Industry cuts its cloth to measure up to buyers' needs

Challenges always present opportunities and the impetus for companies to improve or transform, believes Zhang Ziyan, president of Jiangsu Guotai International Group, a major Chinese trading enterprise.

"Currently the Chinese textile industry is facing many challenges, which also means some opportunities for us," says Zhang. "It is really crucial for textile companies to make changes to combat these challenges."

Zhang, who has been in the textile trade for about 30 years and joined the group in 1980, started his business career as a salesman.

Speaking at the group's headquarters in Zhangjiagang, Jiangsu province, opposite the five-star Guomao Hotel it owns, Zhang says the outlook for the Chinese textile industry is bleak and it is make-or-break time for many businesses.

However, he believes the problems facing the textile industry are temporary and are mainly the result of the restructuring and consolidation of the industry. He claims 40 percent of textile companies in China are running at a loss, 30 percent are just about making ends meet while, of the rest, the earnings of the top third far outweigh those of the rest combined.

Zhang blames several factors for this situation, including increasing labor costs, rising yuan exchange rates and overcapacity.

"Many textile companies, especially the small and medium-sized enterprises, will fail amid the fierce competition," he warns. "The textile industry will further consolidate and as many as two-thirds of textile companies will collapse."

He also says that it is rare to see private investment in the textile industry these days, so many owners want to sell their factories. Many of Jiangsu Guotai International Group's customers are reducing their inventory and cutting down on production.

In spite of these drawbacks, however, his company still made progress last year, Zhang claims.

With 106 subsidiaries making it one of the biggest State-owned enterprises in Suzhou city, a center for the textile industry, Jiangsu Guotai International Group marked up annual sales of 30.28 billion yuan ($4.93 billion) last year, an increase of 16 percent compared with 2011.

In 2012, the group made total imports and exports of $2.73 billion, a year-on-year increase of 15.8 percent. Export sales hit $2.19 billion, increasing by 6.6 percent compared with 2011, while import sales hit $540 million, an increase of 78.1 percent.

Last year, the group gained revenue of $1.65 billion from exporting clothes.

In the first quarter of this year, the group saw an increase in exports of 40 percent, with that of clothing, increasing by 50 percent.

Zhang says the group's good performance is down to changes it began making in 2011.