Although the European Union has agreed to stop investigations on 10 categories of textile products from China, according to the agreement signed by both sides last Saturday in Shanghai, China's textile companies cannot sigh with relief because the country's textile export growth to EU will be limited between 8 percent and 12.5 percent annually from 2005 to 2007.

This means the EU market is not fully opened yet, despite the elimination of global textile quota on Jan. 1, 2005, said a Chinese insider, who believes China's textile industry has to restructure itself to deal with future tough tests.

The Chinese government should voluntarily impose limit on the amount of textile export and introduce "voluntary export quotas" to restructure its industry, he said.

"China now has more than 40,000 enterprises that export textile goods, but only 3,000 enterprises have an annual export value of more than 5 million US dollars each," said Xi Shiping, chief executive of the Shanghai Textile Holding Group.

Many small textile firms that vanished after doing one business deal had disrupted the export order and brought shame on the prestige of Chinese textile industry, he said.

The distribution of "voluntary quotas" provides an opportunity for the government to reshape enterprises for textile export, he said.

Even for most competitive textile enterprises in developed coastal areas, the export quotas are deficient. The textile export of eastern China's Zhejiang and Jiangsu provinces, which ranked as the first and third largest textile exporters in China last year, soared at a surprising rate since beginning of this year.

In January 2005, Zhejiang's textile export soared 70.7 percent to the European Union, and 72 percent to the United States. Jiangsu's textile export to the European Union jumped 80.6 percent last February.

The limitation of a growth rate between 8 and 12.5 percent definitely means extremely fierce competitions among all enterprises for "voluntary quotas."

When distributing quotas, the government will support the most competitive enterprises, Xi said.

Experts suggest Chinese textile enterprises should improve their own structure and sharpen their competitive edge to deal with new challenges. Most of China's products for export, especially light industrial products, are low value-added. In many cases, raw materials are imported, processed in China and then for export.

Despite huge amount of export, Chinese textile industry gains only meager profits from international trade. In the first two months of this year, the cotton textile industry of Jiangsu Province only had a sales-profit ratio of 1.42 percent.

The textile industry at the Yangtze River delta has to abandon former development pattern of low cost and low profit, said Shen Anjing, vice president of the Shanghai Municipal Textile Academy.

"To face the new challenge, the country's textile sector should readjust their export strategies and introduce more advanced technology to increase the added value of their products," said Sun Huaibin, spokesman for the China Textile Industry Council.

China is regarded as the largest beneficiary from the elimination of global textile quota, but in fact China's profits gained from garment processing account for only less than 10 percent of garment sales abroad.

Wang Yu, secretary general of the China Import and Export Council, advised domestic textile enterprises to cooperate with their foreign counterparts because the Chinese enterprises enjoy large production scale, while foreign companies have name brands and advantage in garment design, noting their collaboration will benefit both sides.

Source: Xinhua