Analysis of Export Competitiveness of Dongguan City Textile and Clothing Industry ()
1. Introduction
The most famous scholar in the study of industrial competitiveness is Michael Porter from Harvard Business School. In his book National Competitive Advantage (Porter, 2007) , he proposed a “diamond model” to analyze why a country or an industry has strong international competitiveness. Since Porter proposed the “diamond model”, many scholars internationally have studied industrial competitiveness based on this theory. Three scholars from the United States, Lee Young-A., Sontag S., & Slocum A. (2002) studied the size, distribution, and market competitiveness of textile and clothing enterprises in Michigan, USA, and proposed six factors that affect industrial competitiveness, namely product development, organization and management, technology and communication, marketing and international trade, human resources, and environmental issues. Zhang Jinchang (2002) used import and export data of two countries to evaluate the international competitiveness index system of industries. The index system consists of three groups of indicators: market share index, index reflecting net export trade surplus, and index reflecting the proportion of exports. Yang Jinling (2008) believes that China’s textile industry has a certain degree of international competitiveness. However, as workers’ wages and unceasingly rising raw material price, product prices are difficult to rise by the same margin, leading to a continuous compression of the company’s profit margin, and the international competitiveness of China’s textile industry has continuously declined. Jiang & Kuang (2022) analyzed and made comparison in terms of IMS and RCA indexes between Guangdong Province and Jiangsu and Zhejiang, two major textile export provinces. It was found that Guangdong’s textile and clothing industry has weaker international advantages compared to Zhejiang and Jiangsu provinces. Parul Bajaj and Anuj Sharma (2019) stated that Europe and the United States are adopting restrictive trade policies, which will further reduce their dependence on China’s textile and clothing. Moreover, in the context of trade liberalization, India will be able to strengthen its exports of textile and clothing trade.
Through literature collection, it was found that domestic and foreign scholars have diverse research perspectives and comprehensive directions in the textile industry. It was relatively early that foreign scholars have studied the textile and clothing industry, while Chinese scholars have mostly engaged in their research after China’s accession to the WTO and the cancellation of quotas; therefore, it is relatively little literature on the analysis of export competitiveness of Dongguan textile and clothing industry.
2. Connotation of Export Competitiveness
Export competitiveness is a comprehensive reflection of a country’s comprehensive national strength and technological level, but there is currently no accurate definition. From the perspective of international competitiveness of industries, export competitiveness can be defined as obtaining the maximum market share and profits with lower industrial costs and special commodity characteristics under current macroeconomic conditions and industrial development levels. The core is how to strike roots in the world with products and services and seize overseas markets.
In classical trade theory, Adam Smith’s (2008) representative work A Study of the Nature and Causes of National Wealth (also known as The Wealth of Nations) emphasizes the role of “absolute advantage” in determining the choice of national division of labor, which is a good beginning for international trade theory. Under the guidance of the theory of absolute advantage, David Ricardo further improves the international trade theory of the classical school and proposed the “Comparative Advantage Theory”. The comparative advantage theory holds that in international trade, as long as there is a certain gap in existing industrial manufacturing technology between countries, it will lead to differences in product production costs and prices, which will result in countries having their own competitive advantages in different products.
In neoclassical trade theory, in 1919, Herschel first proposed the basic argument of “Factor Endowment Theory”, which was adopted by Orin and founded in 1933. He also published an article titled Interregional Trade and International Trade (2001). In 1941, American economists Samuelson and Stolper jointly proposed the idea of gradually equalization of production factor price and published Real Wages and Protectionism. Subsequently, around 1948, Samuelson published articles such as International Trade and Factor Price Equilibrium, developing the theory of factor endowment and establishing the theory of factor price equalization. Starting from the differences in production factor endowments, Herschel and Orin attempted to explain the reasons for the emergence of international trade, the structure of international trade commodities, and the impact of international trade on factor price. The in-depth and comprehensive research made people realize that production factors and their combinations play a decisive role in national import and export trade.
In the new international trade theory, in 1966, American professor Raymond Vernon first proposed the product lifecycle theory. He stated in his article International Investment and International Trade in the Product Cycle that, in terms of products, they need to go through four stages: introduction, growth, maturity, and decline. In countries with different technological levels, the timing and process of these four stages vary greatly, generally reflected in the differences in technology between different countries and also in the competitive position of the same product in different national markets. Since then, the concept of product lifecycle has expanded from the domestic market to the international market, and the product lifecycle theory has better explained the characteristics of comparative advantage on the international transfer.
