taking an alternative route of investing in production in low cost countries in Africa and Southeast Asia, suggesting that Chinese PEOPLE, if not China the COUNTRY, will retain some level of prominence in global T&A production for the foreseeable future.
  4. Expanding domestic consumption. Stimulating local demand for T&A is also given a high priority in China. This is a move that will help both create new market opportunities for T&A companies and make them less vulnerable to the fluctuations in the international market. Specifically, government sets the goal to expand domestic consumption for apparel, home textiles and industrial textiles by 3%, 3% and 10% annually (or 15.9%, 15.9% and 61.1% cumulatively from 2011 to 2015).


Indeed, China’s T&A industry has many specialties, such as its huge size and the heavy involvement of policy in guiding industry’s future development. However, in many ways, China’s T&A industry is also NOT unique. The slow-down of export growth, relocation of low-end manufacturing, and moving towards more domestic consumption, reflects a development path for China’s T&A industry that is very similar to what has happened in other countries such as Japan, Germany, South Korea and even the United States. Understanding the stages the T&A industry has gone through in these developed economies will help us foresee how the size and nature of China’s T&A industry will continue to evolve in the years ahead.

Sheng Lu is Assistant Professor at the Department of Textiles, Fashion Merchandising and Design, University of Rhode Island. Marsha A. Dickson is Faculty Chair and Co-Director of Sustainable Apparel Initiative, at the Department of Fashion and Apparel Studies, University of Delaware. Image Credit: CC by dianaoftripoli/Flickr

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