Clothing Industry and its Market Expansion Strategy
China’s export performance in the products liberalised under the third stage of the Agreement on Textiles and Clothing (ATC) has been characterized by a surge in exports accompanied by a considerable drop in average unit price. The main factors driving this impressive performance include, on the one hand, the liberalisation of the production and export regime and on the other, considerable increases in production capacity.
This research suggests that the sharp decrease in average unit price was partly caused by the elimination of quota price premiums (the share of quota costs as a percentage of the final cost constituted up to 25% of the final price, or even more if quotas were traded on the black market) and the development of cut-throat price competition in the clothing sector, which has created downward price pressure. The export competitiveness of the Chinese clothing sector is underpinned by qualitative and quantitative gains in China’s fibre-processing industries, which underwent major restructuring from 1997-2000 under the framework of the Ninth Five-Year Plan (1996-2000).
The restructuring of the textile industry has had an encouraging effect on the performance of the clothing industry. A vibrant fibre processing industry has further integrated the various links in the supply chain, which is one of China’s key competitive advantages. Nevertheless, even as China’s textile and clothing (T&C) industry makes significant absolute gains in terms of fibre-processing and garment production capacity, the sector’s relative overall export performance as a percentage of total exports has been steadily decreasing.