Page 286 - 2018 White Paper on the Business Environment in China
P. 286
8 White Paper on the Business Environment in China
To successfully tap China’s alcoholic beverage market, The rising price of raw materials, as well as higher labor
companies must overcome certain obstacles. One of costs, have led to a decrease in profitability for industry
the biggest obstacles is fake hooch. Counterfeiting has operators in recent years. In 2017, profit as a proportion of
a significant impact on any brand affected; it’s proven a industry revenue is estimated at 5.7 percent (IBISWorld).
particularly pertinent issue for drinks brands. Brand value According to China Textile Industry Development Report
is a key differentiator for most businesses in the alcohol (2014/2015), textile fiber production in China exceeded
industry, and so the protection of a drink’s brand is often 50 million tons, accounting for 54.36 percent of world
a core element of its success. No one knows how much of share. As much as 64.2 percent of the world’s chemical
the legitimate alcohol industry in China is eaten into by fibers, 64.1 percent of synthetic fibers and 26.2 percent
such fakery, but industry figures suggest it’s significant. of cotton were produced in China (Antu). Although
companies may be worried about China’s continuous
Textile and Apparel rising production cost, few other lower-wage countries
can beat China in terms of industry integration, supply
In 2015, the export value of textiles was $11.53 billion chain efficiency, and reliability (Lu).
in China, with a decline of 2.3 percent from 2014. In
recent years, the growing costs of land, energy and labor Yet, the absolute return rate of the textile clothing
dramatically increased the comprehensive costs of textile industry was minus 8.69 percent in 2016, consistent with
enterprises in China, which placed them in an inferior China’s A-share market. Textile manufacturing boasted
position in international competition. For example, the minus 6.89 percent, higher than that of clothes retail’s minus
land cost of Chinese companies is 5-10 times as high as 9.94 percent. The RMB depreciation is expected to increase
that of foreign competitors. As a traditional advantage export income, boost the competitiveness of exports
industry, textile industry plays an important role in the and benefit export-oriented manufacturers. In 2016, the
national economy. In 2015, the production value of domestic price of cotton rose dramatically affecting the
textile industry accounted for 7 percent of China’s GDP. relationship of supply-demand. With the decrease in
Textile is a win-win for China. Textile products play an cotton for State reserves, the reserves will exert a smaller
important part in China’s foreign trade, but also as a influence on the market and the demand for cotton will
labor-intensive industry, the textile industry provides a keep stable in the middle and long term. Planting area and
lot of employment opportunities for China (Wood). As production are apt to shrink, and the cotton price in the
per the 13th Five Year Plan of Chinese government for the middle and long term is expected to grow steadily, which
year 2016 to 2020 period, China strategically is moving is good for leading textile manufacturers.
toward more value-adding tech-intensive products.
The plan is to maintain traditional market share and to Clothing retail in 2017 should pay attention to the
grow more on the high value-adding product range. following five aspects: First, the integration of the supply
But real market data shows that the country is losing its chain will lower losses in intermediate processes and
export market drastically from 2015 in almost all product improve efficiency. Second, the upgrade of consumption
sectors in the textiles and clothing arena. The textile and and consumer’s pursuit of quality and personalized
clothing industry is too stretched in China and there are products bring structural opportunities. There is
eight major categories such as garment, cotton fabrics, great development potential for improving efficiency
chemical fabrics, wool fabrics, silk fabrics, knitted fabrics, through internal management and providing third-
textile machinery and bast fiber. Production capabilities party management services. The second-child policy will
for all categories are unparalleled in the world (Lu). stimulate a big increase of newborns, which will drive the
development of clothing. Luxury consumption has finished
Revenue for the apparel manufacturing industry is their periodical adjustments, and the light luxuries will be
expected to grow by 5.6 percent to $339.0 billion in 2017, the first beneficiary. Third, personalized demands drive the
reflecting an annualized increase of 8.5 percent over the development of designer brands, and start-up platforms
past five years. Exports are a strong contributor to industry will improve the marketing and deals for designers and
growth; in 2017, exports are expected to represent 21.2 consumers. Fourth, foreign brands entering the Chinese
percent of industry revenue. Exports as a share of revenue market will provide great opportunities for e-commerce
peaked at 86.8 percent in 1998. Over 19,600 enterprises agents. Fifth, fast-developing cross-border e-commerce
were operating in this industry in 2017, employing 4.55 companies and the value-added tax reform will reshape
million workers with an estimated payroll of $38.5 billion. the competitive patterns of the industry (Chinabgao.com).
