In 1981, Mainland China led the world in the production of cotton cloth and cotton yarn. This achievement, however, cannot mask the difficult problems faced by the textile industry in Mainland China.
Mainland China’s textile industry has a large production capacity, but a substantial part of its capital stock has become obsolete, and its technology, moreover, is not sufficiently modern. This situation derives from inadequate investment in the textile industry during the past thirty years. Also, most of what investment there has been has taken the form of new capital construction, at the expense of replacement investment.
Domestic consumption of indigenous textile goods has demonstrated a faster growth rate since 1978, but consumption levels fall short of those in other developing countries. In 1981, per capita cloth consumption reached 10.29 meters. On average, the cloth consumption of farmers is about half that of city residents.
Recent developments in the production and consumption of chemical fiber textile products demonstrates some of the problems in the centrally planned economy. In the 1970s, by using domestically produced crude oil and by spending liberal amounts of foreign exchange to import production facilities, chemical fiber output increased impressively. In 1981, the production of chemical fibers reached 527,000 tons, But in 1980, and also in 1981, chemical fiber materials had been stockpiled, unsold, in large quantities, and in 1982 the central authorities passed down an order limiting the production of chemical fibers and fabrics. In January 1983, large price adjustments were deemed necessary; chemical fiber materials were adjusted downward by 28 percent, while cotton cloth prices were increased by 20 percent.
This series of events indicates the following: 1) Although said to be a centrally planned economy, in both the planning and implementation stages results were less than satisfactory and disorder was evident; 2) The recent economic reforms since late 1978 emphasizing the profit incentive are incongruent with the rigid pricing system. Between 1980 and 1982, many textile firms sensing the profits that could be realized from the production of chemical fabrics stopped producing low-price cotton cloth. This uncoordinated large scale changeover produced the large chemical fiber and fabrics surplus noted above.
The January 1983 price change can improve the situation somewhat, but the fundamental problem still remains in the maintenance of the rigid pricing system. Consumer demand patterns for different styles and colors of textile goods are complicated and mercurial. Only through the free market price mechanism and profit incentives will demand be greeted with an appropriate supply, not through production plans and pricing schemes handed down from above.
