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China garments Industries

China garments Industries

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Sections

  • Preface
  • 1. Industry Indicators
  • 1.1 Factory Output Volume
  • 1.2 Textile and Apparel Exports
  • Textile and Apparel Exports
  • 1.3 China’s Apparel Imports
  • 2. China’s Apparel Wholesale And Retail Industry
  • 2.1 Domestic Market
  • 2.2 Consumer Expenditures and Buying Power
  • 3. Industry Structure
  • 3.1 Ownership Structure
  • 3.2 The Geographic Distribution of China’s Apparel Industry
  • 3.3 The Distribution of Sizes of Chinese Apparel Establishments
  • 3.4 The Evolution of Apparel Industry Administration
  • 4. The Performance of China’s Apparel Industry
  • 4.1 Profit and Cost Structure
  • 4.1.1 Cost Structure
  • 4.1.2 The Influence of Government Tax Policy
  • 4.1.3 Working Capital
  • 4.1.4 Investment and Financing
  • 4.1.5 Profit
  • 4.2 The Organization of China’s Apparel Industry
  • 4.2.1 Labor Sources
  • 4.2.2 Labor Turnover
  • 4.2.3 Labor - Management Relations
  • 4.2.4 Worker Training
  • 4.2.5 Wages
  • 4.2.6 Organizational Structure
  • 4.3 Technology & Facilities
  • 4.3.1 Types of Production Systems Employed
  • 4.3.2 Equipment and Facilities
  • 4.3.3 Technology Adoption
  • 4.3.5 Order Size
  • 4.3.6 Lead Times
  • 4.3.7 Comparison of Apparel Sourcing Options
  • 4.4 The Retail-Apparel-Textile Pipeline
  • 4.4.1 Domestic Channel
  • 4.4.2 Export Channel
  • 4.4.3 Quota
  • Summary
  • Appendix ATables
  • Appendix B Order Sizes and Lead Times in Sample
  • Appendix C Explanatory Notes for Major Terms
  • References

THE DEVELOPMENT OF THE CHINA APPAREL INDUSTRY

A Report Presented Jointly by China Textile University & Harvard Center of Textile and Apparel Research

November 1999

1

Table of Contents

FORWARD....................................................................................................................................... 3

PREFACE ........................................................................................................................................ 4

1. INDUSTRY INDICATORS......................................................................................................... 6 1.1 FACTORY OUTPUT VOLUME ............................................................................................. 6 1.2 TEXTILE AND APPAREL EXPORTS ................................................................................... 6 1.3 CHINA'S APPAREL IMPORTS............................................................................................... 9 2. CHINA'S APPAREL WHOLESALE AND RETAIL INDUSTRY.......................................... 12 2.1 DOMESTIC MARKET......................................................................................................... 12 2.2 CONSUMER EXPENDITURES AND BUYING POWER..................................................... 13 3. INDUSTRY STRUCTURE ....................................................................................................... 18 3.1 OWNERSHIP STRUCTURE ................................................................................................. 18 3.2 THE GEOGRAPHIC DISTRIBUTION OF CHINA’S APPAREL INDUSTRY ...................... 19 3.3 THE DISTRIBUTION OF SIZES OF CHINESE APPAREL ESTABLISHMENTS................ 20 3.4 THE EVOLUTION OF APPAREL INDUSTRY ADMINISTRATION................................... 21 4. THE PERFORMANCE OF CHINA’S APPAREL INDUSTRY .............................................. 22 4.1 PROFIT AND COST STRUCTURE ..................................................................................... 22 4.1.1 Cost Structure ................................................................................................................ 22 4.1.2 The Influence of Government Tax Policy ......................................................................... 23 4.1.3 Working Capital .............................................................................................................. 23 4.1.4 Investment and Financing............................................................................................... 24 4.1.5 Profit ............................................................................................................................. 24 4.2 THE ORGANIZATION OF CHINA’S APPAREL INDUSTRY ............................................. 25 4.2.1 Labor Sources ................................................................................................................. 25 4.2.2 Labor Turnover .............................................................................................................. 25

2

4.2.3 Labor - Management Relations....................................................................................... 26 4.2.4 Worker Training ............................................................................................................. 26 4.2.5 Wages ............................................................................................................................. 26 4.2.6 Organizational Structure ................................................................................................ 27 4.3 TECHNOLOGY & FACILITIES ........................................................................................... 29 4.3.1 Types of Production Systems Employed.......................................................................... 29 4.3.2 Equipment and Facilities................................................................................................ 29 4.3.3 Technology Adoption ...................................................................................................... 31 4.3.4 Product Mix ................................................................................................................. 323 4.3.5 Order Size ...................................................................................................................... 34 4.3.6 Lead Times..................................................................................................................... 34 4.3.7 Comparison of Apparel Sourcing Options ....................................................................... 36 4.4 THE RETAIL-APAREL-TEXTILE PIPELINE ..................................................................... 37 4.4.1 Domestic Channel .......................................................................................................... 37 4.4.2 Export Channel .............................................................................................................. 37 4.4.3 Quota............................................................................................................................. 38 SUMMARY.................................................................................................................................... 39

APPENDIX A TABLES................................................................................................................ 40

APPENDIX B ORDER SIZE AND LEAD TIME IN SAMPLE .................................................. 45

APPENDIX C EXPLANATORY NOTES FOR MAJOR TERMS.............................................. 50

PROJECT TEAM .......................................................................................................................... 52

REFERENCES............................................................................................................................... 53

3

Foreword
The Harvard Center for Textile and Apparel Research (HCTAR) is pleased to make available this report, researched and written by Professor Gu Qingliang and his associates of the China Textile University, on the development of the Chinese apparel industry. In order to help understand the global apparel and textile sectors and imports and exports to and from the United States, HCTAR has sponsored research and reports on developments in China and Western Europe (France and England). The U.S. Department of Commerce Merchandise Trade Statistics reported that in 1997 U.S. apparel imports, valued at $48.4 billion, were received from more than 175 countries. The U.S. imported $7.4 billion dollars of apparel from the People’s Republic of China (P.R.C.), more than from any other country. Imports from Mexico ranked second at $5.3 billion. In the period 1991-97, imports of apparel from China rose at the annual rate of 12 percent compared to the 34 percent annual rate of increase from Mexico and the 11 percent a year annual rate of increase in all apparel imports. The specification of points of origin of trade and valuation issues has resulted in unusually large discrepancies in reports of trade statistics by China and the U.S. The U.S. Department of Commerce, Commerce News, April 29, 1996, reported: “Each country’s import statistics are consistently greater than the other’s exports.” HCTAR is concerned that Western audiences better understand the operations of the apparel industry of China, including its size, structure, management, performance, technology, human resources, and organization for exports. It is also vital to appreciate the wholesale and retail distribution of apparel within China and the potential for growth of China’s domestic market as economic development occurs. There are doubtless complexities in data and concepts that make translations to Western audiences difficult. We are well aware of these complications from our meetings over the draft manuscript with Professor Gu and his associates and from our earlier visits to apparel plants in China. Despite such questions, it is vital that Western audiences be better informed as to the developments in this sector in China. We acknowledge the assistance of Professor Gary Jefferson of Brandeis University and Professor Tom Rawski of the University of Pittsburgh. This report is the work of Professor Gu and his associates.

Frederick H. Abernathy John T. Dunlop Janice H. Hammond David Weil Cambridge, Massachusetts November 1999

4

Preface
Since the initiation of economic reforms and open policies in the late 1970s, China’s economy has been among the fastest growing in the world. Dramatic changes caused by these reforms have touched virtually every aspect of China’s economy and society. The introduction of a market system in China has fundamentally changed industry structure, firm ownership, and the nature of relationships between supply channel partners. China’s textile and apparel industries provide an excellent example of those changes. China has the largest apparel industry in the world with more than 3.9 million workers employed in an estimated 47,000 establishments in 1995.1 In that year, Chinese apparel factories produced 9.685 billion garments (in units).2 China’s total apparel exports were valued at approximately US$24 billion.3 The majority of China’s apparel exports are designed by foreign customers and made from imported fabrics. Most of these garments are intended for mass markets, with moderate or low prices. A few factories produce high quality clothing for high-fashion foreign brands. In 1995, official figures indicate that the largest importer of Chinese apparel products was Japan, followed by Hong Kong and the United States.4 However, it is important to note that these official figures do not reflect the fact that a big part of Hong Kong’s apparel imports from China were then transshipped to other countries, most notably the U.S. and Japan.5 About 80% of U.S. imports from China travel via intermediaries, with Hong Kong accounting for all but 3-4 percent of intermediary trade.6 Such transshipments have made the accurate assessment of the ultimate destination of China’s apparel exports nearly impossible. China’s sewing industry has long been concentrated in its coastal region. Coastal concentration continued after the introduction of market reforms due to the region’s experience managing apparel production, its relatively convenient transportation and communication, good infrastructure, and “external economies of scale,”7 such as easy access to financial institutions, trading companies, and export agents. However, rising labor costs and the instability of raw materials supply8 along the coast have driven the apparel industry from coastal areas to inland locations, forming a more geographically dispersed industry. Coastal firms have been compelled to move inland to achieve lower labor costs as firms in other Asian countries (as well as inland Chinese firms) become more competitive in the apparel industry. Furthermore, the coastal areas have been among the earliest regions in China to implement economic reforms, resulting in increased competition from Chinese private investors and

1 2 3 4 5 6

Almanac of China’s Textile Industry, 1996, p. 24. Ibid., p. 207. Ibid., p. 25. Ibid. See Appendix A, Table 3 for detailed information on transshipments.

“Comparison of the 1992-1993 Merchandise Trade Statistics of the United States and the People’s Republic of China,” CB-96-56, US Department of Commerce News, Economics and Statistics Administration, Bureau of the Census, Washington, DC 20230.
7

The Global Economy in Transition, second edition, by Brian J. L. Berry, Edgar C. Conkling, D. Michael Ray, Prentice-Hall International, Inc., 1996, p p. 242, 262, 466.
8

Historically, China’s government policies dictated that the apparel industry be concentrated in the coastal areas, with the textile industry located in inland locations as well as in the coastal areas. In the mid-1980’s, changing government policies led to the migration of textile firms to inland and western locations under local control. This has led to decreased stability in textile supply to the coastal regions.

as reported. This report contains some inconsistent data. Economics and Statistics Administration. foreign retailers were allowed entry into China for the first time. in part because different data sources have somewhat different industry coverage and use different statistical methods. Washington. We have tried to note these discrepancies as they arise in the report. to being export-driven (to bring foreign currency into the country) in the 1980s and early 1990s. for example. The 1996 Almanac of China’s Textile Industry derived its statistical figures from the third industry census. sources.S. which covered township level and above with independent accounting system enterprises and village. and types of incentive systems. Whenever the data reported by Chinese sources differ from those reported by U. Private firms compete through better market intelligence and more flexibility in their production systems.for example. Responsiveness to market needs is further enhanced by the direct sourcing of apparel products by foreign brands and the sophisticated marketing skills of joint-venture (JV) partners. jointly-operated. DC 20230. 9 The low barriers to entry in the apparel industry (especially the low capital investment required) led to early entry into this industry by private investors with limited capital as well as by foreign investors interested in “testing the waters” in China without incurring substantial risk. China initiated efforts to establish a market economy. and raw materials. 3. Reforms were expanded in previously untouched areas -.9 Privately-owned enterprises. incentive systems. Over time. major changes were introduced in the structure and role of financial institutions.5 foreign investors in the apparel industry in that area. with their modern equipment and greater flexibility in product type. Some research has been done by both sides to reveal the causes of these differences. to being more consumeroriented in order to survive and prosper in the late 1990s. advanced equipment. the Chinese apparel industry has progressed from being largely volume-driven (to meet domestic demand which far exceeded supply) in the 1960s and 1970s.S. in “CB-96-56. In 1992. distribution channels. Bureau of the Census. U. and channels of distribution. are particularly fierce competitors. Department of Commerce News. 2. . These reforms improved the flexibility and responsiveness of the Chinese apparel industry. A few State-Owned Enterprises (SOEs) with strong support from local government perform well by taking advantage of easy access to funds. The difference in statistical coverage has made the figures in the 1996 Almanac on the high side relative to those in previous years’ editions of the Almanac of China’s Textile Industry. the Chinese figure is reported in this report. private. Notes 1. and government policies that disallowed forward and backward integration in the fiber-textile-apparel-retail channel were removed. although the majority of SOE’s performance has lagged that of private firms. and individual enterprises with an annual sales revenue above 1 million RMB.

