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| Issue date:16/04/2009 |
| ATA Journal for Asia on Textile & Apparel - Apr 2009 Issue |
| Source:Journal for Asia on Textile & Apparel |
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Haiyang(海陽) City of Shandong (山東) Province is the biggest sweater base to the north of the Yangtze River. Currently, enterprises in Haiyang are carrying out market reconstruction, trying to expand in overseas market as well as domestic market by introducing advanced machinery. Haiyang is hoping that the changes would bring the indsutry to a new height.
Haiyang, a city in China's Shandong Province, has more than 40 years' history in sweater production, with annual output value over RMB8 billion, it accounts for 10% of total sweater output of the country. In 2004, China Textile Industry Association was honored as Haiyang "China's Sweater Town".
Knitted sweater industry forms the backbone of Haiyang's industry with 120,000 employees, the largest cluster in Haiyang and accounting for 1/6 of the city's workforce. "Haiyang is the largest sweater base to the north of the Yangtze River in China," according to Xiu Jingtang(修京堂), director of Haiyang Private Economic Development Bureau. From January to October 2008, knitted sweater enterprises in Haiyang accomplished RMB3.68 billion and RMB430 million in direct sales and profit/tax respectively.
Decline in industrial tax for the first time
However, Mr Xiu indicated: "Due to Haiyang's high level of dependency on export, Haiyang sweater industry is substantially affected by the global financial crisis. Affected by shrinking demand in overseas market, this industry is faced with great challenges in 2009."
From January to September 2008, based on data from Haiyang's tax bureau, knitted sweater enterprises collectively paid RMB83.59 million in value-added tax (VAT), down 16.85% year on year (YOY); RMB7.7 million in income tax, down 19.53% YOY; and RMB33.06 million in local tax, down 18.9% YOY. This leads to a decline in tax revenue for the first time in recent years and also leads to a decline in the contribution of the industry to total industrial and commercial tax of the city. In 2006, based on calculation by financial and taxation authorities, the contribution of the knitted sweater industry to total tax revenue of the city was 26.6% in 2006, 23.5% in 2007 and 15.2% in 2008.
"Despite decline in tax revenue in recent years, the knitted sweater industry remains a key industry to create employment," said Xu Pengcheng(徐鵬程), Secretary General of Haiyang Knitwear & Sweater Industry Association. He added that despite substantial decline in tax revenue, the knitted sweater industry has created a large number of jobs and plays an important role in improving people's livelihood, maintaining social stability and propelling the tertiary industry.
"Affected by the economic crisis in 2008, the total number of enterprises and private businesses decreased while the number of above-scale enterprises (annual sales exceeding RMB5 million) basically remained unchanged," he added. As of October 2008, Haiyang had 484 knitted sweater enterprises, of which, 113 were above-scale enterprises, five more than in the same period of previous year and accounting for 49% of total number of above-scale industrial enterprises in Haiyang.
Enterprises in need of technical reform
Xu Yuming (徐玉明), a CPPCC (Chinese People's Political Consultative Conference) vice-chairman in Haiyang and mayor assistant, expressed earlier his expectation of a new round of structural readjustment as the economic situations underwent a dramatic change. He suggested that Haiyang's knitted sweater enterprises should speed up development in order to create a new environment for the knitted sweater industry in Haiyang.
Specifically, they promote technical advancement for the sweater industry and encourage enterprises to perform industrial upgrade through technical innovation. For enterprises that introduce high-end computerized flat knitting machines from Japanese and German brands Shima Seiki and Stoll, governmental departments will provide fund award equal to 3% of purchase price, in addition, they will be fighting for tax-free policy. For top 20 tax-paying sweater enterprises that introduce such machines, municipal government will provide loans equal to 30% of total purchase price.
In 2007, Haiyang introduced 154 fully automatic computerized flat knitting machines from Shima Seiki and Stoll and more than 300 China-made computerized flat knitting machines. In 2008, Haiyang introduced more than 900 high-end computerized knitting machines, including 300 imported machines and 600 China-made machines, hitting RMB180 million in total investment. Early in 2008, Haiyang Municipal Government provided RMB1.585 million subsidy for 15 eligible knitted sweater enterprises for introducing computerized flat knitting machines in addition to RMB219,000 as advertising subsidy. Currently, sweater production in Haiyang is transforming from labor-intensive production to technical-intensive processing.
