With China fashion week in Beijing in full swing (above), and a recent report that international fashion houses are starting to shifting production out of China, this Bystander thought it worthwhile to republish our piece from last month about the challenges facing China’s textile and apparel industry, and its need to move up market:
China’s rag trade is the world’s largest. It consumes 45% of the world’s fiber, accounts for a third of world textile exports and now has a huge and fast-growing domestic market for textiles and apparel into which to sell. As best we can guess, the industry has half a trillion dollars in annual sales and employs more than 20 million people. A further 140 million are involved in cotton farming, and millions more in the chemicals industries producing man-made fibers. Our numbers, though based on commerce ministry data, are a guess. Many of the businesses operating in the industry are too small to get counted in the official figures.
One thing we do know is that the textile and garment industry is both privately and foreign owned to an uncommon extent for such a significant Chinese industry. Another is that it faces the challenge of breaking away from its low-cost, high-volume model, like other industries that have thrived in the export-driven phase of China’s growth over the past three decades. The slump in demand in its export markets in the developed world may be temporary, but rising labor costs will be permanent, and the more painful as industry wages are generally lower than in other parts of manufacturing. The high value added parts of its supply chain lie in the hands of others, notably specialist logistics companies.
The rag trade globally has always been a hybrid of the high-quality fashion market, characterized by modern technology, relatively well-paid workers and designers and a high degree of flexibility, and the low-end, mass production of cheap and standard clothing, such as t-shirts and uniforms by semi-skilled and unskilled, usually female, labour, in which international retailers have the dominant market power. The potentially highest value added part of the business, internationally recognizable fashion brands, are almost completely outside the Chinese industry’s orbit. The country, and Shanghai in particular, does have an emerging cadre of world-class couture designers, some of those work has been making an increasing splash at the biannual Shanghai Fashion Weeks. A collection from Zhang Zhifeng’s Ne Tiger line opened the most recent show, seen above. Yet Shanghai’s best labels are still far from challenging the likes of Louis Vuitton, Chanel, Gucci, Dior and Armani, even inside China where those European labels are the ones that dominate the domestic fashion market.
Every fashion industry cascades down from couture through ready-to-wear to the cheap knock-offs sold on market stalls and needs a textiles industry underpinning it. Redressing China’s textile and garment industry’s structural shortcomings will require a level of innovation beyond anything the domestic textile industry has known. Inevitably, there is a plan. It has been devised by the China Textile Industry Association, a trade body, and officials in Songjiang, one of the satellite towns on the western outskirts of Shanghai and better known for Thames Town, the surreal facsimile of an English home counties market town that has been built there. They plan to build a 2,000 acre industrial zone for the textiles and fashion industries that will be part business park, part R&D center, part fashion expo and shopping mall, and part brand incubator. Two years in the making, a small corner of this project opened a few months back. The full vision will take six or seven years to realise.
The notion of clustering firms, in the hope that the cross-pollination of people, ideas and capital, will foster innovation, is taken from high-tech industries. Fashion Valley, as the zone is being called in an echo of Silicon Valley, will sit alongside Songjiang’s existing industrial zone, already home to biotech, semiconductor and pharma firms.
It will also be close to another essential component of a high-tech industrial cluster, a leading university. Songjiang has several. In particular, the fashion and fabrics-centric Donghua University, whose roots go back to the Shanghai Textile Engineering Institute and which absorbed the textile sections of a number of regional institutions in East China after the Communist Party took power in 1951, maintains a campus in Songjiang. Over the road is the Shanghai University of Engineering Sciences’ new home for its Institute of Clothing Technology, arguably China’s leading fashion design college thanks to its partnership with Paris’s IFA. Neither campus is far from the proposed fashion incubator.
Songjiang is not an illogical spot for such a project. The district has been associated with the textile industry ever since the Mongols replaced rice with cotton as the area’s main crop in the 14th century, leading to spinning and weaving becoming prominent local industries.
The question, asked a thousand times by economic development planners everywhere, and yet to be convincingly answered, is can innovation be systemized? This Bystander doesn’t doubt local bureaucrats’ natural affinity for expensive, large-scale real estate and infrastructure development. And up to a point, in China, if you build it, they will come. Some are told to; others just know to hear the call. Several local firms are already signed up. Developing creative industries and expanding China’s soft, cultural power are all now national priorities.
No doubt, too, that if China’s textile and apparel industry is to escape being stuck in the low-value end of the business it will have to become vertically integrated. To do that it will need to develop both management skills and quality standards along the value chain, as well as dealing with the sustainability and labor issues surrounding the fashion industry internationally. One point in its favor is that the textile and garment industry is suitable for the sort of incremental and process innovation that Chinese firms are starting to become adept at, rather than needing to search for breakthrough products and technologies. Another is that if the textile industry diversifies into technical textiles, for use in the medical, aerospace, automotive and green-technologies industries, for example, it can ride the development arc of those industries, all of which are being championed as strategic national interests.
Best business practice can always be taught, but industrial clusters tend to emerge despite the best intentions of planners. In the U.K. it took more than three decades of economic planning to develop a high-tech company incubator around Cambridge University, known as Silicon Fen. Yet, over the past couple of years, London’s Silicon Roundabout had emerged organically as the place for web start-ups. Closer to home, as well as a thriving fashion industry, Shanghai has an vibrant modern art scene that has grown up around 50 Moganshan Road to the north east, organically and unplanned.
The challenge for the textile and garment industry is give the creativity of designers and fashion entrepreneurs enough free rein to develop world-class brands and labels while providing them with both the technical advances and the business and production disciplines to compete with the established fashion multinationals. In the world’s fashion capitals it is the design and fashion schools rather than industrial parks that play a crucial part in that, places like London’s Central St. Martin’s, New York’s Parsons and FIT, Paris’s Ecole de la Chambre Syndicale and Esmod, Milan’s Instituto Marangoni and Tokyo’s Bunka Fashion College, all of which would fall into the top 10 of most lists of the world’s top fashion schools. SUES and Donghua, which woldn’t rank in many top 50s, will have to break into those ranks.
China has the potential to reshape the global couture market, as it does all luxury markets, because its domestic market is likely to grow so fast and so far. In white goods, Haier is a harbinger of what is possible. It turned a high-end consumer good, wine-cooler refrigerators, into a much cheaper middle-market product, and grabbed a 60% global market share in the process. Unlike as it seems now, it is perfectly conceivable that Shanghai, perhaps even Songjiang, will one day be spoken of in the same breath by fashionistas as Milan, Paris, New York and London.