15 but together were the leading net currency earners among Chinese exports.008 0.368 7.267 NA 11% 27% 7% -2% 2% 10% 15% NA Annual Growth Rate Year 1987 1988 1989 1990 1991 1992 1993 1994 1995 Output 2.384 4. 10 11 12 13 14 15 Almanac of China’s Textile Industry. recorders. The textile category includes fiber. in billions of pieces11 Year 1978 1979 1980 1981 1982 1983 1984 1985 1986 Notes: Output 0. This category includes machinery. Mechanical and electronic industries ranked first among Chinese exports. 25th.8 billion pieces. 207. January. .003 3. for example.14 the textile and apparel industries continue to be important in bringing foreign currency into China. The Information of Textile Foreign Trade.685 billion pieces in 1995. Industry Indicators 1. The Information of Textile Foreign Trade.816 9.6 1. 24.1 Factory Output Volume China is the largest apparel producer in the world with factory output of about 9. 25th January. 1996. 29.004 1. p. China Textile News Publishing House.260 2.13 Although textile and apparel exports as a percent of total Chinese exports declined to 25.5% in 1995.1-1 Growth of Apparel Factory Output. 1996.945 1.911 3. Xi Yujun. and accessories. 1996.985 1.10 Table 1. In 1995 these industries ranked second in export value.685 Annual Growth Rate NA 29% 3% 6% 7% 26% 49% 23% 24% NA = Not Available Compound Annual Growth Rate (CAGR) = 17% 1. Xi Yujun.2 Textile and Apparel Exports Textile and Apparel Exports Apparel and textiles12 have been important Chinese exports since the introduction of economic reforms in the 1970s. China Textile News Publishing House. 207.38% of the value of total Chinese exports in 1994. 1978-1995.2% higher than the previous year of 7. 1996. representing. Data Source: Almanac of China’s Textile Industry. video-recorders.106 1.673 0. electric equipment and accessories.175 3. p.266 6.744 0.

16 As shown in Table 1.428 23. China Textile News Publishing House.3 billion and textile imports of US$1. 25 January.3 billion and US apparel imports from China of US$7.8% -22. April.6% Annual Growth Rate Year Apparel Exports (in US$ billions) 4.722 billion.18 Apparel exports by Joint Venture Enterprises (JVEs) have been booming. April.049 25. Most Chinese apparel exports were basic.864 1. May 8.059 1.949 2.0% 28.7 Apparel Exports During the mid. 1996. 1995 data from The Information of Textile Foreign Trade. It is worth comparing these numbers to those of the US Department of Commerce. Sources: 1978-1994 data from Cheng Zhenghua. As shown in Table 1.130 6. Towards the Garment Market of 2000.4% 4.050 2. representing US$8.0% 25.1% 10.19 Table 1. for a total of $7. or 36.0 billion. the largest importer of Chinese apparel among these was Hong Kong. See “Comparison of the 1992-1993 Merchandise Trade Statistics of the United States and the People’s Republic of China.9% of the total China’s apparel exports.915 3. 1995. Prior to 1978.721 24.7% 42. 18 19 20 Cheng Zhenghua.2% 28.6% 5.060 2. in 1994. since JVEs were not allowed in China. These 21 countries or regions represented over 80% of China’s total apparel exports.7% 28. which reports apparel imports from China of US$6. apparel represented roughly two-thirds of China’s combined textile and apparel exports in value.0% 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Compound Annual Growth Rate (CAGR) = 22.708 1.2% during the 19-year period from 1978 to 1997. apparel exports grew at a compound annual growth rate of 22.998 16.17 and accounting for 16. .to late-1990s. 1978-199720 Year Apparel Exports (in US$ billions) 0.000 31.4 billion. 19961997 data from China Fashion Weekly.0% 27.7% 31.653 2. reaching US$23.8% 11. this number was 0. China replaced Hong Kong as the leading apparel exporter in the world.8 billion.4% 86.7% 1.848 8.2-1. Towards the Garment Market of 2000.2% 16 17 See Table1. which imported over 30% of China’s total apparel exports.754 Annual Growth Rate 30. In 1994.748 18. 1998.75 billion in 1994. for a total of $8. 1995. inexpensive items.872 6.0% 4.748 49.635 1.4 and textile imports of US$1.7% of the global apparel export market.2-1 Chinese Apparel Exports. 21 countries or regions each imported more than US$100 million worth of apparel from China.4% 14.6% 54.2-3.2-2.

Arab S. Korea UK Sweden Canada Italy Value 7. Arab France Macao Malaysia Netherlands Switzerland Singapore Poland Others Total Total Value 201 188 186 168 166 149 148 128 120 112 4. 1985-1995.S.3 Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Share (%) 43. Or.5 53.7 49. it may be that Chinese figures consider only the value-added from “processing contractors. 1995. .78 0.7 21 Source: Cheng Zhenghua.5 41.94 0.22 100.1 57.7 63. whereas the U.159 5.1 31.45 1. 1978-199723 Year 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 Share (%) 29.722 Share (%) 0.652 2. Towards the Garment Market of 2000.9 39. Shanghai Fashion & Accessories Society.3 67.9 66.427 691 435 388 344 304 239 222 210 22 Share (%) 30.S.2-2 Value of China Apparel Exports by Country or Region of Destination.23 2.18 23. 22 This is different from the U.0 43.70 0.7 40.5 41. A Collection of Treatises on Clothing and Accessories in China.8 41.00 0. 1985-1995. DOC is adding some of the transshipment volume reported above as exports to Hong Kong.00 Table 1.54 0. Department of Commerce (DOC).64 1.83 1.2-3 China’s Apparel Industry Exports as a Percent of Total Textile & Apparel Exports.8 Table 1.79 0.63 0.0 46.85 0. It could be that the U.62 0. which reports apparel imports from China of US$6.S. 199421 (Value is given in US$ Million) Rank 1 2 3 4 5 6 7 8 9 10 11 Country/ Region Hong Kong Japan USA Germany Australia Russia S.7 37.47 17.71 0.91 1.4 69.89 Rank 12 13 14 15 16 17 18 19 20 21 22 Country/ Region Taiwan U.085 23.8 66.51 0.28 1.3 billion in 1994.8 38.” which use imported fabric provided by the customer. 23 Source: China Customs. April. DOC considers total value of garments imported (unless US textiles were used).87 10.

3-3. April. whereas 20% were knitwear. See Table 1. The table indicates a sharp increase in China’s apparel imports in 1992.49% in 1996.3-1 Growth of China’s Apparel Imports. 1996. In 1996.1% 24 25 26 27 Fashion Times. 5. Source: Cheng Zhenghua.9 1.4% of China’s total apparel imports.3 China’s Apparel Imports As shown in Table 1.23% in 1992. 5. 1995. 1995 data from Almanac of China’s Textile Industry. . which can be attributed by economic reforms that first allowed foreign retailers access to China’s market. China’s total apparel imports were US$1044.25 By 1996. 29 28 Sources: 1978-1994 data from Research Center of Textile & Apparel Economy. Towards the Garment Market of 2000. See Table 1.26 As shown in Table 1. Hong Kong ranked first. to 17. May 29 1998. China’s apparel imports have grown rapidly since 1978. 1996. 1985-1995. Research Centre of China Textile Economy & Information Centre of China Textile Council.48 million. 1995. The Information of Textile Economy. from 33.28 Table 1. Chinese apparel imports of knitwear have steadily declined during the 1990s. 12th Feb.3-1.3-2.24 In 1994 there were six countries or regions that individually exported more than US$10 million of apparel products to China. an estimated 80% of imported garments were made of woven fabric. 1978-1996 (in Millions of US$)29 Year 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 Imports 1 5 21 15 7 3 6 15 14 17 400% 320% -29% -53% -57% 100% 150% -7% 21% Annual Growth Rate Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 Imports 28 38 48 61 402 510 572 970 1044 Annual Growth Rate 65% 36% 26% 27% 559% 27% 12% 70% 8% CAGR = Compound Annual Growth Rate = 47. 1996 data from Fashion Times. 1985-1995. with a compound annual growth rate of 47.3-4.1% from 1978 to 1996. p. May 29 1998.27 In 1995. In 1994. Japan has surpassed Hong Kong as the largest source of apparel imports into China. p. A collection of Treatises on Clothing and Accessories in China. with 33. Shanghai Fashion & Accessories Society. garments made of woven fabric comprised 72% and knitwear 28% of all apparel imports.

54 0.9 1. .20 29. Korea USA E.475 1.71 0.75 0.7 20.00 Table 1.55 4.3-3 Chinese Apparel Imports from Countries or Regions.76 100.47 0. 199430 Country &Region Hong Kong Japan Taiwan S.18 0.10 Table 1. 1998.477 Percent of Total Imports (%) 42.2 1.210 49.4 5.10 0.044.69 10.4 28.174 7. 5.034 0. May 29.3-2 Chinese Apparel Imports from Countries or Regions.791 310. 199631 Countries & Countries Japan Hong Kong South Korea Taiwan USA Australia Italy Germany Brazil France All others Total Value (million US$) 440. Data source: Fashion Times.858 5.5 100.879 1.925 1. p.643 4.U.00 30 31 Source: China Customs.58 112.8 8.06 10.059 110. Others Total Value ( million US$) 191 165 48 30 11 10 117 572 Percent of Total Imports (%) 33.

00% 32 Source: Fashion Times.91 1. . May 29 1998. 199632 Year Knitwear and accessories Garments made woven and other non-knitted fabrics and accessories Leatherwear and accessories Fur wear and accessories Total Note: NA = Not Available 1992 33.74 100. 5. 1995.63 2. p.10 77.00% 1995 19.00% 1996 17.27 NA NA 100.49 77.3-4 Composition of China’s Apparel Imports in 1992.53 0.23% 63.41 100.45 1.11 Table 1.

