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| Issue date:15/10/2009 |
| ATA Journal for Asia on Textile & Apparel - Oct 2009 Issue |
| Source:Journal for Asia on Textile & Apparel |
| by Staff Reporters |
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Due to various adverse factors in the domestic and overseas markets in 2009, China textile and apparel economy is facing a number of new challenges. However, instead of seeing the present hardship as sign of a weakening industry, many of those in the field in China regarded it as a call for readjustment as the country’s textile industry tries to reach a higher level in the global market.
This survey aimed to find out the attitudes and behaviors of different textile enterprises in China in terms of making investment decisions, applying new technologies, product research and development, extending market reach, addressing manpower needs and so on as they ride through the waves of the global financial crisis.
Profile of respondents
Of all the 554 respondents who participated in this part of the survey, 25.63% were owners, chairmen, general managers and/or factory directors with extensive industrial experience; 26.17% were from sales departments who are particularly sensitive to market change and future development trend; 14.62% were from research and development (R&D) departments who tend to have proactive perspective about popular trend. These three types of respondents account for more than half of all respondents, making the results of this survey substantially representative.
Of these respondents, nearly 45% are equipment/technical suppliers and 43% are textile product production or processing enterprises, while close to 8% are textile material suppliers.
About one-fourth of respondents have 11-20 years of experience in the textile industry, and over 42% have 3-10 years of experience, accounting for the highest percentage in this survey, while another 16% have less than three years of experience.
Key product areas of responding enterprises |
In terms of years of incorporation, about 40% of respondents’ enterprises were established 6-10 years ago, another 40% were established more than 10 years. Since about 80% of the responding enterprises are producers in the textile industry, the results of this survey are more applicable to the manufacturing sector.
In this survey, over half (57.04%) of respondents are from private enterprises, 15% from foreign-owned enterprises, 13% from state-owned/state-controlled enterprises, and 11% from Sino-foreign joint venture/cooperative enterprises.
Of these responding enterprises, 68% have a workforce of less than 500 employees and 12% are listed companies. In terms of business scope, 69.13% are engaged in export business.
Technology upgrade important in next two years
Being one of the biggest textile industrial bases and markets in the world, China relies heavily on imported technologies. By the end of the previous century, constant industry growth combined with the speeding up of technical development has helped China’s textile industry to increase its ability in technology research and development in both “hardware” and “software”.
Technical contribution is playing an increasingly important role in the industry.
When asked about the main sources of technology used, one third of the responding enterprises indicated that they used foreign imported technology while the rest used domestic technology, either introduced or invented in the domestic market.
Among the textile processing enterprises, 43.8% mainly used leading technology introduced in domestic market, about 15 percentage points higher than the other types of enterprises. Moreover, 42% of equipment and technology suppliers mainly used domestic self-developed technology.
In terms of enterprise ownership, 52.5% of foreign-owned enterprises and 40.63% of Sino-foreign joint venture/cooperative enterprises mainly use foreign imported technology. As for collective and private enterprises, 42.11% and 40.19% respectively, mainly used domestic technology, while state-owned and state-controlled enterprises use foreign imported technology, domestically leading technology and domestic self-developed technology evenly.
Secondly, it was found that textile processing enterprises were most enthusiastic in purchasing new technology.
When asked about the intention to renew or purchase technology in the next two to three years, it was found that textile processing enterprises showed the biggest enthusiasm, 72.31% said they intended to do so.
In terms of enterprise ownership, at least half of the enterprises in all categories indicated their intention to install new technology in the coming two to three years, especially the collective enterprises (73.68%).
In terms of enterprise scale, about 80% of the enterprises with more than 3,000 people indicated such intention, followed by about 79% of enterprises with 1,001 to 3,000 people, and about 72% of those with 101 to 500 people.
When asked whether they have purchased or upgraded technology recently, over 70% of textile material suppliers, textile processing enterprises and equipment/technology suppliers indicated that they have had the plan of technology upgrade recently. Specifically, nearly 80% raw material suppliers indicated this intent.
For enterprises of various ownership patterns, 83.56% state-owned/state-controlled enterprises had purchased new technology recently, followed by sino-foreign joint venture/cooperative enterprises (79.69%) and private enterprises (72.78%).
Thirdly, quality is key factor when importing textile equipments.
When purchasing China-made or imported equipments, quality reliability is deemed foremost important. Among the responding enterprises in this survey, 54.87% indicated that equipment quality reliability was the foremost consideration while 25.63% and 14.26% indicated that productivity and functionality respectively was the foremost consideration in selecting equipments.
Other factors included after-sales serves, equipment appearance, equipment precision/performance, and functions.
Fourthly, nearly 70% of enterprises expected to increase inputs of research and development. R&D input is an important indicator to measure the efforts of an enterprise or an industry in technical innovation.
