Page 298 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
company Yili recorded a 43 percent growth to US$6.2 customs data showed exports of clothes and accessories
billion in brand value, strong enough numbers to fell by 0.4 percent in 2017, while textiles exports saw
become the only Chinese firm to make the world’s 10 annual growth of 4.5 percent. Furthermore, labor costs
most valuable food brands in 2018, trailing only Nestle in China have been rising steadily. The minimum wage in
and Danone (Koe). Shenzhen is now about US$336 per month – more than
double the rate in some Southeast Asian countries. Hit
Roughly 549 million people in China bought at by the industry restructuring, some of the big clothing
least one prepackaged beverage in 2018. Revenue is brands have struggled to make a profit and secure
expected to show an annual growth rate (CAGR 2018- finance. Although analysts say Chinese textile and
2022) of 16.4 percent. User penetration was about 30 clothing makers are at low risk from the current trade
percent in 2018 and is expected to hit 52.4 percent by conflicts between China and the US, given that they
2022. (Statista). The Chinese consumers are showing export so little to America compared to other sectors, US
signs of wanting healthier options as such claims as brands are starting to diversify their sourcing. Fewer US
“Made from 100% pure Juice”are getting attention. Even brands were looking to China for products, even though
though 35 percent of Chinese adults aged between 24 the country remains the top sourcing destination for the
and 49 claim they want a healthier diet the soft drink industry worldwide (Leng).
market size continues to grow bigger and faster. The
retail value of the domestic soft drink market bubbled Textile factories are not as common in China as they
over US$103 billion at the beginning of 2018, and the used to be, but this does not mean that the textile or
total volume was 95 million liters. Sports drinks are also silk industry is dead. The middle process, manufacturing
certainly in the running. Chinese consumers drink 545 textile, is simply diminishing. The two ends, design and
million liters of sports drinks per year, four times more product development, and consumption are still doing
than the US. Sports and energy dinks have a potentially fine. While China may still be the world’s largest silk
explosive potential since the Chinese government has producer, exporter and consumer, the domestic industry
announced that it plans on building a US$850 billion has been in decline for the past two decades. Silk
sports economy by 2025. Currently, Red Bull remains the production has been hit by the dwindling population
leading the leading brand in the market, but Monster of mulberry farmers, who have replaced their crop with
Energy is creeping up from behind (Yu). more lucrative plants like passion fruit, and this has in
turn caused the price of silkworm cocoons to balloon.
US wine exports to China were up 14 percent in Silkworm cocoons cost 40 percent more than usual in
value to US$38.4 million for the first six months of 2018, 2018. Other factors behind the industry decline include
compared with the same time period the previous year, the rising costs of labor and the measures required to
despite the continued threat of increased China tariffs. reduce the amount of pollution caused by the dyeing of
Total US wine exports worldwide were up 2.7 percent silk products. The characteristics of silk have also worked
by value to $708 million through June 2018. By volume, against the popularity of the fabric. Many consumers
exports are up 1.7 percent to 21.3 million cases for the are not fond of it because it wrinkles easily and is
six months (Beverage). difficult to launder. In 2017, the total amount of raw
silk produced in China stood at nearly 140,000 metric
Textile and Apparel tons, down by 1.86 percent year-on-year. Meanwhile,
the production of processed silk dropped by 11.62
While the country is still the world’s largest percent to about 7,600 tons. Some manufacturers have
clothing exporter with enormous production capacity, responded to the situation by mixing low quality silk
oversupply at home, high labor costs, and rising global with other types of fabrics so that the product can be
protectionism have all eroded its competitiveness. sold cheaply. Other brands have repositioning silk as a
China’s market share by value in the global textile and luxury item. According to McKinsey’s 2017 China Luxury
clothing industry fell from 38.6 percent in 2015 to Report, Chinese luxury consumers spend more than 500
35.8 percent in 2016, with a downward trend in major billion yuan annually and account for almost a third of
apparel importing regions such as the US, European the global luxury market. Tourists who purchase silk
Union and Japan. Since 2014, exports of Chinese textiles products as one-off souvenirs make up another core
and clothing have declined sharply from about US$236 group of customers for most of the silk brands. The
billion in 2014 to US$206 billion in 2016. Chinese most important growth driver is the local consumers.
