Introduction to Foreign Investment in the Textile Industry

Since the reform and opening-up, attracting foreign investment has played a key role in China's economic development and reform and foreign-invested enterprises have become an important component to China's economy. In 2001, the contractual value of foreign direct investment totaled US$69.19 billion -- an increase of 10.4 percent over the previous year. The actual foreign direct investment was US$46.85 billion, up 14.9 percent.

The phases of foreign investment in the textile industry are basically consistent with those of the national foreign investment. The 1979-1991 period was the initial development phase; 1992-1995 was the rapid development phase; 1996-present is the adjustment and upgrading phase.

In the first phase, foreign investment mainly went to small projects and small enterprises in the textile industry and the number of contracted foreign-investment projects showed a progressive increase. During the second phase, the central committee decided to accelerate reform and foreign investment in the textile industry saw a booming development. The number of foreign investment grew dramatically and more and more solely owned, foreign-invested projects emerged. During the third phase, foreign investment in the textile industry stepped into an era of adjustments and upgrades, with the amount of foreign investment experienced a decline.

Foreign investment in the textile industry played an important role in the national foreign-investment area. The contracted number of foreign-invested projects in the textiles industry accounted for 10 percent of the total foreign-invested projects and the amount of foreign investment in the textile industry accounted for 5 percent of the total amount of foreign investment between 1983-2001.

In 2000, the number of the foreign direct-investment projects in the textile industry was 801; contracted foreign-direct investment reached US$1.99 billion and the amount of actual foreign direct investment was US$1.37billion. By 2000, the number of enterprises with foreign investment was 5,336, with a total output value of 264.27 billion yuan; industrial value added was 66.91 billion yuan with 255.36 billion yuan in total assets; ownership rights were at 113.43 billion yuan; sales income, 248.76 billion yuan; total profits, 10.64 billion yuan and the payable value-added tax was 6.61 billion yuan.

Foreign investment in the textile industry has been developed steadily and has now stepped into a phase of adjustment and upgrading. The main method of utilizing foreign investment is via joint investments. In recent years, the number of solely owned, foreign-invested enterprises has been on the rise. Sources of foreign investments, like Hong Kong, Taiwan, Japan, the United States, Macao and Korea, have been diversified.

The scale of foreign-invested enterprises has shown a momentum of expansion. Large projects and enterprises have increased remarkably and sizeable MNCs have begun investing in the textile industry on a large scale. Foreign, solely owned enterprises in the chemical fiber area are mainly large projects and the general technological level of foreign-invested enterprises in the textile industry is quite high. The industry structure of foreign-invested enterprises consists mostly of textile- and garment-making enterprises; chemical fiber enterprises are also an important component.

Most foreign investment concentrated in Eastern coastal regions is now starting to shift to the Mid-Western regions. While the exports revenue of foreign-invested textile enterprises has shown a momentum of rapid increase. The economic efficiency of the foreign-invested textile industry, however, is not so promising.

[Source: China Textile Industry Council]