International competitiveness of Chinese textile and clothing industry – a diamond model approach
| Pages | 2-19 |
| Published date | 04 February 2019 |
| Date | 04 February 2019 |
| DOI | https://doi.org/10.1108/JCEFTS-01-2018-0003 |
| Author | Zhijie Guan,Yan Xu,Hong Jiang,Guogang Jiang |
| Subject Matter | Economics,International economics |
International competitiveness of
Chinese textile and clothing
industry –a diamond
model approach
Zhijie Guan,Yan Xu,Hong Jiang and Guogang Jiang
Changzhou University, Changzhou, China
Abstract
Purpose –The purpose of this paperis to analyze raw materials, labor, capital, demand,related industries,
strategiesand policies influencing international competitivenessof Chinese textile and clothingindustry.
Design/methodology/approach –The analysis is conducted using “Diamond Model”, in which raw
materials, labor, capital, demand, related industries, strategies and policies are included as explanatory
variables, and the impacts of internationalcompetitiveness on market share (MS), trade competitiveness(TC)
and revealed comparative advantage(RCA) are examined based on the estimated coefficients of these
variables.
Findings –These factors have different effectson TC, MS and RCA. While their effects on TC and MS are
similar insign even though their degree of significance differs,their effects on RCA are opposite to TC and MS
except for capital.Raw materials and capital have negative effects on TC and MS, whilethe other factors have
positiveones. Raw materials have positive effects on RCA, but allother factors have negative ones.
Practical/implications –The results from thisstudy imply that it is necessary to increase investmentin
fixed assets of Chinese textileand clothing industry, speed up the pace of upgrading equipment, improvethe
level of industrialization,while strengthening the supply of textile raw materials, and lowering raw material
prices, therebyreducing the cost of textile and clothing enterprises.
Originality/value –To the best of the authors’knowledge, this is the first empirical researchmade using
econometric model about the impact of the main factors of trade competitiveness in Chinese textile and
clothingindustry based on the “Diamond Model”.
Keywords International competitiveness, Diamond model, Textile and clothing industry
Paper type Research paper
1. Introduction
China is the world’s largest textile and clothing exporter and producer; Chinese textile and
clothing exports are important for the sustainedand stable growth of the national economy
and social employment. With international market demand shrinking, changing trade
policy, rising labor costs and other factors, many textile enterprises are facing
unprecedented pressure. Since China’s accession to the World Trade Organization in 2001
and the abolition of quota restrictions in 2005, global trade of textile and clothing has
entered into an era of liberalization. The way that the textile and clothingindustry survive
under complex internationalenvironment has become a crucial issue.
International competitiveness is a relative concept with two main explanations; on one
hand, it refers to the ability of the state to increase nationalincome and wealth, while on the
JEL classification –F14, O24
JCEFTS
12,1
2
Journalof Chinese Economic and
ForeignTrade Studies
Vol.12 No. 1, 2019
pp. 2-19
© Emerald Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-01-2018-0003
The current issue and full text archive of this journal is available on Emerald Insight at:
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other, it refers to the competitive performance of a country in import and export (Scott and
Lodge, 1985;Buckley et al., 1988;Durand and Giorno, 1990). Economic outcomes such as
imports, exports or balance of trade have become trade-related measures owing to them
being connected to prices or costs at national or industry-specific level. The main measures
include real exchange rates based on consumer prices and unit labor costs in tradeable
goods. Turner and Dack (1993) and Marsh and Tokarick(1996) reviewed measures of trade
competitiveness based on relative prices and costs, and noticed the difficulty for these
measures to directly connectchanges in competitiveness based on trade flows. In addition to
these indicators, quantity indicators for imports and exports or the trade balance are also
used as measures of competitiveness. In general, market share (MS), trade competitiveness
(TC) and revealed comparativeadvantage (RCA) are adopted in the analysis of international
competitiveness(Swagel, 2012;Zhang, 2012;Szczepan and Justyna, 2013).
Some scholars have compared the international competitiveness of the textile and
garment industry betweendifferent countries. Huong and Pham (2016) used the Generalized
Double Diamond Model (GDDM) to compare international competitiveness of textile and
garment industries in Vietnam and China. Their conclusion indicates that international
competitiveness of Vietnam’s textile and apparel industry is lower than that of China.
Kathuria (2013) used the RCA index to compare the international competitiveness of the
textile and clothing industries in India and Bangladesh. Xie and Zhou (2012) built the price
term of trade, competitive complementary index, competitive pressureindex and symmetric
revealed comparative advantage, which are similar to the five export indicators, to
analyze and compare the competitive relationship between Chinese and Indian textile
products in the European and American markets. The results indicate that the similarities
between Chinese and Indian products are high,but Chinese products have an advantage in
quality, while Indian products haveterms of trade advantages. Serra et al. (2012) carried out
an empirical analysis based on a sampleof 167 enterprises in Portugal and 165 in the UK on
the influence of organizational and managerial factors on the export of enterprises when
exports are at a declining trend. Zhu and Sun (2010) used the international market share,
trade competitiveness and revealed comparative advantage to compare and evaluate the
international competitiveness of the textile and clothing products of the world’s top 10
textile and clothing exportingregions between 2001 and 2007.
There have been many researches related to the affecting factors of international
competitiveness of textile and apparel industry. In terms of the affecting factors of MS, Akben-
Selcuk (2016) investigated the factors affecting MS in the Turkish market. He found that return
on assets is positively related to firm size, international sales, liquidity and growth and negatively
related to leverage and R&D expenditures, while gross profit margin is positively related to size
and international sales and negatively related to leverage and R&D expenditures. Zhang and Bai
(2014) pointed out that the abolishment of the quota system in 2005 has increased the MS of
Chinese textile and clothing industry. Knappe (2005) implied the WTO quotas on textile and
clothing industries reduced the MS of less developed countries in Asia. In terms of the affecting
factors of TC, Zhan and Xiang (2014) checked the TC change of Chinese and other countries’
textile and clothing products in the European market between 2000 and 2014. They pointed out
that the accession to the WTO in 2001 and the elimination of global textile quotas in 2005 have
increased the TC of Chinese textile and clothing products in the EU. Islam et al. (2013) found
through their investigations that the TC of Bangladesh textile industry can be brought on top
winning track if the government and other individuals take serious actions by for example,
providing subsidies to the textile industry, minimizing the internal dispute among the exporters,
withdrawing the withholding and sales taxes etc. Cao (2012) proposed that the composition and
level of development of intra-industry trade is an important determinant to the change of TC of a
Chinese textile
and clothing
industry
3
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