Open wholesale “marts”—which are wholesalers run by local governments that also sell to individual consumers—have played an important role in the distribution of Chinese apparel. apparel expenditures as a percent of total retail purchase of consumer goods has halved during this period.831 205. In 1995. shoes and hats are included. The industry growth is reflected in the growth in wholesalers.2 billion RMB.385 Employees in Wholesale Establishments 607. China Statistical Yearbook.446.888 As shown in Table 2. the market potential in China is immense.815 4.018.136 Employees in Retail Establishments 2. Because mart sales include both wholesale sales to retailers and consumer sales.81 billion RMB.306 2.795. 1995.1-1.809 765. Textile products.2 billion people and the sharp increase in consumption by Chinese citizens. severe supply shortages in the apparel industry drove the Chinese government to establish a “coupon” system to ration garments to Chinese citizens. China Statistical Yearbook. China’s Apparel Wholesale And Retail Industry 2.1 Domestic Market In 1954.030. With the development of the domestic apparel and textile industries. See Table 2. and their employees. 1995. 33 34 35 36 37 China Statistical Yearbook. as shown in the table below. the total sales of clothing jumped to 287.34 With a population exceeding 1. Given the significant opportunities for further increase in per capita consumption of consumer products. this system was phased out in 1983. this volume is not strictly a subset of the total retail sales of 244.12 2. Number of Wholesale Establishments 199435 199636 117. 1997. .37 (This topic is detailed in Appendix A Table 1). 1997.1-1. China has become one of the largest markets in the world. In 1994 the total sales of apparel amounted to 260.8 billion RMB in 1995 reported in Table 2. China Statistical Yearbook. See Table 2.1-1. although the value of apparel sold has increased tenfold since 1978. garments.669 Number of Retail Establishments 1. retailers.2 billion RMB. the sales of the top 20 specialized textile and apparel trade markets totaled 129.33 In 1996.1-1.

2 203.2 244. With the growth of income. . These data were reported directly in the China Statistical Yearbook prior to 1995.1 260. 1992-1997.37 57.2 118.1-1 Total Retail Sales Growth of Consumer Goods38 Year All Consumer Goods (in Billions of RMB) 126.9 115.5 1246 1627 2062 2477 19. the apparel figures were computed based on the following weighted average: Total Consumers’ consumption on clothing = per capita consumption of non-farmer households * population of non-farmer households + per capita consumption of farmer households * population of farmer households.26 88.5 970.4 511.1-1. the Chinese have spent more money on consumer products than ever before.2 135. 1997.0 824. consumer goods sales totaled 2. with an average annual growth rate of 38.9 380.4% Apparel Products as a Percent of Total Consumer Goods Sales 22% 23% 20% 19% 18% 17% 17% 16% 16% 16% 16% 16% 16% 12% 12% 1978 1980 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 CAGR (84 – 96) 2. p.477 billion RMB.40 up 20. 551. As shown in Table 2. the consumer goods market has flourished.2-2.2 Consumer Expenditures and Buying Power With the development of the Chinese economy brought about by economic reforms.74 77.85 41.9% from 1990 through 1996.5 179.23 110.4 707.677 (in 1996 currency).1% from 1995.6% Apparel Products (in Billions of RMB)39 27. 41 See Table 2.03 71.8 287.13 Table 2.2 14.6 158. the annual consumption per capita increased from 184 RMB to 2. 40 China Statistical Yearbook.4 289. Because of a change in reporting method.4 725.5 653. in 1996.41 Urban 38 39 Source: China Statistical Yearbook.1 437. From 1978 to 1996.

2-2. Table 4-1. Nike (U. .5 686. 4-2. December 28th 1992). May 1993). Although name brand apparel is sold at a relatively lower price in China than out of China.42 Prices have been growing in this process. Jeanswest (Hong Kong.3 708.46 the number of people who can afford to by these items is still limited. Liz Claiborne (U.S. Adidas (U..6 1221 1578 1926 In 1992.6 784 921. 42 43 44 45 China Statistical Yearbook. 23rd 1993). 1997. including Printemps (France)..14 residents spent more than the rural residents because of their higher income.2-3.43 Table 2.S. some overseas retailers established department stores in China. See Table2. The possibility of the subjects concealing their real income may cause these data on the low side.6 191. October 1994). Data source: China Statistical Yearbook. April 8th 1994).S. Jan. 1992). Stefanell (France. 293. Also. 4-4. and Benetton (Italy. The pioneers were primarily name brands that provided licenses or franchises for specialty stores in China.S. These included Giordano (Hong Kong. p.. Data in this column come from the data collected by the sample survey on the urban households.6 601. 1992). China first allowed foreign retailers to compete in China. 4-3. June 1992). Sincere (Hong Kong). even less than the per capita consumption data in Table 2. Mexx (Holland.3 397. 46 See Appendix A..2-1 Growth of Annual Per Capita Chinese Income (in RMB)44 Year 1978 1980 1985 1989 1990 1991 1992 1993 1994 1995 1996 Urban Residents45 316 439 685 1261 1387 1544 1826 2337 3179 3893 4377 Rural Residents 133. Esprit (U. 1997. 1993). Shuihing (Hong Kong) and Isetan (Japan).

15 Table 2.9% Non-Agricultural Residents 405 496 802 920 1089 1431 1568 1686 1925 2424 3027 3956 5044 5620 19.2-2 Annual Per Capita Consumption of Consumer Goods (in RMB) 47 Year 1978 1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 CAGR (85 – 96) All Residents 184 236 437 485 550 683 762 803 896 1070 1331 1737 2311 2677 17. . 1997.4% 47 Source: China Statistical Yearbook.9% Agricultural Residents 138 178 347 376 417 508 553 571 621 718 855 1087 1479 1756 15.

p.07 52.06 162.04 170.01 769.44 51.42 584.61 399 479.32 88.64 240.2-4 Growth of Chinese Per Capita Annual Living Expenditures and Clothing Expenditures (in RMB)49 URBAN HOUSEHOLDS Year 1978 1980 1985 1990 1991 1992 1993 1994 1995 1996 Living Exp.6% 13.33 70. . 1985 –199648 Year 1985* 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 *Note: Take the price in 1985 as 100.89 1453.63 619.7% 7.2 527. 116.95 14.08 Clothing Exp.73 2110. General Consumer Price Index 100.0% 13.47 Clothing Exp.9% 6.9 199.2% 48 49 Source: China Statistical Yearbook.36 1572.7 208.4% 14.7 12.79 659.2 165.2-3 General Consumer Price Index.2 170.2 1278.5% Clothing/ Living Exp.2% 6.81 2851.7% 14.81 1310.2% 14.57 3919.0% 7. NA NA 673.6 302.16 Table 2.4 258.0 106.8 160.66 112.6 300. 1997.5% 13. See Appendix A. NA NA 98.8% 7.3 135.5 114.51 55. RURAL HOUSEHOLDS Living Exp. 267 Source: China Statistical Yearbook 1992-1997.74 19.99 30.21 317. 12.34 3537.2% 8. 14.4% 13. Table 5 for percent of urban and rural population in the total population of China.9 Table 2.8 327.8 181.3 9.7 Clothing/ Living Exp.8% 8.81 1671.86 45.65 1016.

31 1.99 5.10 1.2-7 Consumption Pattern of Rural vs.38 1.06 5.76 1987 0.40 0.56 3.2-5 Annual Per Capita Garments Bought by Urban Households (in pieces)50 Year Cotton Synthetic Wool Silk Knit Total 1985 0. City Market52 Levels High-grade softgoods Middle-grade softgoods Low-grade softgoods Rural Market NA 26% 60% City Market 0.21 1993 1.96 2.37 1996 1.10 1.32 1.47 1991 0.49 3. These data show per capita purchases of garments of different types of material.32 1.81 2.28 0.65 3.47 1. It is not the average number of garments bought by men.62 0. women and children.30 0. These data show per capita purchases of garments intended for men.6% 70%-75% 25% 50 Source: China Statistical Yearbook 1992.24 1990 0.40 1986 0.17 Table 2.22 0.19 0.07 1. These data are not available after 1991.10 1.77 Table 2.37 0.28 1.44 1.18 0.95 5.29 1. 52 Almanac of China’s Textile Industry.38 0.20 0.50 0.53 Table 2. .39 3. 1993-1997.11 1. women and children.33 0.10 1. respectively.83 2.20 1995 1.55 1989 0.84 2.66 0.92 2.56 3. 1994.12 5.36 1.45 3.16 0.51 3.2-6 Annual Per Capita Garments Bought by Urban Households (in pieces)51 Year Men’s Women’s Children’s Total 1992 1.09 1. 51 Source: China Statistical Yearbook.17 0.21 0.22 1994 1. These data are not available before 1992.95 5.51 1988 0.18 0.

collective. 143. SOEs. Industry Structure 3. except that the former private owners retained some control over the enterprises (typically receiving some portion of the profits and participating in the management of the company). Tan-an. and exports.5% from 1994 of US$6.53 In 1996. those factories were converted into collective and state-owned enterprises (SOEs).1 Ownership Structure Before the 1950s. JVEs exported US$7. p. they cut and sewed garments made of fabric provided 53 54 55 Almanac of China’s Textile Industry.21% of the national apparel output in 1992 and 1993. even though roughly 90 percent of the JVEs’ exports were “processing only” enterprises (i. up 16. A JVE may be formed between a foreign partner and a collective. Then. most of the China’s garment factories were privately owned.54 SOEs comprised the second largest number of apparel establishments. foreign owned. the term SOE designates only “pure” SOEs (that is not SOEs in joint ventures). . The number of JVEs in the apparel industry grew rapidly in the early 1990s. The output volume of RTs comprised 76. June 12.18 3.68 billion apparel products.1956). China Textile & Apparel. the term RT is used to designate both pure rural townships and JVEs formed with RTs. during the Campaign of Joint State-Private (from 1952 . SOEs Collectives RT Urban Collectives Privately owned Foreign Owned JVE Inconveniently.7 points higher than the previous year. 1995/ Jan. the volume of product produced. 1994. or a county. a university. Foreign-owned firms are fully owned by foreign investors. or JVEs. Privately-owned firms are owned by Chinese individuals. As a result of the economic reforms and open policies initiated in 1978. Collectives can be further subdivided into rural township (RT) and other (typical urban) collectives. a province. RTs (pure RTs or JVEs formed from RTs) are the largest apparel producers in China on almost every dimension – the number of enterprises. a privately-owned firm. whereas others have only a financial investment in the enterprise. rural township (RT). Other collectives are owned by communities within urban environments. RT output was estimated to be 80% of total apparel output. Some foreign partners participate in the management of the JVE. Sometimes.44% and 91. this campaign was similar to nationalization.59 billion. There are several ways to characterize apparel firms in China. In some ways. or any other group of individuals. SOEs are owned by the central government. There were 12. All firms are privately-owned. 1996. respectively. Conversely. or an SOE. In 1995.e. almost all of China’s apparel enterprises were collective & state-owned. a JVE is formed by breaking off part of a firm to become a new enterprise – other times an entire firm is transformed into a JVE when a foreign investment is made. By 1978.55 In 1995. for example by a district government.98% of China’s total apparel exports. Thus we use the term “pure RT” in the following text when it is important to indicate an RT that is not part of a joint venture. ‘China’s Ever Shining Industry: Apparel’. Dec. RTs are collectives owned by small villages and towns. 4. 1997. collective. Xinmin Night News. Wu Qi-liang. the ownership structure of China’s apparel industry has evolved into a co-existence of private. SOE and joint-venture enterprises (JVEs).194 apparel JVEs in existence in 1995. JVE exports comprised 31. and privately owned refers to only “pure” privately owned firms.