286
To successfully tap China’s alcoholic beverage market, The rising price of raw materials, as well as higher labor
companies must overcome certain obstacles. One of costs, have led to a decrease in profitability for industry
the biggest obstacles is fake hooch. Counterfeiting has operators in recent years. In 2017, profit as a proportion of
a significant impact on any brand affected; it’s proven a industry revenue is estimated at 5.7 percent (IBISWorld).
particularly pertinent issue for drinks brands. Brand value According to China Textile Industry Development Report
is a key differentiator for most businesses in the alcohol (2014/2015), textile fiber production in China exceeded
industry, and so the protection of a drink’s brand is often 50 million tons, accounting for 54.36 percent of world
a core element of its success. No one knows how much of share. As much as 64.2 percent of the world’s chemical
the legitimate alcohol industry in China is eaten into by fibers, 64.1 percent of synthetic fibers and 26.2 percent
such fakery, but industry figures suggest it’s significant. of cotton were produced in China (Antu). Although
companies may be worried about China’s continuous
Textile and Apparel rising production cost, few other lower-wage countries
can beat China in terms of industry integration, supply
In 2015, the export value of textiles was $11.53 billion chain efficiency, and reliability (Lu).
in China, with a decline of 2.3 percent from 2014. In
recent years, the growing costs of land, energy and labor Yet, the absolute return rate of the textile clothing
dramatically increased the comprehensive costs of textile industry was minus 8.69 percent in 2016, consistent with
enterprises in China, which placed them in an inferior China’s A-share market. Textile manufacturing boasted
position in international competition. For example, the minus 6.89 percent, higher than that of clothes retail’s minus
land cost of Chinese companies is 5-10 times as high as 9.94 percent. The RMB depreciation is expected to increase
that of foreign competitors. As a traditional advantage export income, boost the competitiveness of exports
industry, textile industry plays an important role in the and benefit export-oriented manufacturers. In 2016, the
national economy. In 2015, the production value of domestic price of cotton rose dramatically affecting the
textile industry accounted for 7 percent of China’s GDP. relationship of supply-demand. With the decrease in
Textile is a win-win for China. Textile products play an cotton for State reserves, the reserves will exert a smaller
important part in China’s foreign trade, but also as a influence on the market and the demand for cotton will
labor-intensive industry, the textile industry provides a keep stable in the middle and long term. Planting area and
lot of employment opportunities for China (Wood). As production are apt to shrink, and the cotton price in the
per the 13th Five Year Plan of Chinese government for the middle and long term is expected to grow steadily, which
year 2016 to 2020 period, China strategically is moving is good for leading textile manufacturers.
toward more value-adding tech-intensive products.
The plan is to maintain traditional market share and to Clothing retail in 2017 should pay attention to the
grow more on the high value-adding product range. following five aspects: First, the integration of the supply
But real market data shows that the country is losing its chain will lower losses in intermediate processes and
export market drastically from 2015 in almost all product improve efficiency. Second, the upgrade of consumption
sectors in the textiles and clothing arena. The textile and and consumer’s pursuit of quality and personalized
clothing industry is too stretched in China and there are products bring structural opportunities. There is
eight major categories such as garment, cotton fabrics, great development potential for improving efficiency
chemical fabrics, wool fabrics, silk fabrics, knitted fabrics, through internal management and providing third-
textile machinery and bast fiber. Production capabilities party management services. The second-child policy will
for all categories are unparalleled in the world (Lu). stimulate a big increase of newborns, which will drive the
development of clothing. Luxury consumption has finished
Revenue for the apparel manufacturing industry is their periodical adjustments, and the light luxuries will be
expected to grow by 5.6 percent to $339.0 billion in 2017, the first beneficiary. Third, personalized demands drive the
reflecting an annualized increase of 8.5 percent over the development of designer brands, and start-up platforms
past five years. Exports are a strong contributor to industry will improve the marketing and deals for designers and
growth; in 2017, exports are expected to represent 21.2 consumers. Fourth, foreign brands entering the Chinese
percent of industry revenue. Exports as a share of revenue market will provide great opportunities for e-commerce
peaked at 86.8 percent in 1998. Over 19,600 enterprises agents. Fifth, fast-developing cross-border e-commerce
were operating in this industry in 2017, employing 4.55 companies and the value-added tax reform will reshape
million workers with an estimated payroll of $38.5 billion. the competitive patterns of the industry (Chinabgao.com).
286