298
company Yili recorded a 43 percent growth to US$6.2 customs data showed exports of clothes and accessories
billion in brand value, strong enough numbers to fell by 0.4 percent in 2017, while textiles exports saw
become the only Chinese firm to make the world’s 10 annual growth of 4.5 percent. Furthermore, labor costs
most valuable food brands in 2018, trailing only Nestle in China have been rising steadily. The minimum wage in
and Danone (Koe). Shenzhen is now about US$336 per month – more than
double the rate in some Southeast Asian countries. Hit
Roughly 549 million people in China bought at by the industry restructuring, some of the big clothing
least one prepackaged beverage in 2018. Revenue is brands have struggled to make a profit and secure
expected to show an annual growth rate (CAGR 2018- finance. Although analysts say Chinese textile and
2022) of 16.4 percent. User penetration was about 30 clothing makers are at low risk from the current trade
percent in 2018 and is expected to hit 52.4 percent by conflicts between China and the US, given that they
2022. (Statista). The Chinese consumers are showing export so little to America compared to other sectors, US
signs of wanting healthier options as such claims as brands are starting to diversify their sourcing. Fewer US
“Made from 100% pure Juice”are getting attention. Even brands were looking to China for products, even though
though 35 percent of Chinese adults aged between 24 the country remains the top sourcing destination for the
and 49 claim they want a healthier diet the soft drink industry worldwide (Leng).
market size continues to grow bigger and faster. The
retail value of the domestic soft drink market bubbled Textile factories are not as common in China as they
over US$103 billion at the beginning of 2018, and the used to be, but this does not mean that the textile or
total volume was 95 million liters. Sports drinks are also silk industry is dead. The middle process, manufacturing
certainly in the running. Chinese consumers drink 545 textile, is simply diminishing. The two ends, design and
million liters of sports drinks per year, four times more product development, and consumption are still doing
than the US. Sports and energy dinks have a potentially fine. While China may still be the world’s largest silk
explosive potential since the Chinese government has producer, exporter and consumer, the domestic industry
announced that it plans on building a US$850 billion has been in decline for the past two decades. Silk
sports economy by 2025. Currently, Red Bull remains the production has been hit by the dwindling population
leading the leading brand in the market, but Monster of mulberry farmers, who have replaced their crop with
Energy is creeping up from behind (Yu). more lucrative plants like passion fruit, and this has in
turn caused the price of silkworm cocoons to balloon.
US wine exports to China were up 14 percent in Silkworm cocoons cost 40 percent more than usual in
value to US$38.4 million for the first six months of 2018, 2018. Other factors behind the industry decline include
compared with the same time period the previous year, the rising costs of labor and the measures required to
despite the continued threat of increased China tariffs. reduce the amount of pollution caused by the dyeing of
Total US wine exports worldwide were up 2.7 percent silk products. The characteristics of silk have also worked
by value to $708 million through June 2018. By volume, against the popularity of the fabric. Many consumers
exports are up 1.7 percent to 21.3 million cases for the are not fond of it because it wrinkles easily and is
six months (Beverage). difficult to launder. In 2017, the total amount of raw
silk produced in China stood at nearly 140,000 metric
Textile and Apparel tons, down by 1.86 percent year-on-year. Meanwhile,
the production of processed silk dropped by 11.62
While the country is still the world’s largest percent to about 7,600 tons. Some manufacturers have
clothing exporter with enormous production capacity, responded to the situation by mixing low quality silk
oversupply at home, high labor costs, and rising global with other types of fabrics so that the product can be
protectionism have all eroded its competitiveness. sold cheaply. Other brands have repositioning silk as a
China’s market share by value in the global textile and luxury item. According to McKinsey’s 2017 China Luxury
clothing industry fell from 38.6 percent in 2015 to Report, Chinese luxury consumers spend more than 500
35.8 percent in 2016, with a downward trend in major billion yuan annually and account for almost a third of
apparel importing regions such as the US, European the global luxury market. Tourists who purchase silk
Union and Japan. Since 2014, exports of Chinese textiles products as one-off souvenirs make up another core
and clothing have declined sharply from about US$236 group of customers for most of the silk brands. The
billion in 2014 to US$206 billion in 2016. Chinese most important growth driver is the local consumers.
298