3. Analysis of the Export Status of Dongguan City Textile and Clothing Industry
3.1. Analysis of the Total Export Status
In the past decade, the total export value of Dongguan textile has shown an overall growth trend, but not by much. In two years, the export value shows downward trend. In 2013 and 2016, the total export value of Dongguan textile decreased by 8.55% and 15.03% respectively. The total export value of Dongguan city textile in 2011 was 1643.09 million US dollars, while in 2012 it was 1670.82 million US dollars. However, in 2013, 2014, and 2015, it reached 1527.96 million US dollars, 1616.03 million US dollars, and 1817.68 million US dollars, respectively.
In 2016, the total export value of Dongguan city textile decreased significantly due to three main reasons: firstly, the growth rate of international market demand decreased. The expected global economic growth was deceased from 3.3% at the beginning of this year to 2.9%; secondly, the traditional competitive advantage of textile and clothing was being whittled away. Dongguan is located in the Pearl River Delta Economic Zone, and the labor employment cost is far higher than that of Vietnam, Myanmar and other countries. From 2011 to 2020, the average annual growth rate of labor cost in Dongguan textile industry exceeded 8.6%; thirdly, the step-out of industries and orders to Southeast Asian has been accelerated.
In 2016, the Ministry of Industry and Information issued the Textile Industry Development Plan (2016-2020), proposing six key tasks, which means that the textile industry will shift from a scale-speed-oriented to a quality-efficiency-oriented. In the following 2017, the total export value of textile increased by 23.22% during the same period, making it the fastest growing year between 2011 and 2020.
The improvement of the world economic situation and policy support have become important links affecting the development of the textile industry, and the improvement of the European and American economies has brought impetus to the export situation of textile and clothing.
A series of policies has been introduced by the Chinese government to stabilize the development of foreign trade, and has launched policies such as “developing cross-border e-commerce” and “providing services and support for foreign trade enterprises”, further improving the simplification of China’s foreign trade and reducing the overall cost pressure of foreign trade. Affected by this, the total export value of Dongguan’s textile showed slightly growth year by year from 2018 to 2020.
3.2. Structural Analysis
Dongguan textile and clothing industry, as a regional traditional advantageous industry, plays an important role in the development of modern light industry and textile industry clusters. In 2020, Dongguan textile and clothing industry achieved value added of industries above designated size of 9.07 billion yuan, accounting for 14.12% of the total added value of the province’s textile and clothing industry above designated size. After more than 40 years of reform and opening up, the local textile and clothing industry in Dongguan has formed a certain scale of clustering.
In the process of development, Dongguan textile and clothing industry has formed a regional industrial division. Currently, it has formed respectively a textile and clothing industry belt, a woolen knitting industry belt, and a shoemaking industry belt centered around Humen, Dalang, and Houjie. From 2011 to 2020, the number of textile and clothing enterprises above designated size in Dongguan increased from 247 to 501, doubling the total amount and showing an overall upward trend.
In the early stages of reform and opening up, Dongguan textile and clothing industry faced an unknown market with weak competitiveness among various enterprises. However, after years of development, relying on its advantages in manufacturing foundation, openness, and other aspects, Dongguan had begun to play a new role in carrying the global economic gravity center transfer, which provided great space for Dongguan’s traditional industry to grow and strengthen.
Dongguan textile and clothing industry no longer only values processing trade, but instead of focusing on the R&D and marketing of “smile curve” products with higher added value. The business model has shifted from simple processing production to a direction that integrates R&D design, advanced manufacturing, and brand marketing, seizing the high-end links of international industrial division.
In short, in recent years, the growth rate of Dongguan textile and clothing industry has slowed down compared to the “Twelve-Five” Year Plan period, which is related to the transformation period of Dongguan’s industrial development.
3.3. Analysis of Trade Methods
For a long time, China’s textile and clothing exports have won by quantity, mainly focusing on mid to low grade clothing. Dongguan textile and clothing industry is mainly composed of small and medium-sized OEM manufacturers, with 70% of the export value of products coming from OEM. However, small and medium-sized enterprises are mostly guided by short-term interests and operated with short, flat, and fast operating methods, which is detrimental to the long-term development of the brand. “Winning by cheap price and quantity” leads to excessive competition of low-grade products.
