APPAREL PRODUCTION:

A CASE OF CHINA

REPUBLIC OF CHINA

Program: Masters Of Science In Fashion Technology

Course: Garment Production Management
Prepared By: Jemal Assres
Advisor: Proff. Adhiambo.Odhuno
03/27/2021
 Key Statistics:

 Population (2014): 1.39 billion (world’s largest

population).
 Employment in garment industry (2013): over 10 million.
 Value garment export (2013): €130.01 billion/$164.13
billion.
 Percentage of the world market for garment (2012): 38%.
 Geography: China is located in East Asia bordering 14
countries; among them, Nepal, North Korea, and
Vietnam.
 Politics: China is a ‘socialist republic’, ruled by the
Chinese Communist Party.

03/27/2021 2
 INTRODUCTION

•The global share of China’s textile and clothing exports has

increased from 2.6% in 1970 to approximately 38% today.
•Accession to the WTO has strengthened China’s textile and
clothing sector as key importers of textiles and clothing,
including the United States, the European Union and Canada,
have begun to phase out quotas on Chinese import.
•In the EU, China’s textile and clothing products removed from
quota restrictions surged by 46% in value and 188% in volume in
2002, while average prices decreased by 50%, according to EU
estimates.

03/27/2021 3
 STRUCTURE OF T&C SECTOR

• China’s T&C sector is segmented into upstream

production sub-sectors (spinning, weaving,
knitting and dyeing) and clothing manufacturing
(cutting and finishing).
• Generally speaking, the industry is vertically-
integrated.

03/27/2021 4
 Clothing Sector

• Garment manufacturing, which is more labor-

intensive, has been almost entirely deregulated
and is one of the most liberalized sectors in China.
• Barriers to entry in the sector are low and the state
plays only a minor role in directing the industry.

03/27/2021 5
Key players in China’s clothing market

 On the whole, the high-end domestic clothing market in

China is dominated by brands of European origin and
other imported products, such as :
 Giorgio Armani,
 Cerruti 1881,
 Hugo Boss,
 Dunhill,
 Chanel,
 Dior,
 Ermenegildo Zegna and
 Salvatore Ferragamo.
03/27/2021 6
• The middle and low end of the market has a product mix
of foreign and domestic brands, with most of the goods
being manufactured in China.
• A small portion of these products are sourced from
developing countries and least developed countries
(LDCs), and imports from LDCs are growing steadily.

03/27/2021 7
• For example, in Zara’s stores in Shanghai, over
90% of stock-keeping units (SKUs) are imported,
with Bangladesh, Egypt, Morocco, Portugal,
Spain, Turkey, and Viet Nam and being the main
import sources.
• Bangladesh, Cambodia, India and Indonesia are
also important procurement target countries.

03/27/2021 8
• Nevertheless, China’s clothing industry still possesses
great competitive advantage in terms of labor cost, lead
time, vertical integration of the industry, the variety of
products, and political stability from a Chinese
perspective.

03/27/2021 9
03/27/2021 10
 

In the clothing manufacturing segment, there are three different kinds of enterprises:

1. Foreign-invested enterprises, including joint ventures

and wholly foreign-owned enterprises (WFOEs)
managed mainly by Hong Kong and Taiwan-based
enterprises;
2. SOEs, which are largely focused on domestic sales;
3. So-called collective enterprises, which are effectively,
privatized SOEs at the village and township levels.

03/27/2021 11
03/27/2021 12
 Profitability of Textile & Clothing
Companies
• The combined profits of state-owned and
privately owned T&C enterprises reached
US$ 5.37 billion, up 30.36% from the year
2012.
• Profitability is stronger in the textile
industry than in the low-margin clothing
manufacturing industry.

03/27/2021 13
03/27/2021 14
03/27/2021 15
Political & Economic Significance of the T&C Sector

• The T&C industry represents around 10% of

the Chinese economy in terms of GDP and
generates about 20% of exports of goods in
value.
• The labor-intensive textile and clothing
industry remains a key source of employment,
particularly on the export manufacturing
regions of the eastern seaboard.

03/27/2021 16
 Share of Total Employment in the T&C
Value Chain
• Some 18 million workers are directly employed in
the Chinese T&C sector, in addition to some 13
million more employed in natural fibre processing.
• China’s textiles industry consumes over 6.2 million
tons of domestically produced natural fibers, which
provides employment for an estimated 100 million
farmers (or 10 million households).

03/27/2021 17
 T&C Share of Total Exports

03/27/2021 18
China’s T&C Sector – Main Competitive
Factors:
 ƒ Price – greater competition enables buyers to squeeze suppliers who
are willing to sell at razor thin margins (and even bear losses) in order
to gain market share and survive.
 Quality – the quality of China’s textile products is comparatively high,
and represents good value for buyers.
 Costs – labor costs are still low, Factory and land are cheap and in some
places the government offers attractive land use fees if T&C enterprises
provide employment and contribute to local economic development.
 A Complete Industry Chain – China is a one-stop shop. Chinese
producers have great flexibility in meeting buyers’ requirements on
product specifications, quality and quantity.
Infrastructure and logistics are competitive, enabling suppliers to cut
delivery.

03/27/2021 19
 Labor and Management

03/27/2021 20
 Attractive government policies:
• Incentives include:
• Corporate tax reductions;
• VAT exemptions;
• Tariff exemptions;
• Others (reduced land use fees, utility
charges, etc.)

03/27/2021 21
 National Legal Requirements for HSE
Conditions for labourers:
 National Legislation.
 National Labour Law (1994).
 Law of the People’s Republic of China on Work Safety
(2002).
 Social Insurance Regulations: In China, there are
considered to be five basic types of social insurance: pension,
unemployment, maternity, medical, and work injury.
Only one—work injury insurance—has been included in a
nationwide law: the 2002 Law of Occupational Disease
Prevention and Treatment.
 All-China Federation of Trade Unions (ACFTU)

03/27/2021 22
 Industrial & INVESTMENT Policy

• Adjustment to Post-Quota Environment.

• Growth of Domestic Markets as Outlet for
Domestic Production.
• Outward Investment in Less Developed
Countries

03/27/2021 23
 references
1. Study on China’s Textiles and Clothing and Market Expansion Strategy – January 2005.
2. Ibid., (n.4) 16 ‘Merchandise Trade: International Trade Statistics 2013’ (World Trade
Organisation)
http://www.wto.org/english/res_e/statis_e/its2013_e/its13_highlights2_e.pdf accessed 23
December 2013, p56
17 China National Textile and Apparel Council, Report on the development of China’s textile
and apparel industry for 2006, China Textile and Apparel Press
3. ‘China’s Apparel Market 2012 (Li & Fung Research Centre, 2012) http://economists-
pickresearch.hktdc.com/resources/MI_Portal/Article/ef/2013/01/455227/1357733319503_ecs
29122012.pdf accessed 23 December 2014, slide 11
21 ‘List of Main Export Apparel Enterprises of China’ (China National Garment Association)
http://www.cnga.org.cn/engl/powerful/export.asp,
accessed 23 December 2014

03/27/2021 24