Considerations of textile enterprises when purchasing equipment |
Currently, R&D input of textile enterprises in developed countries accounts for 3-5% or even up to 10% of their turnover. China is a latecomer in this respect, but exhibits high-speed growth and its textile R&D input is increasing year after year.
As indicated in this survey, over half of the responding enterprises used 2-5% of their turnover in R&D while 22.74% indicated more than 5%, gradually getting closer to the international level.
The survey found that about 67% of respondents intended to increase R&D input in the next two years, among them, about 45% came from the textile machinery production sector, especially those Sino-foreign joint venture/ cooperative enterprises and private enterprises, about 69% and 70% of them respectively intended to increase R&D input.
Up to 80.69% of responding enterprises have set up technical research centers and/or specialized departments for R&D purposes.
Expected investment return within 2-4 years
When asked about their expectation in investing in fixed assets, 55.78% of responding enterprises indicated that they expect to obtain investment return within two to four years while only 18.41% expected the period to be more than four years.
Compared with state-owned enterprises and foreign-owned enterprises, private enterprises are more sensitive to market changes and more flexible in making readjustment. Of all private enterprises in this survey, 62.45% expected to get return for investment in fixed assets within two to four years.
Also shown in the survey, 93.32% of responding enterprises found the service quality of existing equipment suppliers “Very good” or “Fairly good”; 69.31% had their own mechanism to handle customer complaints. However, some concerns were also raised, including high equipment maintenance cost, insufficient or inefficient after-sales services.
However, respondents were aware of investment risks, and over 63% indicated that primarily came from the ever-changing export environment.
About 30% respondents found that the macro-economic control measures in China had a significant impact on the market. Approximately 27% indicated that substandard industrial operation and market immaturity formed a severe bottleneck.
Other investment risks faced by the textile industry at present include chaotic price competition and slow transformation of small- to medium-sized enterprises in China.
Despite these risks, Chinese industry players have continued investing and about 86% respondents indicated that they would “maintain” or “expand” their production scale in the coming two to three years. To do so, they said they would intensify technical innovation, strengthen marketing efforts, increase brand-building efforts and introduce advanced technology and equipment.
Bottlenecks exist in brand building
When asked about the challenges they meet in brand building, 34% of respondents said the key challenges included the pressure on net profit and 34.77% indicated that counterfeiting brought about negative impacts. About 26% said the sources of pressure were funding and time. Specifically, 43.14% of textile material suppliers indicated that counterfeiting brought great challenges.
Additionally, to open up overseas marketing channels, 53.25% respondents said that they would appoint local agents, 38.99% would form joint venture companies with local enterprises, while 38.99% would establish local production bases. Therefore, working through local agencies remains the most favoured option when it comes to exploring new markets overseas.
At home, nearly half of the respondents believed that the China market would be shared by varied products from different countries in years ahead. While about 30% indicated that domestic products would dominate, 13.72% felt rather uncertain about the future market.
Product quality deemed lifeline of enterprises
Enterprises, pressed by intense market competition, are more eager than ever to seek sustained development. When asked about key issues in developing their enterprises in the next three years, 86.46% of respondents considered product quality “very important”, which is 11 percentage points higher than it was found two years ago (75.11% of respondents in the Adsale Textile Industry Survey 2006/07).
Obstacles faced by textile enterprises when opening up markets in developed regions
Ways to open up overseas markets | |
Other important factors included cost control (64.42%) and market development (61.19%). These factors became more important for Chinese textile enterprises compared to of what respondents answered two years ago (56.6% and 48.72% of respondents respectively in the 2006/07 Survey).
Talent shortage gets more serious
To achieve industrial upgrading, the textile and apparel industry needs knowledgeable employees to contribute to its development.
The survey found that close to 65% of the respondents wanted to recruit more R&D professionals urgently, while about 45% said market development/ marketing professionals, and 33% said corporate management professionals.
Specifically, almost 70% of the equipment/technology suppliers reported they most urgently needed R&D professionals, while about 40% of textile processing enterprises most urgently needed management professionals.
Different types of enterprises vary in their human resources needs. The survey found that about 72% of respondents expected the shortage of R&D professionals in their enterprises to become more serious in the next three years.
Talent shortage of the textile industry in the next three years |
In particular, more than 80% of the textile material suppliers anticipated such a trend.
The shortages of middle-level technical professionals, management professionals and workers are also foreseen for the next three years, though not as severe.
Lastly, East China region (six provinces and one city: Shandong, Jiangsu, Anhui, Jiangxi, Zhejiang, Fujian and Shanghai) was found to face the biggest shortage of various types of professionals, including management professionals, market development/marketing professionals, R&D technical professionals, medium-level technicians and workers.
Disclaimer
This article aims to reflect the respondents’ general views, which may be used as reference by fellow industrialists. However, we will not assume any responsibility in the event that the report is used as the basis for any investment decisions or market activities.
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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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| 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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