Therefore, although the concentration of resources in Dongguan textile and clothing industry should be beneficial for optimizing resource allocation and improving efficiency, in fact, Dongguan textile and clothing value chain is in a weak state in the worldwide and has not changed. Most enterprises have not yet formed advanced management concepts and brand awareness, which limits their expansion into domestic and foreign markets.
Through the above analysis of the total export volume, structure, and trade mode of Dongguan textile and clothing industry, it can be concluded that Dongguan textile and clothing industry started early, developed rapidly, and has formed industrial clusters. However, due to the increase in production factor costs, such as labor employment costs, and trade methods of its main dependence on production and processing, Dongguan textile and clothing industry urgently needs transformation and upgrading.
4. Analysis of Dongguan Textile Export Competitiveness Indicators
In international trade, after the analysis and comparison of the international competitiveness of the same commodity, it usually adopts three indicators: international market share index, trade competition index, and revealed comparative advantage index.
4.1. International Market Share
International market share, also known as export market Share, refers to the share of a product from a country in the total global export value. This refers to the proportion of a certain product from a country in the global sales amount of similar goods in an open international market, expressed as:
(1)
In the formula,
represents the international market share index of j product from i country;
represents the total export value of j product from i country;
represents the total export value of j products in the worldwide. When
’s value is closer to 0, it indicates that the international market share of j product from i country is weaker; on the contrary, when
’s value is getting close to 1, the international market Share of j product from i country is stronger.
The research object of this article is the international competitiveness of Dongguan textile and clothing industry. Therefore, taking the total textile export value in Dongguan city as the numerator, and the total textile export value in world trade as the denominator, then to calculate the IMS index. The specific data is shown in Table 1.
It can be seen that the international market share of Dongguan textile and clothing industry began to decline from 2011 to 2014, and dropped to the lowest value of 0.33% between 2011 and 2020 in 2014. The international market share of Dongguan textile and clothing industry fluctuated between 2015 and 2018; After 2018, it had a trend of recovery. As of 2020, the international market share of Dongguan textile and clothing industry basically rebounded to the level of year 2014.
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Table 1. Dongguan city textile international market share index.
Data source: Dongguan Statistical Yearbook (2012-2021); WTO Historical Statistics http://www.wto.org.
4.2. Trade Competition Index
The Trade Competition Index, also known as the Trade Specialization Index, is used to measure the important role of a certain product in a country. It can also be used to measure the international competitiveness of a certain product in a country, and to compare the competitiveness of the same product between different countries. In this article, the TC index is used to measure the international competitiveness of a certain product in a country, expressed as:
(2)
In the formula,
represents the trade competition index of j products from i country;
represents the export value of the j industry from i country;
represents the import value of the j industry from i country. When
’s value is within different value ranges, the corresponding meanings represented are different.
The trade competition index selects the difference between Dongguan city textile value of export and import as the numerator, and the sum of Dongguan city textile value of export and import as the denominator to calculate the TC index. The specific data is shown in Table 2.
It can be seen that the overall competition index of Dongguan textile and clothing trade showed an upward trend from 2011 to 2020. The TC index was only below 30% in 2012 and 2013, and was between (0.3, 0.6) in other years. The data indicates that Dongguan textile and clothing industry has a strong competitive advantage.
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Table 2. Dongguan city textile trade competition index.
Data source: Dongguan Statistical Yearbook (2012-2021); WTO Historical Statistics http://www.wto.org.
4.3. The Revealed Comparative Advantage Index
The revealed comparative advantage index is the ratio of share of a certain product from a country in its total export value to the world’s share of that product in its world’s total export value. It is the most important indicator reflecting the intensity and specialization advantage of export trade of a certain product from a country, expressed by the formula:
(3)
In the formula,
represents the export value of j product from i country, and
represents the export value of all products of i country;
represents the export value of j products in the world,
represents the total export value of all products in the world. When
, it represents that it has a revealed comparative advantage for j products of country i, the larger the
’s value, the more obvious it is; when
, it means that it has a revealed comparative advantage for j product of i country, and the smaller the value, the more obvious the disadvantage it is.
The revealed comparative advantage index selects the ratio of Dongguan city textile export value to Dongguan’s total export goods as the numerator, and the ratio of world textile export value to world export goods as the denominator to calculate the RCA index. The specific data is shown in Table 3.