Dalian. able to take civil responsibility. February 29. This area is of high population density and the people there with higher income and better education are more conscious of fashion than in other areas.2 The Geographic Distribution of China’s Apparel Industry The majority of Chinese apparel factories are located in coastal areas.59 This geographic distribution of China’s apparel industry has been driven by the following factors: 1.091 15. 2.19 by the foreign customer) which has low value-added.971 6. organization.56 Table 3. Zhuhai. Qingdao.408 6. Jiangxi. Hebei. Henan. Ningxia. 56 57 The Information of China’s Textile Foreign Trade. 1996. and the smallest number in the western provinces. Hubei. Jiangsu. take liability. Ningbo. Financially independent and compile their own statement of assets and liabilities. Shandong. 59 Coastal area includes Beijing.146 5. Xiamen are all located in coastal areas. Sichuan. there are more qualified workers in the coastal areas than the rest. China Textile News Publishing House. Guangdong. Shannxi and Yunnan (10 provinces in total). Process and use their assets independently. location. Hunan. Tianjin and Zhejiang (12 provinces and municipalities in the total). West area includes Gansu. Shenzhen.226 6. The coastal area is China’s traditional location for its apparel industry as well as for upstream industries such as the textile industry and synthetic fiber industry. Established legally. having their own names. 1988-1994. 1988-1994. In addition. Chinese Sewing Industry)58 Year SOE Total Collective Ownership NA 17. Qinghai. Fujian.318 6.1-1 The Ownership Structure of Independent Accounting Units57 (Number of Establishments. China Industrial Economic Statistical Yearbook. Xizang and Xinjiang (8 provinces in total). 58 Sources: China Economic Statistical Yearbook. Hainan. Haikou. Jilin. Shanghai. Inn Mongolia. Guizhou. have authority to sign contract with other units. which meet the following requirements: 1.212 RT ownership (included in Total Collective Ownership) 7.897 16.465 5. Liaoning. Shanghai. Guangxi.648 1987 1988 1989 1990 1991 1992 1993 1994 NA 613 642 681 729 NA 892 918 3. The open door policy was first applied in the coastal areas and the main Economic Development Zones.612 NA 15.791 15. . Midlands includes Anhui.475 6. thereby leading to better market potential. The next largest number of firms is located in the midland provinces.008 16. The legal units of Independent accounting refer to enterprises engaging in industrial production activities. 3. Heilongjiang. 2. 3. Shanxi.

has increased the wage gap among the coastal. Guangdong (30. . Sichuan. Sichuan. and about 30% are of small size (less than 200 employees). Fortunately.0%).21%). 3.20 4. Zhejiang. In order of largest to smallest output. especially in the coastal areas. although their location had shifted somewhat. 60 Almanac of China’s Textile Industry. Liaoning. Shandong and Hebei continue to be the main sources of China’s apparel industry. Hubei.05%). Jiangsu.04%). Beijing and Tianjin. Henan. The sharp increase in labor cost. Zhejiang. move the plants to the middle or west. The survey focused on the type of equipment and technology employed by each plant. and western provinces. Jiangsu. Hebei. Hubei and Tianjin. In 1994. Guangxi (32. On average. a Sino-Japanese JVE. they were Guangdong. Shanghai. The company saves about half of its labor cost by employing non-Shanghai workers. Meanwhile four provinces grew more than 25% in 1995: Anhui (53. or employ workers from the inland provinces. Shandong. about 20% of the factories are middle-sized (200 to 500 employees). there were 12 provinces and municipalities with output of more than 100 million pieces. Shandong. 1996. Zhejiang. the provinces were Guangdong. This wage gap puts coastal apparel factories under pressure to cut down their production. employs mostly workers from Hubei Province (a province west of Shanghai). 2. the Shanghai Meixu Fashion Company. For example. Shanghai. Shanghai. we conducted a survey of apparel establishments in July and August of 1995. There are relatively well-equipped infrastructures in the area. In 1995. Liaoning. Half of the China’s apparel factories are relatively large (over 500 employees per plant). Fujian. Hebei. In order of largest to smallest output. 24. there were 11 provinces and municipalities whose apparel output exceeded 100 million pieces. The survey indicated that: 1. making it attractive to foreign investors. Jiangsu. Fujian. p. and Yunnan (28. apparel establishments in the coastal area are larger than those of the midlands and western areas.60 The above data illustrated that the coastal provinces Guangdong. middle.3 The Distribution of Sizes of Chinese Apparel Establishments We have been unable to attain government data on the distribution of sizes of Chinese garment factories. Anhui. the value of their collective output comprised 90% of that of China’s total apparel output.

21 Table 3. Liaoning. apparel manufacturers were administrated by various central government ministries. Sichuan. and western regions of China were sampled.7 40 25. and Zhejiang. at the establishment (i. Liaoning. individual factory) level. In 1994. Coastal areas and the three municipalities were chosen.8 21 20 21. the National Textile Industry Bureau was founded. taking the place of CNTC as the administrative overseer of the apparel and textile industries. Henan. The sampling enterprises in the west areas were drawn from Shanxi. the China National Textile Council (CNTC) replaced the China Textile Ministry. 24. 3. the Central Government began an effort to transfer those apparel firms under The Light Industry Ministry to the China Textile Ministry to facilitate vertical integration across the textile and apparel industries as well as to increase the coordination between the two industries. such as Shandong.4 The Evolution of Apparel Industry Administration China’s ready-to-wear industry has developed gradually since the 1950s.8 23. including the Light Industry Ministry.9 10 5. 2. In the survey. The sampling enterprises in the midlands were drawn from Anhui. but produced approximately 60% of apparel output.1 79 38 20 137 Notes: NOE stands for the number of establishments in the category indicated.e. . midland. p. Guangdong. Source: These figures are from a survey we conducted in July and August of 1995.) On December 1st. Hubei and Jiangxi. Provinces with an abundant labor force provide enough labor resources to the apparel industry. firms administered by the CNTC represented approximately 40% of all apparel firms in China in number.4 10 27 % 22. which requires labor-intensive work. the majority of clothing Chinese people wore were made at home or in a tailor’s shop. since their apparel industry are relatively welldeveloped. (Apparel enterprises owned by retailers were overseen by the Commercial Department.5 28. they indicate the percent of all enterprises in the stated region in the designated size range. Anhui.62 On April 16.3-1 The Size of Chinese Sewing Establishments61 Size Region Coastal Midlands West Total >1.9 % 22. 1986.9 20 20. Hebei. Tianjin. 1996.4 % 35. Shandong. 62 61 Almanac of China’s Textile Industry. 137 enterprises from the coastal.4 18. Jiangxi and Shanxi. From the 1950s to the mid-1980s. So provinces with a large output of agricultural products – which implies an abundant labor force in China – were chosen.000 NOE 500 -1000 NOE 200 . On June 21. These provinces were chosen because: 1. 1993.200 NOE <50 NOE Subtotal % NOE % 16. Henan. Shanghai. 1998.5 % 100 100 100 100 13 11 4 28 28 7 2 37 18 8 4 30 18 9 8 35 2 3 2 7 2. Xinjiang and Sichuan. Before that time.5 7. Percentages should be read across rows rather than columns.500 NOE 50 . 3. and Xinjiang. such as Hubei. The sampling establishments in the coastal areas were drawn from Beijing. Provinces that produce large quantities of cotton were also chosen.

6 1.63 5. labor costs are relatively low compared to material costs and overhead expenses. the cost of materials (including thread.48 0.04 USA 90% 5% 6.S. so the overhead costs in an SOE are larger than in JVEs and RT enterprises. electrical power and gas). and in 1995 it rose 35.54 8. 1995. and increases in the price of raw materials.1 Cost Structure For apparel firms that purchase their own fabric.18 Thailand 65% 10% 0. and thread. administrative. Source: Kurt Salmon’s Associates (KSA) – 46 Country Cost Comparison Report.77 2.43 Hong Kong 90% 6% 4. In recent years. For example.82 0. etc.99 4.51 UK 100% 9% 6. A social security system (including endowment insurance. RTs and JVEs didn’t have this responsibility.64 Table 4. Border) 70% 15% 0. firms will pay into a social security fund rather than making direct payments to retirees in the future.) was recently established in China. general. in 1994 it rose 54.54 Mexico (U. in 1993 the price of cotton rose 12. All manufacturing overheads are included. The Performance of China’s Apparel Industry 4. etc. rising utility costs (including water.83 8. SOEs are older organizations that traditionally had a responsibility to pay retirees.75 Notes: Exchange rates as of October 1995. medical insurance. Sales. 1994 and 1996. 64 65 66 63 Almanac of China’s Textile Industry.64 22. and corporate overhead costs are not included.68 14. Thus. zippers and other supplies comprise the remaining 10%.22 4. overhead expenses are 40-50%.70 1. buttons.44 10.) is approximately 2/3.63 For apparel firms that use fabric supplied by their customers.79 0.47 0. Hourly Wages (including incentives) (in US$/hr) Wages Plus Social Costs (in US$/hr) Overhead costs per attended hr (in US$/hr) Cost per SAH66 Produced (in US$/ SAH) China 75% 7% 0.62 0.49 1.5%.14 13. for a man’s suit. buttons.92 South Korea 65% 8% 0.67 7. For example.48 Germany 100% 10% 12.64 7.49 17. .1-1 Country Comparison: Production Costs (China & Selected Countries)65 Clothing & Footwear Productivity Absenteeism Avg.22 31. needles.4% over the previous year.1 Profit and Cost Structure 4.00 0.06 0.37%. operating costs in both of the above cases have increased due to inflation. and labor costs are just below 1/6 of total costs SOEs have to pay retirees. SAH stands for Standard Allowed Hour.81 2. escalating wages. labor costs typically account for 30-40% of total costs.1. Cost per SAH is defined as the manufacturing conversion cost (not including materials) to produce a Standard Allowed Hour of direct labor. the overhead expenses are just above 1/6.

this preferential tax policy was cancelled for the JVEs that registered after January 1st. In August 1994. (in Zhejiang Province) had 36 million RMB of fixed assets. 67 JTN Monthly. Compared to enterprises with other forms of ownership. which produces apparel mainly for the Japanese market. . Ltd. the government removed JVEs from this preferential treatment.000 to 300.3 Working Capital Manufacturers for domestic market Apparel manufacturers face a relatively high-risk domestic market and need funds for working capital. For example. working capital requirements typically are lower.1. lower tax rates and more preferential tax policies. and required 80 million in working capital. Shanghai Xinye Garment Co. a JVE could be exempt from tax in its first two years of operation and need to pay only half tax in the next three years. Table 4. For example. 4. JVEs have fewer taxes.23 4.000 pieces in 1995. annual sales of 400 million. For example. 1996. Business tax This tax rate is 3% and is applied only to retailers.. Value Added Tax A value-added tax (17%) was introduced at the beginning of 1994.1. Ltd. required working capital of 200.. Manufactures mainly for exports For manufacturers who mainly do assembly for export. The company had an annual output of 300. Yixiu Children’s Wear Co.67 The value-added tax refund rate dropped from 17% in 1994 to 14% in 1995.000 RMB.1-2 Tax Rates of Enterprises Enterprise Type SOEs ( large and middle scale) SOE s(small scale) and Collective Enterprises Private enterprises JVEs Tax Rate 55% 10%-55% (Progressive taxation) 35% 33% Note: The tax reported above is the central government tax of earnings.2 The Influence of Government Tax Policy Income tax Preferential tax treatments have been given to JVEs. The government promised that enterprises procuring raw materials within China and converting them into products for exports would receive tax refunds. However. February 1995.. in 1995.

