China’s Ministry of Commerce runs a comprehensive ‘textiles market monitoring’ website that updates analyses of the commodity indices. To those in the textiles trade, both within and beyond China, the chemical fibre and silk indices are indispensable in monitoring the pulse of the market.
Surprisingly, perhaps, the indices of the textiles market are not issued by a central authority, but by the Eastern Silk Market of China (ESM), a management agency and transactions platform based in Shengze township of Jiangsu province. Transactions that take place in this township shape the national commodity indices used by China’s government and businesses to evaluate market trends across the country. It is no exaggeration to say that Shengze township is the hub of China’s textiles market.
Shengze is located in Wujiang city (a county-level city) of Jiangsu province on China’s coastal belt. Historically, Shengze township was ranked alongside Suzhou city, Hangzhou city and Huzhou city as China’s four major silk capitals. For centuries, the township has been a magnet for the silk trade.
The textiles industry is a major pillar of Wujiang city’s economy. In 2008, textiles production was valued at Rmb85bn ($12.4bn), constituting one-third of Wujiang’s industrial GDP. In the same year, 300 million garments and 180 million pieces of knitwear were produced. The export of silk products from Wujiang accounted for one-sixth of China’s total exports.
Shengze, a township under Wujiang’s jurisdiction, has transformed itself from an ancient silk market to a modern textiles hub. Of the 7000 textiles producers in Wujiang city, more than 2300 are located in Shengze township. In recent years, Shengze has produced about 8.5 billion metres of textiles annually. Today, products go beyond silk and to synthetic fabrics and a whole range of finished products.
Shengze boasts four major firms with assets of more than Rmb3bn, the most famous of which is the Hengli Group. In 2008, Hengli’s sales exceeded Rmb12bn, making it the largest textiles producer in Jiangsu province. Both the Hengli Group and Shenghong Group have joined the list of China’s top 500 enterprises.
The textiles industry in China, which is heavily export-oriented, was dealt a heavy blow during the financial crisis. In Shengze, it is believed that last year exports fell by about 15%. The drop in demand from Europe and the US was especially pronounced. Equally challenging to local producers were the fluctuating prices of raw materials, such as oil, and rising labour costs. To soften the impact of the crisis, the central government raised the value-added tax rebate on the export of textiles and garments and increased loans for small and medium-sized enterprises.
Complementing the central government’s stimulus policy, planners in Shengze have taken measures to help boost local trade and sales. In this regard, the ESM has taken the lead. To ease the shortage of funds among exporters, the ESM has been working with local banks to design loan packages and risk-management funds for exporters who normally do not have enough assets to mortgage. This is expected to expand loans significantly and encourage exports.
The ESM has also been organising exhibitions. In September 2009, it gathered 48 firms to participate in a major textiles exhibition in Paris, organised by Messe Frankfurt GmbH. The trip proved successful – two months after the exhibition, the CEO of Messe Frankfurt visited Shengze to discuss further collaboration. This year, the ESM plans to hold its first international textiles expo in Shengze.
With the goal of upgrading in mind, the Wujiang city government drafted a three-year plan, running from 2009 to 2012, to reinvigorate the textiles industry. The city hopes to maintain the growth of the industry by more than 12% annually. It also plans to mobilise resources for research, brand development, and energy and water conservation.
In Shengze, the township party secretary, the area’s leading official, sums up his business and governing philosophy: “Sell each metre of cloth for an extra dollar and make an extra dollar from each metre of sale.” To put it simply, officials want local products to be more valuable and to fetch higher profits. To achieve this, innovation and brand building are indispensable.
To strengthen the brand name of ‘made in Shengze’, the ESM has created two group brand names in the categories of dyeing/finishing and weaving. Producers who satisfy quality criteria are entitled to apply those brand names. Additionally, in Shengze, three textile products have won the coveted national title of ‘China brand name’ and nine of them the provincial ‘Jiangsu brand name’.
The recent establishment of Shanghai-Shengze Textiles Exhibition and Exchange Centre, situated in Shengze, represents another step forward in building a conducive environment for innovation. In collaboration with the Shanghai Intellectual Property Rights Service Centre, it provides a platform for exhibiting new patents and technologies in textiles manufacturing. Interested firms may purchase the patents and apply them to their production. A venue such as this simultaneously encourages firms to adopt new technologies and protects intellectual property rights.
In the past decade, Shengze township has attracted more than Rmb10bn in FDI to its textile industry. There are firms present from all provinces of China, as well as Japan, South Korea, Hong Kong, Taiwan and India.
The local government seeks to attract foreign investment in research, branding, design, testing, marketing and distribution. As executives of the ESM say: “Shengze provides an ideal location for setting up an R&D centre and for outsourcing services such as design.” Shengze has firms engaged in all processes of manufacturing, from the making of fibres to the retail of end-products and offers firms the prospect of producing new designs on the spot and distributing them through an existing, wide network of retailers and exporters.
Although the short-term impact has been painful, the financial crisis has strengthened the impetus for textiles firms to upgrade and innovate. With traditional exports taking a hit, the government and textile producers realise how important it is to move up the value chain and to create their own brand names.
The Eastern silk market of China
Central to the boom of the textiles industry in Shengze is the establishment of the Eastern Silk Market of China in 1986. The ESM was initially established by the local government to provide a common venue for producers to trade.
Since its founding, the ESM has grown exponentially. More than 5600 businesses reside in an area of four square kilometres. The ESM also runs an online trading website, www.silkcapital.com, and a comprehensive service platform. In 2009, on-site trading volume reached a whopping Rmb63bn and online transactions hit Rmb30bn, making the ESM the largest specialised textiles trading zone in China.