It can be seen that from 2011 to 2020, the RCA index of Dongguan city textile and clothing industry was only lower than 1 in 2016, which was 0.89. In other years, the RCA index was greater than 1, which indicates that Dongguan city textile and clothing industry has stronger international competitiveness.
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Table 3. Dongguan textile revealed comparative advantage index.
Data source: Dongguan Statistical Yearbook (2012-2021); WTO Historical Statistics http://www.wto.org.
By analyzing the international competitiveness of Dongguan city textile industry using IMS, TC, and RCA, it can be concluded that the international market share of Dongguan city textile and clothing industry fluctuated mostly at 0.4% from 2011 to 2020 with a trend of gradually increasing in recent years. From the values of the TC and RCA index, it can be seen that Dongguan city textile have strong international competitiveness, but they are not very strong. Therefore, Dongguan is a major textile and clothing city, rather than a strong textile industry city.
5. Analysis of the International Competitiveness of Dongguan Textile and Clothing Industry
5.1. Rising Raw Material and Labor Costs
In recent years, the prices of fuel, power, and raw materials have risen, squeezing the profits of the textile and clothing industry. In addition, the developed countries, such as Europe and America, have implemented trade protection for Chinese textile, which results in small and medium-sized textile and clothing enterprises experiencing production stoppages or semi stoppages.
Dongguan textile and clothing enterprises are labor-intensive industries, and their important business model is to rely on cheap labor to earn price differences. However, from 2011 to 2022, the per capita wage of workers in the post in Dongguan continued to rise, and labor costs continued to rise with an average annual increase of over 8.6%. The business model of Dongguan labor-intensive textile and clothing enterprises relying on cheap labor to earn price differences has been affected to some extent. Dongguan textile and clothing enterprises faced enormous cost pressure.
5.2. Intense Competition between Enterprises
Under the conditions of a sound market system, if the local market has strong competitors, it can drive enterprises towards international competition. However, if domestic competition is too fierce, it is easy to lead to excessive consumption of resources. The overall number of textile and clothing enterprises above designated size in Dongguan showed an upward trend from 2011 to 2020, and the number doubled within 10 years, leading to increasingly fierce competition among enterprises.
At present, Dongguan has formed a large-scale industrial cluster; however, except for enterprises above designated size in the cluster, there are also a large number of textile and clothing enterprises and individual businesses below designated size in the cluster. Dongguan textile and clothing industry still faces low threshold, leading to the emergence of vicious competition methods within the industry, such as “price wars”, which is not conducive to the industrial development. At present, the number of textile and clothing enterprises above designated size in Dongguan is growing rapidly, competition is fierce, and the entry threshold for the industry is low, which needs to be constrained and standardized.
5.3. Lack of Independent Brands and Innovation Capabilities
Over the past 40 years of reform and opening up, Dongguan has been attracting foreign investment with its geographical advantages, national policy preferences, and low labor costs. According to the Dongguan Statistical Yearbook (2011-2020), the proportion of foreign-invested enterprises (including Chinese Hong Kong, Chinese Macao, and Chinese Taiwan) in Dongguan textile and clothing enterprises has decreased from 42.91% to 24.75% in 2011. Foreign investment economy is an important component of Dongguan’s economy. Among Dongguan textile and clothing enterprises, most of them are mainly engaged in processing trade without independent product research and development institutions, and have a relatively low position in international division of labor. The spillover effect of technology has limited impact on Dongguan textile and clothing industry.
The proportion of foreign-invested enterprises above designated size (Chinese Hong Kong, Chinese Macao, and Chinese Taiwan) in the number of textile and clothing enterprises in Dongguan continues to decline, indirectly reflecting the increased domestic investment in Dongguan textile and clothing industry. However, the proportion of foreign-invested enterprises is still relatively high, and most of them belong to processing trade, without the significant technology spillover.
In the past, Dongguan’s clothing production was mainly based on “three supplies and one supplement”. Although there were many textile and clothing enterprises, as well as independent brands such as YICHUN and CITY BEAUTY, there were few brands with certain influence in the international market. From this, it can be seen that Dongguan clothing and textile industry has strong processing capabilities but little brand influence, which is not conducive to the further development of Dongguan textile and clothing industry.
Most companies are oriented towards immediate interests and lack long-term brand planning. In addition to brand competitiveness, Dongguan textile and clothing industry also lacks core competitiveness, such as talent and technology, which results in weak product innovation ability, low product grade, and less prominent brand effect.