the profits of export oriented apparel manufacturers have dropped significantly.96 1995 1.650 41. Source: Almanac of China’s Textile Industry.5 Profit In recent years.239 Net Value of Fixed Assets 5.031 17.87 1989 6. 4.967 20.835 End of Year Working Capital 14.921 18.03 1991 3. Table 4.538 11. Sources: 1988-1993 data from China Industrial Economic Statistical Yearbook.45 1994 2.017 17.204 37.667 11.4 Investment and Financing Manufacturers have few choices for financing their business. and less than 2% in 1995.010 8.995 9.63 1992 3.241 17.1.561 15.706 17.671 54. .656 26.1. 1994 . 1994-1996 data from China Statistical Yearbook. Almanac of China’s Textile Industry. Table 4.123 27.95 68 69 70 71 Source: China Industrial Economic Statistical Yearbook. The average profit rate of China’s apparel industry was 7-8% in 1970s.1-3 Capital Structure of the Sewing Industry (in Billions of RMB)68 Year 1988 1989 1990 1991 1992 1993 1994 Number of Enterprises 18.216 21. For some manufacturers.886 35.871 7.239 14.043 16.1-4 Investment in the Garment Industry (in Millions of RMB)69 Year Value 1986 20 1987 180 1988 290 1989 260 1990 270 1991 440 1992 720 1993 540 1994 503 1995 569 1996 721 Note: The data are for enterprises overseen by the CNTC.1-5 Average Profits per 100 RMB Sales in China Sewing Industry (in RMB)71 Year Average profits per 100 RMB Sales 1988 5. the profit rate was negative.170 4. leasing buildings and land is acceptable. Bank loans are a common practice. 1989-1994.439 Original Value of Fixed Assets 7.70 In 1996. 1995-1997. 1995-1997.81 1996 -0.499 16.190 19.159 26. 1989-1995. 5% in 1980s.03 1990 5.17 1993 3.24 Table 4.

of which 72 workers (23% of the total) come from rural inland areas. labor turnover peaks around the Spring Festival.8%). High Woolen Sweater. (a JVE) has 132 workers. Labor turnover is relatively low in SOEs compared to private enterprises. SOEs hired only local workers. For example.2.72 State-Owned Enterprises In the past. 1996.1 Labor Sources The average wages of China’s apparel industry are lower than those of other manufacturing industries in China. In recent years.. Ltd. Ltd.2-1 Labor Sources for Shanghai Xinye Garment Co. .2 Labor Turnover Labor Turnover Generally. an estimated 60 million workers from rural inland areas have flooded the cities in coastal areas. Enterprises of other ownership Enterprises of other forms of ownership typically hire more workers from rural inland areas than SOEs. Ltd. Local workers constitute 21. almost half of the workers of the Shanghai Xinye Garment Co. SOEs have recruited non-local workers to fill their vacancies. Province Local Anhui Hunan Shanxi Hubei Jiangsu Shandong Sichuan Number of Employees 28 19 9 4 48 11 9 4 4. (a private enterprise) left the factory after the 1996 Spring Festival. In recent years. Shanghai No. Shanghai Xinye Garment Co..2..2 The Organization of China’s Apparel Industry 4. a private apparel company located in Shanghai. now has only 2 of its original 70 workers remaining in the factory. Feb. also illustrates high labor turnover in private enterprises. 72 Report of Shanghai People’s Political Consultative Conference. For example.25 4. established four years ago.2%.5 Garment Factory employs 314 workers. of whom 104 are from rural inland areas (76. Table 4... Ltd. The High Woolen Sweater Co. For example.

73 By 1995. additional workers are hired. but was not dependent on a worker’s productivity. In the early 1990s.4 Worker Training State-Owned Enterprises In State-Owned Enterprises. Private enterprises Other than a few large firms. In 1997. approximately 38% of total.3 Labor . SOEs in the apparel industry started to set up contract relationships with their workers. Now. the average wage of an employee in a State-Owned apparel enterprise in Shanghai was about 800-950 RMB per month in Shanghai. sewing workers are paid a basic wage plus a piece-rate. . up 15% from 1996.2. Private enterprises In private enterprises. 1996. The contract period is usually between one to three years. Ibid. During the training period they are provided a basic salary.75 73 74 75 Almanac of China’s Textile Industry. there were 2.74 4. an employee signs a contract with the company under mutual consent. During busy seasons. apparel manufacturers paid their workers an hourly wage. new workers must be given a three-month training program upon hiring. The contract period in SOEs typically is longer than that in enterprises with other forms of ownership. Contract workers By the end of 1993. An employee’s wage was based on the number of years he or she had worked in the factory and on the employee’s absenteeism record. almost all employees work on a contract basis.7 million contract workers in China’s textile industry. 4. After more than three months of probation.5 Wages State-Owned Enterprises Before the economic reforms. the number of contract workers had grown to 9. and paid pensions to workers after they retired. Almanac of China’s Textile Industry.26 4.2. 1994. private enterprises have no special training programs for new employees.2. representing more than 80% of the workers in the industry.Management Relations State-Owned Enterprises SOE used to offer their workers lifetime employment. After a standard production quantity is produced.944 million. most apparel enterprises employ piece-rate compensation systems.

Production Dept. Note that in 1996. Technical Dept. General Affairs Warehouse 76 Ibid. in part because of the heavy historical and social burdens (such as support of retired workers) they bear.2-2 shows the organizational structure of a JVE.051. Table 4. Thus. 15% higher than 1996.2-2 Organizational Structure of Shanghai Xinye Garment Co. Table 4. at least in the Shanghai area. wages in the apparel sector are roughly in the average range for manufacturing wages.2. . During busy seasons. Financial Dept. 4. Table 2.2-3 shows the organizational structure of an SOE.76 The average annual wages of manufacturing industries in China are showed in the Appendix A. the workers can get 950-1350 RMB per month because of extra shifts and hours. Ltd.6 Organizational Structure SOEs typically have more complicated organization structures than JVEs and RT enterprises of the same size.. or about 838 RMB per month. Table 4. a piece-rate system is used.27 Private enterprises In private enterprises. the average wage of a sewing worker in a private enterprise was 700-800 RMB per month on average in 1997. the average annual wage across all manufacturing industries in Shanghai was 10. (SinoJapan JVE) Chairman of the Board General Manager Sales Dept. In Shanghai.

Commercial Affairs Department Other Industry Subsidiaries Stock & Security Office Garment Designing Center General Accountant President Investment & Development Affa Department ris Legal Adviser Office President Assistant Audit Department Finance Department Limited Shanshan Liability Company Vice President Development Dept. (SOE) Head-quater of Industry City General Designer Image Planning Department General Engineer Intel..3 The Organization Structure of Shanshan Group Co. Planning Dept Garment Producing Enterprises ffiaris Supervision Office Finance Settlement Center Marketing Subsidiaries . Ltd.2.28 Table 4. Management Center Supply Dept. Personnel Department President Office Information Dept. Marketing Dept.

Among these imports.3.2 Equipment and Facilities Sources of equipment and facilities Most Chinese garment factories are equipped with domestic machines. in 1997. which produces hotel uniforms. However.. and Germany.3 Technology & Facilities 4. in the Beijing Wanfu Garment Co. Ltd. 41% lower than 1996. modular production systems have not been applied in the China’s apparel industry. For example. For example. Switzerland. 1998. US$3. imports of industrial sewing machinery declined 53% and of computer embroider machinery declined 41%. In recent years the amount of imported machinery has declined. 1998. The domestic models are F1001 and F1002. a few plants organize their production processing using some of the concepts of a modular system.77 Modular Production System To date. while imports of family-used multi-function sewing machine increased 82%. a group of six or seven workers using basic equipment can easily change two to three different styles in one shift. However.1 Types of Production Systems Employed Progressive Bundle System In China. 77 78 Shanghai Apparel Association. the United States. Japan and Spain – examples include Gerber’s GM001 and GM300 models. and the ETON2001 and ETON2000 models from Switzerland.3.. the Progressive Bundle System (PBS) remains dominant in apparel assembly. Zhang Chonghe.3-1 shows the breakdown of imported versus domestic equipment by region. The imported machines are mainly from Japan. imported equipment and more sophisticated technology are widely used in most recently established enterprises – especially by export-oriented firms.78 Our survey of 137 apparel manufacturers showed that 50% of apparel plants in the coastal areas use mainly imported machines. . The majority of these were imported from USA. Unit Production System By the end of 1994. whereas domestic machines dominate more than 80% of apparel factories in the middle and western regions. 4. By June of 1998. China Sewing Machinery Industry. and estimated 20 sets of the Unit Production Systems (UPSs) were in use.2 billion of sewing machines and accessories were imported. among which about 20 were imported. about 50 sets of UPS were used in China.29 4. Table 4.

2% 87. Coastal 6. about 1.9% 100% 1992 and before 1993 1994 From Jan.781 6. Data source: Survey conducted by China Textile University.Aug.467 179 235 186 429 47 337 Percentage 49. 1995 Sample Totals: 32 19 20 8 79 28 11 12 7 58 60 30 32 15 137 According to Chinese Customs records. Imported Machinery79 Machinery Sewing Machine Over-lock Machine Button Attaching Machine Covering Stitch Machine Straight Buttonholing Machine Dom. Dom.30 Table 4.4% 28. Imp. Chinese Apparel Industry General Corporation.6% 34. Imp.8% 13.932 1. July – August 1995.9% 20.3-1 Quantity of Domestic vs. in 1997 the sewing machinery industry exported 4 million sets of sewing machines.4% 10. Table 4. July – August 1995.8% 30. .3-2 Age of Equipment (By Number of Factories)81 Year of Purchase Coastal Middle & West Total Percent of Total 43.060 2. = Imported machinery Age of equipment From 1980 to 1990.000 industrial sewing machines were imported into China.9% 43. Dom. = Domestic (China-made) machinery Imp. 79 80 81 Data source: Survey conducted by China Textile University.9% 79.1% 65.2% 69.8% 21. Dom.177 323 522 131 254 133 137 337 Percentage 86.80 About half of the enterprises in our sample bought a large number of machines after 1992. Imp.8% 12. Table 4.4% 50.586 2.8% Middle & West 13.156 1.1% 12.1% Dom.380.9% 71.3-3 shows China’s imports and exports of sewing machine equipment from 1990 to 1995.1% 55. Imp.6% 44. The Developing Garment Industry in China.2% 56. Lian Leyin.2% 87.9% 23. valued at US$280 million. Imp. Dom.

According to one estimate.3. grading.94 1. 4 in Jiangsu. China Textile Leader.3 Technology Adoption CAD/CAM Recent years have seen the beginning of the use of Computer-Aided Design (CAD) systems in China’s apparel industry.3-3 Trade of Clothing Machinery (By Millions of US$)82 Year Imports Exports 1990 190 27 1991 275 34 1992 399 43 1993 480 53 1994 394 81 1995 320 102 4. ‘The Development and Application of Apparel CAD / CAM System in China’. 1998 No.15 0. There are 13 ETON 2002 sets in use in China – 3 in Dalian. Table 4.84 Most firms use the CAD systems primarily for pattern making.02 0.3-4 shows the adoption of different systems through 1994. 2 in Hubei.3-5 indicates the rate of adoption of CAD systems in China. ALEXIS of Switzerland. Lectra of France. 1998 No. Wen Lishen.3-5 Development & Application of CAD in China’s Apparel Industry86 Time 1981-1985 1986-1990 1991-1992 1993-1994 1995-1996 By Aug. ‘The Development and Application of Apparel CAD / CAM System in China’.10 82 83 84 Source: Chinese Customs. Invesronica of Spain. Table 4. and marker making rather than for product design. . 1. 1994. and some domestic companies. 1. 2 in Beijing. 85 Ibid. Source: Supplementary Issue of Garment Machinery News. 86 Data source: Wen Lishen.85 Table 4. Table 4. China Textile Leader. CAD systems will be used by 5% of the Chinese industry by the end of 2000.3-4 Number of CAD Systems Imported into China (As of 1994)83 Suppliers Gerber Lectra Invesronica Date of First Introduction to China early 1980s the late 1980s 1992 Customers (in 1994) 63 30 23 An estimated 530 sets of CAD systems had been installed by China’s apparel industry by mid-1997. Major suppliers of the CAD systems used in China are Gerber of USA. 1997 CAD Customers 3-10 10-70 120-200 200-250 250-400 530 Coverage Rate (%) 0.42 0. 1 in Guangdong and 1 in Shanghai (the one in Shanghai is used for teaching purposes).31 Table 4.53 0.

