The Rupp Report: China With Rising Domestic Demand

Every day, news channels worldwide report on the new financial crisis occurring from the mortgage
disaster in the United States. Not only the banking system, but the whole economic structure is
jeopardized. A gigantic amount of wealth is destroyed every day. What is the impact on the United
States’ biggest trade partner, China? China also is facing some problems — a renminbi stronger than
ever, and increasing salary, raw material and energy costs.

Recently, I had the opportunity to meet Yang Zhao Hua, vice chairman of the Sub-Council for
Textile Industry (CCPIT) and the Textile Chamber of Commerce (CCOIC) in Beijing, and asked him if
the actual US crisis is affecting the Chinese textile market.

Exports Total 28 Percent

“Not that much,” Yang said. Only if this crisis had a global scale would China probably face
some difficulties. According to Yang, China’s overall textile production in 2007 reached a value of
some US$627 billion. And only 28 percent, with a value of US$175.6 billion, was exported. Domestic
demand is steadily increasing, which moderates some occurring export troubles.

Generally, Yang sees a positive development for the Chinese textile industry in 2008. It
might be that exports will decrease a little; however, the rising domestic demand will balance this

Better Quality

To be more competitive, China is putting forth much effort to increase the quality of its
products. This is not the problem, Yang says, but rather the demand for good raw materials. That’s
why China has to be very careful in further increasing its capacity. With a further expansion, the
raw material system could collapse.

But how is the situation in terms of energy and environmental issues? The energy situation at
the moment is quite stable, he says. China is building more nuclear power stations to provide the
requested power supply for its industry.

The environment also is a big issue in the 11th Five-Year Plan of the Chinese government,
Yang mentioned. China is very concerned that industry produce in an environmentally friendly way —
especially the finishing industry, which is requested and obliged to reduce its wastewater by some
70 percent.


As Yang is very much involved in the organization of the upcoming ITMA Asia in Shanghai, the
question was obvious: How is the situation with ITMA Asia? “Very good,” he said, “Two strong
partners go together.” ITMA Asia will be a solid exhibition. The overall exhibition space will
total 130,000 square meters — all sold out. All the big Western textile machinery builders are
participating, and the fair will have a big impact on the domestic textile machinery industry.
There is a large waiting list of domestic manufacturers.

A New Start

In the lunar year, 2008 is the year of the rat. The rat is the first sign of the Chinese
zodiac and opens the new 12-year cycle. After the result of the US financial turmoil, which might
change global trade dramatically, 2008 could be the start of a new era. Not bad at all for China:
Rats are known as people with great leadership skills and are the most highly organized and
systematic of the 12 signs. Intelligent and cunning at the same time, rats are highly ambitious and
strong-willed people who are keen and unapologetic promoters of their own agendas, which often
include money and power. So, all in all, those are enough reasons for the Chinese textile industry
to think positivly of the future. See you soon in Shanghai.

March 18, 2008