5.4. Existence of Green Trade Barriers
Although green trade barriers are no longer the main obstacle to the export of the textile and clothing industry, they are still one of the factors that cause instability in Dongguan textile and clothing exports. Developed countries continue to formulate some environmental regulations and inspection standards for textile, improve product quality standards, and restrict the import of textile and clothing products by setting new technical barriers, affecting Dongguan’s foreign trade in textile and clothing products.
6. Suggestions and Conclusion
6.1. Countermeasure Suggestions
To improve the export competitiveness of Dongguan textile and clothing industry, the following countermeasures and suggestions are proposed.
1) Emphasize the development of knowledge resources
The increasing cost of labor and other production factors makes it impossible for Dongguan textile and clothing industry to continue using low-cost methods to obtain price differentials. To maintain and gradually improve its competitive advantage in the increasingly fierce international competition, Dongguan textile and clothing industry must start by introducing and cultivating advanced production factors.
The government needs to create a suitable entrepreneurial environment in society, introduce preferential policies for talents, focus on vocational education, increase investment in human capital, cultivate skilled workers with innovative spirit and ability, and improve labor productivity.
2) Adhere to industry standards and avoid adverse competition
There are many textile and clothing enterprises in Dongguan, and even if certain industry standards have been established, more attention should be paid to industry self-discipline, especially with the large number of small and medium-sized private enterprises, which are prone to adverse competition. Only when relevant textile and clothing enterprises comply with industry standards and minimize unnecessary friction can the textile industry achieve sustained and stable development, providing guarantees for textile product exports.
3) Increase R&D investment and implement brand strategy
With the increasing phenomenon of “homogenization” in the world market, enterprises must establish brand awareness, fully leverage their competitive advantages, and create a unique brand image. From raw materials, design, production to after-sales service, we independently create our own brand, thereby enhancing the international influence of textile and clothing enterprises and the international competitiveness of textile and clothing products. Quality improvement and brand building complement each other and will play a promoting role in the transformation and upgrading of enterprises.
Under the new situation, the international trade of the textile and clothing industry is facing unprecedented challenges. Faced with the uncertainty of international trade, Dongguan needs to seize the opportunity, combine the digital economy with the textile industry, utilize the advantages of e-commerce, and promote the export of textile and clothing products.
4) Establish a trade barrier warning mechanism
The Textile and Clothing Association should establish a trade barrier warning mechanism, establish a comprehensive information center, collect and grasp the latest situation of trade export conditions, improve industry standards according to international norms and standards, and promptly notify relevant enterprises. At the same time, enterprises should follow industry standards and norms that are consistent with international standards to avoid being constrained by others.
6.2. Conclusion
Dongguan textile and clothing industry started early and formed industrial clusters, mainly relying on export trade, with strong international competitiveness. However, due to factors such as increased production factor costs and increased domestic and international competition pressure in Dongguan, the demographic dividend is gradually disappearing, production costs are low, and the advantages of industrial clusters are reduced. The rapid development of the textile and clothing industry can no longer rely on a large amount of low-cost labor and processing trade to promote, and transformation and upgrading are needed to better enhance the international competitiveness of Dongguan textile and clothing industry.
Acknowledgements
This research was financially supported by Scientific Research Project of Lingnan Normal University. The project is Research on Economic Growth in Underdeveloped Areas (Xu Yanli, Grant No. ZW1807).
It is a pleasure to acknowledge the support of the project from Xu Yanli being selected in the introduction of shortage top talent of “Yangfan (Sailing up) project” in Guangdong Province in 2014. The project is Leading Industry Development Strategy Research in Emerging Areas in Western Guangdong for Accelerating the Economic Development of Western Guangdong.
It is also a pleasure to acknowledge the support from the talents introduction project of universities in Guangdong Province.
It is also a pleasure to acknowledge the support from the following projects: 1) Excellent Course “Macroeconomics” in Teaching Quality and Teaching Reform Project in Lingnan Normal University in 2017 (Grant No. 114961700227). 2) Comprehensive reform experiment of International Economics and Trade major in Guangdong University of Petrochemical Technology. 3) International Education Department in Guangdong University of Petrochemical Technology. The project is Research on Teaching Quality Evaluation for the major International Economics and Trade in English in the Background of International Education (Grant No. 2014GDUPTGJ-07).
This research is supported by Guangdong Coastal Economic Belt Development Research Center, Lingnan Normal University (Grant No. 20223L08, Grant No. 20191L01).