3% of the 28. an American brand. Barcodes are popular in supermarkets in China. There were more than 100 Apparel Design and Research Centres and 35 Quality Inspection Stations. In Shanghai there were about 17 apparel manufacturers using the UPC bar-code system in 1995.S. In total.88 The Imitative Three-Dimension “magic mirror” system was developed by No. Electric Data Interchange (EDI) was first introduced in China after the Shekou Shenzhen EDI Conference in January 1990. but are seldom used in department stores.S. but they do not use them in the manufacturing process. . the China’s Ministry of Foreign Trade and Economic Cooperation (MOFTEC) announced that computer networks should be used to reduce the time required to clear China’s textile exports through U. The headquarters of Richini. communicates with every point of sale through its computer network. Customs and MOFTEC.4% of the increase. 87 88 The Shanghai Branch of China Article Numbering Centre. No. 4. In January 1994.3-6 shows the composition of China’s apparel exports in 1994. Bar-code and Information System.4 Product Mix Our survey indicated that 62. 1995. Many enterprises have registered for barcodes.710 Research Institute of the Ministry of Aeronautics and Astronautics Industry and was applied in retailing POS in 1993. and 9. including two State Inspection Centres.9.8% of apparel manufacturers produce garments made of woven fabrics only. Its main stores collect daily data stored in floppy disks from each POS. Currently. in China in 1995.3. a Hong Kong brand of casual wear.32 Bar-codes The UPC/EAN bar-code system has been used since China joined the International Article Numbering Association. scans bar codes at the point of sale (POS).87 Jeanswest.7% manufacture garments made of knit fabrics only. Table 4. Customs.5% produce garments made of both woven and knit fabrics. quota licenses are checked through computer networks linking U. and volume increases represented 9. Enterprises that have registered trademarks can apply for a UPC bar code at the China Article Numbering Centre.7% increase. China’s total apparel exports increased 28.7% in value in 1997. They mainly use barcodes for exports and supermarkets. of which price increases represented 19. and send the data to company headquarters in Hong Kong by e-mail. 27.

15 -0.413 0.35 5.232 1.70 16.736 4.595 6.7% 6.789 1.020 0.3-6 Product Mix of Apparel Exports in 199489 Fabric from which apparel was made: Total Woven Cotton Woven Man-made Fibre Woven Silk Woven Wool Woven Total Knits Cotton Knits Man-made Fibre Knits Wool Knits Quantity (in billions of pieces) -2.86% 8.698 1.91 1.57 3.75% 10.98% 33.13% 52.037 -2.33 Table 4.3% 11.75% 17.88% 20.76% 25.07% 29.39 5.429 0.54% 5.80% 37.322 2.09% 19.57% 26.53% 6.01% 8.20% 26.02 5.53% -0.156 Annual Growth Rate -14.966 1.47% 10.60% 32.65% 33. .862 Annual Growth Rate 30.74% 89 Data Source: China Customs.329 0.89% Average Unit Price (US$/piece) -2.10% Value (billion US$) 15.53 Annual Growth Rate 14.875 0.48% 14.

.3. Apparel production quantities are not constrained when the customer supplies the fabric. For example.3-7 Standard Lead Times of Xinye Garment Co. in 1995 the minimum order size for the Shanghai Xinye Garment Co. an order of T-shirts from Wal-Mart was 400. For example. In 1996. there are trends towards increasing variety and smaller order quantities. and seasonal fluctuations. we studied order sizes and lead-times at 16 establishments (five trading companies and 11 apparel manufacturers). 30-40 days Order ----> (Confirm samples) Contract 10-15 days ----> Delivery of materials 20-40 days ----> Bulk Production 10-15 days ----> Delivery of garments to Japanese customers . With the materials supplied by customers The order size of apparel exports depends heavily on the demands of foreign customers. while the order sizes of fashion products are much smaller. There are different minimum order sizes for different types of fabrics.6 Lead Times With the materials supplied by customers Lead times depend on factors such as fabric and accessories delivery.5 Order Size In the domestic apparel market. Ltd. 4. The order size ranges from tens of or hundreds of pieces to more than one million (in the case of some T-shirts).150 men’s coats. The range of order sizes provided by any one firm is large.000 to 4.3. Table 4. was 283 silk shirts and the maximum order size was 12. For example.000 yards for woven fabric and 1.S.000 yards in our sample.000 pieces. Orders from U.S. Fabric lead times are 20-40 days for closer countries such as Japan.3.. It usually takes 40-60 days for the materials to be delivered to China from oceanic countries. Lead times are heavily dependent upon the delivery of the materials supplied by the customer and the factory’s productivity. The average minimum order size in our sample was 200 to 300 pieces. it is two months for delivery of fabric from the U. we studied these trends in nine establishments. A set of lead times (from contract signing to delivery) for one firm is shown in Table 4. The Appendix describes the detailed performance characteristics of these firms. Basic products such as shirts have large fabric order sizes (the maximum may be hundreds of thousand yards)..7. Order size depends on the type of garments that the factory is to assemble. Order size depends on the demands of the customer and on minimum fabric order quantities.34 4. and Canadian customers are usually larger than those from Japanese and European customers. In general.000 to 4. Ltd. With the materials procured by apparel firm The minimum order size for textile fabrics was 3.000 pieces for each style of each color. In 1998. minimum order quantities are 3. order size.

In total. the shortest was 25 to 50 days.35 With the materials procured by apparel firm The average lead time in our sample when materials had to be procured by the apparel firm was three to six months. There is substantial room to reduce the lead times of apparel to the domestic market by reducing fabric lead times. . it takes two to three months for manufacturing with supplied materials and three to four months (no more than half a year) when materials must be procured by the apparel firm. It usually takes one to two months to finish the fabric (two months for yarn-dyed fabric). it typically takes only one month or so to produce and deliver the product. Fabric lead times are determined by the fabric manufacturer and the type of the fabric. After the arrival of the materials. The average lead time for fabrics was 40 to 90 days.

0 4. 1995. Customers90 Country & Region Sri Lanka Singapore Hong Kong Thailand Philippines Taiwan China Caribbean Basin Malaysia Indonesia Note: 5=best.0 3.1 3.0 Quality 4.9 2. Results incorporate rankings from 14 leading North American apparel companies.0 2.3 2.1 3.3 4.8 3.8 3.3 3.0 3.5 3.5 2.5 2.3 2. 91 Source: KSA European interviews.5 3.8 3.0 4.7 Average 4.3 3.0 2.5 2.0 2.0 4.1 2. 1995.8 2.5 2.0 4.0 Average 3.3 Quality 4.7 Delivery 4.4 2.0 4.7 Comparison of Apparel Sourcing Options The tables below show comparative rankings of service. and European customers.0 3. and cost across different regions by U.5 3.0 3.5 4.0 2.0 3.5 2. 1=worst 92 Service 3.3 3.1 3.5 3.0 4.1 4. 1=worst Service 4.0 1.3 4.0 2.8 3.S.8 Table 4.1 2.9 2. . quality. 92 Eastern Europe includes all the nearer European countries and the Baltic States.5 3.36 4.0 2.0 2.3 2.0 3.3-8 Qualitative Ranking of Highest Volume Countries and Regions by U.3.3 3.0 4.8 3.6 3.0 4.4 3.0 4.8 3.0 4.8 2.5 4.8 90 Source: KSA North American interviews.5 4.8 3.5 2.0 3.4 3.0 3.5 3.0 3.5 3.5 3.5 4.3-9 Qualitative Ranking of Highest Volume Countries and Regions by European Customers91 Country & Region Malaysia North Africa Singapore China Eastern Europe Hong Kong Taiwan Thailand Bangladesh Russia/Ukraine India Sri Lanka Note: 5=best.2 3.5 4.4 3.5 3.5 3.0 2.0 3.5 2.0 2.0 2.7 Cost 4.S. delivery.5 3.7 3.3 2.5 4.3 3.9 2.0 3.0 4.3 3.3 4. Table 4.3 4.5 4.3 Cost 3.3 3.8 2.0 3.5 Delivery 3.

37 4. Retail Chains.<----------------------------> Retailer Pattern B: (Typical retail types: Speciality Stores. Pattern C is seldom adopted in China.1 Domestic Channel There are dozens of large wholesale markets in China’s domestic apparel pipeline.<------>Chinese Office <---------> Retailer of Foreign Jobber Textile Mfr. Department stores.2 Export Channel Three export channel models are shown below. 1994. About 70%-80% of garments are sold using channel pattern A shown below. and Pattern B is often seen in small and middle cities or towns.…) Textile Mfr. Pattern E is most widely used in China.<----------------(Direct Sourcing) Pattern E: Apparel Mfr.<----> Apparel Mfr. Department stores. Direct Mail). <------->Domestic Agency <---->Foreign Jobber<----> Retailer (SOE or JVE) Pattern F: Apparel Mfr.<----> Wholesaler<-----> Retailer Pattern C: (Typical retail types: Speciality Stores. Pattern A: (Typical retail types: Specialty Stores.4.<-----> Apparel Mfr. --------------------------------------------------------------------------------------------------------DOMESTIC OVERSEAS --------------------------------------------------------------------------------------------------------Pattern D: Apparel Mfr. street fashion peddlars).4 The Retail-Apparel-Textile Pipeline 4.<-.<------------------------------------->Foreign Jobber <--> Retailer (SOE who can export directly or JVE) 93 Almanac of China’ Textile Industry. Textile Mfr. .93 Pattern A is popular in large cities. Apparel Mfr.------------------------------------ 4.<-------> Jobber <--------> Retailer Textile Mfr.4.

July 1995. an enterprise will get the quota if its bidding price and quantity meets the requirements of the Bidding Office that is in charge of the bid. and the computer system will decide who gets the quota based on the bidding price and quantity.4. August 14. Textile Asia. intending to receive close scrutiny from apparel enterprises. The public bid will be conducted through a new “Electronic Bid System. After 1992. The Provincial Foreign Trade Department assigns quota to local enterprises that have licenses to export and are required to transfer foreign exchange to the government.94 In 1998.96 94 95 96 Paul Leung. MOFTEC announced a new set of regulations for auctioning all apparel quotas by open bids. In a negotiating bid. 7. The transfer of quota among enterprises is allowed. . In May 1995.3 Quota China’s Ministry of Foreign Trade and Economic Cooperation (MOFTEC) manages the quota. Textile Information.95 The 1999 quota for textile and apparel products will be auctioned in two ways: public bid and negotiating bid. 1998. including five government files. Apparel quota is auctioned through freely submitted bids. International Business. estimated demand in world markets and estimated quantities available from domestic suppliers. 1998 May 10. No. The quantity of quota offered for auction is decided by MOFTEC based on the actual quantities exported in the previous year.38 4.” in which enterprises are required to send their electronic bidding document before a certain time. both domestic and foreign-funded. new regulations on quota management were issued. a small part of quota was auctioned publicly to promote the export of high value-added garments. China’s Ministry of Foreign Trade and Economic Cooperation.