Leverage brands to open up domestic market
Haiyang exports 95% of its sweater products to overseas market. In 2007 the city earned US$430 million from export. Specifically, Haiyang accounts for 10% in total export of the country.
According to Mr Xu Pengcheng: "In recent years, Haiyang sweater products are mainly exported to Japan, Korea, Europe and the US. They are highly fashionable. Haiyang sweater products have won extensive popularity for their style. On the other hand, however, this mode to win orders through foreign trade is also a disadvantage. Haiyang sweaters are worn by foreigners but it is less popular in China ... Haiyang sweater enterprises lack the experience and popularity in the domestic market."
Haiyang Knitted Sweater Industry Association and Haiyang International Knitting&Sweater Wholesale City (海陽國際針織毛衫城) jointly organize Haiyang spring/autumn sweater trade fairs each year. Haiyang municipal government also encourages enterprises to build up their proprietary brands. To promote the development of wholesale city and encourage sweater enterprises to open up international market and domestic market, local government offers a series of preferential policies. Specifically, in addition to enjoying existing preferential policies, enterprises that settle in the wholesale city and engage in selling local sweater products and materials to domestic market can have income tax refunded in the first 3 years (to be refunded in the first quarter of the next year) ; for enterprises that engage in domestic sales through other channels, 50% of their income tax can be refunded.
Fully automatic computerized embroidery machines in Rosa Blu Workshop |
Rosa Blu Textile is a Sino-German joint venture company mainly engaged in production of home textiles and sweater products. According to Rosa Blu general manager Liu Zhibo: "Last year, our export market was affected by global financial crisis. However, when financial crisis came, we had received most of our orders and some orders have been fulfilled. Therefore, the impact on us was insignificant and our output value and sales value in 2008 remained the same level as in 2007. We are not at all optimistic about the export market in 2009. However, we began several years ago to open up domestic market. For this purpose, we have adopted a 'self operation + franchised operation' development mode. Currently, Chinese purchase power still promises great potential for improvement. We hope our business expansion in domestic market can substantially make up the deficit in export market. Besides, local government has enacted some measures to deal with financial crisis, which is particularly helpful to us. If we can successfully open up domestic market, we can maintain the same level of output and sales in 2009 as in 2007 and 2008."
Liu Zhibo concluded: "Haiyang is a traditional export processing base. To deal with current financial crisis, we have to focus on opening up domestic market. This is also a fundamental measure to help us out of the crisis. He said: "We have been fostering domestic market for many years. This market is becoming mature. Our domestic market can compensate for the shrinking export market. In addition, we have a strong R&D team. This year, we have further intensified our input in new product and new style development. We leverage on technical progress to upgrade our capability to open up market and meet specific needs of domestic customers. With high-quality products and intensified efforts to open up new market, we are sure we can successfully cope with the current financial crisis."
He added: "China has enacted a series of policies and associated the textile industry with national economy and people's livelihood. This fully reflects that the Chinese government places great importance on the textile industry. Increasing tax refund rate for export is a specific policy to support enterprises. We feel the pressure on us is relieving."
Sweater Wholesale City propels industrial takeoff
Haiyang International Knitting& Sweater Wholesale City will become the largest sweater market in North China |
Haiyang International Knitting&Sweater Wholesale City is a key project supported by Haiyang Municipal Government. After completion, it will become the largest sweater knitwear purchase center in North China. Exceeding RMB2 billion in total investment and covering 1,500mu in land area and 1 million square meter in floor space.
As a purchase platform, the city started organizing China (Haiyang) International Knitted Sweater, Materials & Mechanical Equipment Expo in 2007. The exposition held in October 2008 accomplished RMB600 million in turnover, up 20% over the previous session. |
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| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "ATA Journal for Asia on Textile & Apparel", Adsale Textile English Website - www.AdsaleATA.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
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