Driven by consumers’ demand. China has played an important role in the global textile and apparel economy. 2. and has influenced significantly international apparel trade. Facing both overseas competition from newly emerging apparel exporting countries and increasing labor costs (especially in coastal areas). China owns the largest apparel industry in the world. 4. and geographical transition. China is the leading apparel exporter in the world. and has made rapid progress in recent years. with its imports growing dramatically since 1978.39 Summary The research conducted by China Textile University has led to the following conclusions: 1. China’s apparel industry must evolve towards more variety and smaller order size to meet the changing demands of both domestic and international markets. China’s apparel industry is now in the process of institutional. China’s apparel industry is still dominated by the mass-production of basic items. manufacturing and merchandising. China’s apparel industry has been and will continue to be one of the pillar industries in China. To maintain a leading role in the apparel market. the industry has gradually introduced new technologies for designing. 3. . However. structural. With the huge pool of cheap labor and abundant raw materials.

22 4. RMB) 17.59 3.00 9.98 7.40 5.50 5.07 .50 3.21 8.00 13.43 3.40 Appendix A Tables Table 1 The Top 20 Textile & Apparel Marts (1995) Name Shaoxing China Light Textiles City (Zhejiang) Haicheng Xi Liu Apparel Wholesale Market (Liaoning) Wujiang China Dongfang Silk Market (Jiangsu) Shenyang Wuai Commodity Wholesale Market (Liaoning) Luqiao Chinese Daily-use Commodity Market (Zhejiang) Luoyang Guanlin Commercial Market (Henan) Ruian Commercial City (Zhejiang) Huzhou Zhili Textiles & Embroidery Market (Zhejiang) Hangzhou Sijiqing Garments Market (Zhejiang) Ji Mo Garments Wholesale Market (Shandong) Luqiao Small Commodity Market (Zhejiang) Zibo Zi Chuan Garments City (Shandong) Ningbo Light Textile Market (Zhejiang) Zibo Zhou Chuan Textile World (Shandong) Nantong Sanxing Embroidery City (Jiangsu) Miaoqiao China Sweater Market (Jiangsu) Wenzhou Commercial City (Zhejiang) Puning Liusha Fabrics Market (Guangdong) Puning Liusha Apparel Market (Guangdong) Jiaxing Tongxiang Puyuan Sweaters Market (Zhejiang) Data source: Almanac of China’s Textile Industry.48 3.80 4.97 4.31 15.30 3.49 3. 1996 Sales (bn.60 5.66 4.30 3.

41 Table 2 Average Annual Wages of Manufacturing Industries in China (Unit: RMB) Province Beijing Tianjin Hebei Shanxi Inn Mongolia Liaoning Jilin Heilongjiang Shanghai Jiangsu Zhejiang Anhui Fujian Jiangxi Shandong Henan Hubei Hunan Guangdong Guangxi 1985 1284 1097 1047 1133 1124 1075 1054 1074 1329 1052 1045 971 1023 1021 1086 1021 1042 1079 1363 1086 1986 1438 1354 1219 1318 1254 1247 1182 1252 1570 1240 123 1134 1201 1152 1269 1165 1178 1238 1487 1277 1987 1742 1620 1408 1501 1343 1465 1350 1403 1864 1504 1465 1300 1357 1273 1454 1305 1348 1499 1765 1498 1988 2094 1942 1688 1763 1565 1797 1626 1641 2247 1851 1798 1534 1642 1504 1840 1522 1614 1727 2329 1760 1989 2369 2264 1871 2096 1767 2008 1772 1838 2624 1977 1990 1737 1926 1641 1999 1711 1759 1915 2766 1892 1990 2701 2429 2058 2318 1945 2199 1894 1903 2877 2180 2177 1940 2170 1792 2250 1938 1937 2099 3023 2099 1991 2985 2734 2220 2503 2117 2396 2042 2129 3374 2378 2391 2105 2461 1934 2405 2071 2163 2247 3511 2312 1992 3518 3116 2539 2727 2357 2704 2270 2326 4317 2883 2827 2360 2856 2167 2653 2374 2430 2551 4178 2699 1993 4621 3979 2882 2756 2580 3092 2565 2389 5612 3654 3741 2716 3568 2393 2909 2542 2819 3043 5482 3509 1994 6242 5022 3870 3348 3339 3972 3324 2898 7020 4660 5054 3483 4714 3091 3800 3191 3785 3824 6838 4457 1995 7570 6020 4514 4087 3681 4523 4132 3628 8890 5674 6059 4246 5931 3939 4729 4034 4479 4536 7913 5311 1996 8821 6828 4822 4509 4095 4766 5140 3611 10051 6062 6644 4751 6666 4586 5038 4550 4859 4665 8570 5511 .

42 Table 2 The Average Annual Wages of Manufacturing Industries in China – Continued (Unit: RMB) Province Sichuan Guizhou Yunnan Xizang Shaanxi Gansu Qinghai Ningxia Xinjiang 1985 1077 1130 1165 1963 1096 1388 1558 1291 1402 1986 1223 1266 1294 2179 1248 1508 1746 1512 1594 1987 1377 1412 1506 2274 1427 1739 1972 1718 1760 1988 1646 1657 1795 2525 1695 205 2231 1959 2028 1989 1882 1875 2037 2584 1900 2323 2387 2242 2248 1990 2107 2171 2316 3093 2089 2531 2535 2473 2449 1991 2311 2351 2540 3116 2246 2715 2652 2665 2617 1992 2528 2683 2876 3355 2441 2986 2905 2925 2897 1993 3092 3149 3410 3410 2758 3623 3161 3006 3164 1994 4457 3918 4632 4167 3476 4498 4184 3737 4138 1995 4622 4704 5677 4789 4093 5488 4761 4746 5220 1996 5095 5009 6680 5211 4560 5906 5177 5190 5673 Source: China Statistical Yearbook. 1986-1997 .

4 8849 8360.4 15031.3 12728.9 4813.660 2.3 6297.2 1770.9 *7.9 1762.7 516.2 3090.7 Japan NA 386.5 15217.7 2052. Dec.1 9.6 21008. .500 1.1 *9.488 – 3. June 1998.7 25829.2 772.1 2.4 16. Men’s Suit97 Brand Name Ferre Balenciage Pierre Cardin Pei luo meng Brand Origin Italy France France China Production Place Italy Hong Kong Tianjin Shanghai Main Price Range (RMB) 15.000 –3..092.613.2 4334. 1985—1995 USA 2985. The source for these data is a market survey conducted by China Textile University.091.43 Table 3 Hong Kong Re-exports of Articles of Apparel & Clothing Accessories From China to Selected Major Countries of Destination (1984-1995) Unit: HKD Million Year 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Notes: * Data given at the end of 1991.9 7.8 **3.000 – 17. Since the survey was aimed at people with medium to high income.4 6000.2 488.2 5684. the medium.or high.5 9894.8 963.5 1293.318. those without asterisk given at the end of 1992. 4-3.4 1297.261. Trade Statistics Dissemination Section.4 7643. Data Source: Hong Kong External Trade.482. 4-2.8 12594.324.4 United Kingdom NA NA 161.1 918. ** Data given at the end of 1989. those without double asterisk given at the end of 1990.5 1558.5 10453.8 8486.3 Germany NA 339.596.9 China 68. Hong Kong.000 2.5 268.0 21319.492.3 24446.700 97 Table 4-1.7 3.9 France NA NA NA NA NA NA Table 4-1 Price Range of Name Brands in Shanghai Market.1 1511. and 4-4 show the well-accepted price range of certain name brands in the Shanghai market.1 154.2 1504.7 587.2 7695.8 1649.2 *16.1 NA NA 1277.2 3829.4 1.5 628.3 7668.2 754. Census & Statistics Department.1 1548.6 389.3 17624.6 4389.9 *1.005.8 *2.1 3330.8 1903.252.350.200 – 2.class brands of apparel were emphasized.

62 29. 1997.39 23.800 940 – 1.000 – 17. Urban Year 1978 1980 1985 1990 1991 1992 1993 1994 1995 1996 Percent Urban Residents 17.71 26. p.44 Table 4-2 Price Range of Name Brands in Shanghai Market.S.S.500 1.37 71.500 200 – 350 Ports Mysheros Table 4-3 Price Range of Name Brands in Shanghai Market. Women’s Suits Brand Name D&G Anne Klein Sisley Brand Origin Italy U.59 73.41 26.488 – 1. U.S.96 70.250 Table 5 Population Structure: Rural vs. U.04 29.63 28.400 – 1.888 1. China Production Place Shanghai Shanghai Beijing Main Price Range(RMB) 200 .38 70. Casualwear Brand Name C.S. Sportswear Brand Name Nike Adidas Lining Brand Origin U. 69.63 72.29 73.14 28. China Production Place Shanghai Shanghai Hubei 98 Main Price Range (RMB) 700 – 900 200 – 420 80 .92 19.63 98 China Statistical Yearbook.61 76.K Esprit Kangsai Brand Origin U.08 80.86 71.800 200 – 800 100 – 400 Table 4-4 Price Range of Name Brands in Shanghai Market.37 Percent Rural Residents 82.S. Italy Canada China Taiwan Production Place Italy Japan Guangdong Fujian Shanghai Main Price Range(RMB) 15. .37 27.

Four months with own materials. 2. L/C (letter of credit) should have arrived one and a half month ahead the delivery.--one to two hundred pieces . § Order size: Max. LTD.45 Appendix B Order Sizes and Lead Times in Sample Case studies are critical to gaining a deep understanding of China’s apparel industry. weaving. unit cutting.—1.tens of thousand of dozens (with quota).-. sewing. The Itochu Co. Min--60 pieces Two months with materials from USA and three months in general. About three months with own materials. Shanghai Wellstone Apparel Co. Lead Times and Order Sizes in the Sample Firms in 1996 1. high-temperature decanting.--Tens of thousand. packaging. Shanghai New Union Textiles I/E Corporation Pudong Company § § Order size: Lead time: Max.more than one million pieces (T-shirt).000 pieces / one style in one color § § Lead-time: three months in general (for pattern making.. hand drawing. Shanghai Artwaves Garment & Ornament Co. Most frequently -. contract signing.several thousand pieces. sewing) 3. LTD § § § Main product: silk garment with hand painting Order size: Lead time: Most frequently --3. Shanghai Silk I/E Corporation § § Order size: Lead time: Max.. LTD § Main product: knitted garments § Order size: Max.--ten million pieces (white T-shirt). The following research examined the lead times and order sizes of various firms in 1996 and 1998.000 pieces One and a half-month (with stable supply of 100% silk grey) (Dying. Min. 4. and delivering) Depending on the delivery of the materials.-. colour fixed water-cleaning and dry-cleaning. 5. dying. Min. thread buying..

4. -. Gurrand Investment (Shanghai) Co. LTD (Sino-American) § Order size: Max. one to two months for fabric delivery with own materials.--several hundred pieces Most frequently --several thousand pieces 25 to 50 days on average with material supplied by Japanese customer 8..forty thousand pieces. LTD § Order size: Max.one to two thousand pieces Three to six months 7..40 days Min. -. -.2. -. Shanghai Swell Co. LTD § § Order size: Lead time: Max. -.--500-600 dozens Most frequently --1. the sewing time is 25-35 days § 10. East Grace Corporation Wuxi China § § § Order size:with materials supplied by customer. 25-45 days for dying fabric while 30-50 days for yarn-dyed fabric For both above.46 6.two to three hundred pieces Most frequently -.000 yards Lead time: with materials supplied by customer. Wujiang Tung Ah Feather Products Co.10 days § Lead time: . -.000 dozens.fourteen thousand pieces Min. Min..300-500 pieces Most frequently -.000 dozens 14-45 days § Lead time: 11. min order size of fabric is 3. Min. Shenzhen Inwear Co. LTD § Order size: Max..000 pieces Average -.000 . min is 50 pieces for each style each colour With own materials..two to three thousand pieces 30 to 50 days with materials supplied by Japanese customer § Lead time: 9.13. Shanghai Xinye Garment Co. -.--13.000 dozens Min. LTD § § Order size: Lead time: Min.

LTD § Order size: § Lead time: Max.000 pieces Average one to two months. Business news-.400. LTD § Order size: § Lead time: § Order size: § Lead time: Max -.--less than 500 pieces Most frequently --2-3 thousand pieces Note: orders from American customers are much bigger With own materials. Shanghai Garment Group Co. 1-2 months on average § Lead time: 15.--tens of pieces to one or two thousand Most frequently --thousands of pieces to tens of thousands pieces 60-80 days 13. 3-4 months on average With supplied materials. Shanghai High Sweater Design Corporation 14.Shanghai Xinwin Attire Factory § Order size: Max--200.500-1. -.-.47 12.one to two hundred pieces for women’s shirts Three months for common fabrics Half a year for complicated fabrics (Time for L/C is half and a month at least) 16. Min. Min. Shanghai Garment I/E Corporation (Japanese Division) § Order size: Min. half a year for large order..000 pieces Min -.thousands to tens of thousand dozens. Shanghai Worldbest I/E Co.000 pieces (short pants) Min.-.tens of pieces ..

Ltd. Shanghai Smart Apparel Co. § § § § § Product: men’s shirt Target consumer: Price level: Order size: Lead time: common men 110-230 RMB per piece 1. Beijing White Collar Apparel Co.000 . Kangsai Group Co.000-5. Ltd. Ltd. Ltd. Wuhan Taihe Industry Group Co. § § § § § Product: casual wear Target consumer: Price level: Order size: Lead time: young active persons 150-350 RMB 1200-100.000 per style 45 days or so 5.000 pieces one month 4.000 pieces depends on the style and specification of the garment 2.000 pieces 45 days .300 RMB / set 600. Guangdong Zhong Shan City Haoli Clothing Co. § § § § Product: women’s fashion Target consumer: Price level: Order size: young and middle age professional women 350-1.10. Ltd.48 Lead Times and Order Sizes in the Sample Firms in 1998 1. § § § § § Product: knitting casual wear Target consumer: Price level: Order size: Lead time: common 80-250 RMB per piece 2. § § § § § Product: women’s fashion Target consumer: Price level: Order size: Lead time: young fashionable women 290-510 RMB per piece 100-3.000 pieces one year 3.

§ § § § § Product: hand-knitting wear Target consumer: Price level: Order size: Lead time: fashionable women aged 20-40 100-300 RMB per piece 3-5 piece per style three to five months 7.000 or more one to two weeks 9. Shanghai St. Ltd.000 pieces . Shanghai Oniya Fashion Co. § § § § § Product: women’s wear Target consumer: Price level: Order size: Lead time: elegant young women 300-600 RMB per piece 1. § § § § § Product: women’s fashion and professional wear Target consumer: Price level: Order size: Lead time: medium to higher level women aged 20-30 400-800 RMB per piece 100-3. Ltd. § § § § § Product: cashmere sweater and coat Target consumer: Price level: Order size: Lead time: high level 800-1.000 pieces 45 days for an order of 3. Edenweiss Cashmere Apparel Trading Co.900 RMB per piece 100-3. Ltd. Shanghai Li Li Min Knitting Co.000 pieces one to two weeks for an order of 100 pieces 8.49 6. Shanghai T&A Fashion Co.

(4) consumer goods sold to foreigners . (8) stoves and other heating facilities and liquefied gas sold by gas companies to households and institutions.50 Appendix C Explanatory Notes for Major Terms Apparel Industry refers to apparel manufacturing establishments. to urban and rural households and institutions. daily-use articles for cultural life and recreation. power. special stamps. Excluded under this heading are: raw materials. (7) consumer goods purchased and then sold by second-hand shops. medicine and medical instruments and fuels. enterprises. (3) grain and non-staple food. enterprises and institutions. books. and sale of commodities among farmers. first-day covers. military units and to canteens of hotels and hostels that only serve their guests. books. the total retail sales of consumer goods is an important indicator for the study of people’s livelihoods. stamps sold at post offices. clothing. and manufacturing establishments in other industries of different type of ownership. schools. Total retail sales of consumer goods refers to the sum of retail sales of consumer goods by wholesale. Illustrating the supply of consumers’ goods through various channels to households and institutions to meet their demands. retail. fuels. (6) newspapers. clothing. (5) Chinese and western medicines. newspaper and magazines. Hong Kong and Macao during their stay in the mainland of China. Consumer Goods include food. magazines directly sold to households and institutions by publishers. new and old commemorative stamps. income of water. herbs and medical facilities purchased by households. operational income of urban public utilities. commissioned sales at second-hand shops. institutions or state farms and sold directly to their employees or their canteens. stamp albums and other stamp-collection articles sold by stamp companies. The retail sales of consumer goods include: (1) commodities and housing (including building materials for the construction or repair of housing) sold to urban and rural households. and (10) commodities sold by farmers to non-agricultural households and institutions. . institutions and state farms for production purpose: commodities sold to trade establishments for re-selling. overseas Chinese. and commodities produced by enterprises. gas production and supply establishments from the supply of their products. and so on. daily articles and fuels sold to military personnel. tools sold to enterprise. (2) food and fuel sold to canteens of institutions. equipment. as well as retail sales by firms to non-agricultural households. catering. the purchasing power of consumer goods and the circulation of money. and Chinese compatriots in Taiwan. (9) commodity housing buildings sold to households by urban construction and real estates management agencies.

imputed value of consumption of owner-occupied dwellings and consumption goods in the form of physical wages obtained by residents. or when the area has a population of below 20. including expenditures on various commodities and expenses for non-commodity items such as culture and service. or when it is a remote area. Expenditure on commodities refers to expenses of the sample households for the purchase of commodities from shops. hosing and building materials. catering industries. canteens markets and the peasants classified into nine items: food. mountainous area. clothing.. daily-life necessities. and the percentage of non-agricultural population to 70% or 2. including the purchase of various kinds of goods for consumption and outlays of various kinds of services. cultural life and education. e. tourism area. newspaper and journals. excluding outlays for the purchase of building and production.000. a town was defined as consisting of more than 2. i. since 1964. fuels and other commodities. small mining area.. the number of permanent residents for a town was raised to 3.000 with 2. City refers to cities established with the approval of the central government.000. such as rents. pharmaceutical and medical treatment. license tax.000 nonagricultural population. Living expenditures refers to total expenditures of the sample households for daily life.) Total consumption includes personal consumption and public consumption. Urban population refers to the population living in areas under the administration of city or town forms of government. or when the area has a population of more than 20. small harbor. loss. Total consumption refers to the total final expenditure of consumption of goods and service by the resident units in a certain period time. factories. Resident consumption refers to total final consumption of goods and services during a certain period of time. heath care. excluding financial support and gifts to others. resident units purchase goods and services domestically and abroad in meeting their own demands on physical life. tax payments (such as income tax. e. Included are those for own consumption or for gifts to relatives and friends. etc.500 permanent residents with 85% of non-agricultural population. the value of products which are provided by public service organizations for government. etc. Through 1963. Public consumption refers to value of total output of government minus receipts from sales. traffic. of which 50% or more were considered non-agricultural population. and government paid for the products which are consumed by the public later.51 Disposable income refers to the actual income of the surveyed households that is available for daily life.000 permanent residents. Town refers to towns established with the approval of the provincial government. . (This excludes non-resident units’ expenditure of consumption within national territory. i. cultural life and mental life. autonomous region.) and various expense by individual laborers for business purposes. real estates tax. etc. cultural and recreational articles. Rural population refers to the population of counties excluding those living in towns or cities in the county. Further adjustment was made in 1984: a town is defined when the area is the location of a countylevel government agency. or border area with non-agricultural population of below 2. or municipality directly under the central government. but excluding fines and confiscation.000 with 10% or more of non-agricultural population.

Professor of Marketing.52 Appendix D Project Team This report is asub-project of Harvard Center of Textile & Apparel Research (HCTAR). Business School • Yang Yixiong. China Textile University Project Leaders: • Gu Qingliang. Fashion Institute Members of Project: • Wang Yueping • Wei Yan • Fang Ping Major Contributors: • Hu Ruilin • Chen Xiuhua • Wang Dengming • Tang Li • Chen Zhan • Zhang Mingjie • Gong Chen • Zhou Aiying • Liu Yan . Professor of Fashion Merchandising.

Textile and apparel Exports of the Three Areas of China to the United States. Towards the Garment Market of 2000. Almanac of China’s Textile Industry. 1985-1995. People’s Republic of China. Beijing. . China Statistical Publishing House. The Development Strategy Research Center of Light Industry. 1997. The China Industrial Economic Statistical Yearbook. No. The Editorial Board of the Almanac of China’s Textile Industry. Journal of China Textile University. 1986-1994. 1995. 1995. China Statistical Publishing House. Kurt Salmon’s Associates (KSA) . 9. 4. Beijing. 1998. 7. 1. 74-81. Wen Lisheng. Quota to be Auctioned. Textile Press of China. Pan Jingming. J. The Development and Application of Apparel CAD/CAM Systems in China. Regular News. 1995. 3. Textile Asia.T. Structure Adjustment and Technological Innovation. China Textile News Publishing House. Sun Zhigang. Beijing. Zhang Zhiming. 3. A Selection of Treaties of Textile Academy Symposium. KSA European Interviews. Apr. Changing Reobtaining an employment to Restarting an Undertaking. No. A Collection of Outstanding Articles Winning Chen Weiji Prize at Fourth Session. Xi Yujun. Almanac of China’s Light Industry. Xie Yingan. Beijing. 41-45. 1998. China Textile Leader. 8. A Collection of Treatises on Clothing and Accessories in China. Moves in Asia. 2. Almanac of China’s Economy Publishing House. 17. Almanac of China’s Light Industry Publishing House. 1992-1997. Beijing. Cheng Zhenghua. China Textile Press. 16. 1996. 15. 25. Wang Yueping. 14. p. 12. 1997. July 1995. People’s Republic of China. 1995. KSA North American Interviews. 13. Research On the Developing Strategy of Shanghai Knitting Industry Enterprises. China Industrial Economy. The Editorial Board of the Almanac of China’s Economy. Shanghai. 5. 1998. April. The Information of Textile Foreign Trade. Jan. Almanac of China’s Economy. Beijing. p. Paul Leung. Feb. 1995. 5. 1988-1995.53 References 1. 1988-1997. State Statistical Bureau. p. Nov. 6. China Statistical Yearbook. 154-160..N Monthly. No. Shanghai Fashion & Accessories Society. 10.46 Country Comparison Report. State Statistical Bureau. China. 11. 1994-1997.

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