Analysis of economic operation of China’s apparel industry

2018 marked the 40th anniversary of Chinas adoption of the reform and opening-up policy. To Chinas apparel industry， 2018 was a year full of challenges， changes and tests. Faced with the volatile international situations and the tremendous pressure of the domestic structural adjustment， Chinas apparel industry had maintained an overall steady development momentum characterized by steady performance on the domestic and foreign sales market， steady improvement of the operation quality and efficiency， improvement of transformation and upgrade effects， regardless of gathering crises and uncertainties. On the whole， a high-quality development pattern had been forming in 2018.

（Excerpt from the “Report on Development of Chinas Apparel Industry from 2018 to 2019.”）

Economic operation of Chinas apparel industry in 2018

Output： Basically steady but with a slight drop

According to the National Bureau of Statistics， enterprises beyond the designated scale of the apparel industry had in total turned out 22.274 billion pieces of apparels in 2018， registering a year-on-year decrease of 3.37%， and the growth rate dropped by 0.75% compared with the same period last year. The drop ratio was 4.13% lower than that of January to July. Among them， 11.157 billion pieces were woven apparels， registering a year-on-year decrease of 3.10%； 11.117 billion pieces were knitwear， registering a year-onyear decrease of 3.62%. Under the category of woven apparels， the output of down jackets， tailored suits， and blouses experienced different degrees of decline， namely 5.4%， 2.39% and 8.20%， respectively， compared with the same period last year.

As predicted by China National Garment Association， the total output of apparels turned out by the whole society reached 45.6 billion pieces， which was generally the same to that of last year.

The industrial added value maintained a low-speed growth. According to statistics released by the National Bureau of Statistics， the industrial added value of apparel enterprises above the designated scale increased by 4.4% and the growth rate slowed down by 1.4%， both compared with last year. Since the advent of the 2018， the industrial added value of the apparel industry had maintained a upward trend similar to that of the textile industry but still 3.4% higher than that of the textile industry and 1.8% lower than that of the second industry.

Rebounding of export performance

According to data released by China Customs， apparels and apparel accessories worth 157.633 billion USD had been exported from China to other countries in 2018， registering a year-on-year increase of 0.3%， and the growth rate was 0.7% higher than that of last year. To be specific， the export performance of knitwear was better than that of woven apparels. Knitwear and knitwear accessories worth 73.335 billion USD were exported from China to other countries in 2018， registering a year-on-year increase of 2.1%. In contrast， 71.302 billion USD of woven apparels and their accessories were exported from China to other countries in 2018， experiencing a year-on-year decline of 2.9%.

In terms of monthly export performance， Chinas apparel monthly export had regained positive growth since June 2018. In September and October 2018， the growth rate of Chinas apparel export was 8.5% and 8.4%， respectively， compared with the same period last year. There was an alleviation of Chinas apparel export slump， and Chinas apparel export realized rebounding. In November and December 2018， the apparel monthly export dropped by 2.7% and 4.4%， respectively， compared with the same period last year. These falls in export volume lowered the annual apparel export.

Chinas apparel export to the United States and Japan made a recovery； the drop of Chinas apparel export to the EU shrunk； Chinas apparel export to some countries along the “Belt & Road”maintained a sound development momentum.

Rapid growth of domestic sales

Since the beginning of 2018， Chinas apparel domestic demand had maintained a steady and rapid growth. According to China National Garment Association， the national total apparel sales was predicted to reach 3.08 trillion yuan in 2018， registering a yearon-year increase of 7.32%.

·Significant increase in the growth rate of online apparel sales

Data of the National Bureau of Statistics suggested that， from January 2018 to December 2018， the online retail sales of apparels nationwide registered a year-on-year increase of 22.0%， and that the growth rate sped up by 1.7% compared with the same period last year. Online retail of apparels became the first driving force of the rapid growth of Chinas apparel domestic demand.

·Slight increase in retail sales of large-scale retail enterprises

According to statistics of China National Commercial Information Center， the apparel retail sales of major large-scale retail enterprises in China from January 2018 to December 2018 increased by 0.99%， and the growth rate slowed down by 4.43%， both compared with the same period last year. The retail sales volume of various apparels dropped by 4.22%， and the growth rate fell by 8.43%， also compared with the same period last year. The price increase was mainly attributable to the decline in the apparel retail sales volume of large-scale retail enterprises.

·Steady growth of turnover on specialized market segments

The Distribution Office of China Textile and Apparel Council revealed in its quarterly statistics that the turnover of 45 major textile and apparel specialized market segments from January 2018 to December 2018 reached 1.209344 trillion yuan， registering a year-on-year increase of 6.55%. Regionally， the turnover of specialized market segments in East China realized steady growth on a huge base； driven by the emergence and population backflow of Chinas second-tier and third-tier cities， the apparel turnover of Central China experienced an overall increase.

·Continuation of mild growth of apparel price

Since the beginning of 2018， the retail price index of national apparel products and the consumer price index of apparels maintained the mild growth trend of last year， and the growth rate tended to be synchronous. However， these was a considerable drop in the apparel manufacturers ex-factory price index， compared with the same period last year. Data of the National Bureau of Statistics suggested that the retail price index of national apparel products achieved a year-on-year increase of 1.3%， whose growth rate was 0.2% higher than the same period last year. The consumer price index of apparels also climbed by 1.2%， but the growth rate fell by 0.1%， both compared with the same period last year.

Alleviation of industrial investment drop

On the one hand， affected by cost increase and growing pressure of profitability， enterprises were cautious about production capacity increase and inventory replenishment. An increasing number of outstanding enterprises enhanced their overseas industrial investment intensity. On the other hand， in the new period of industrial development， enterprises investment direction was changed， attaching greater importance to optimization of the supply chain， brand culture and creativity， technological innovation， and improvement of other soft powers.

Operation quality and efficiency： Steady and with slight increase

Since 2018， Chinas apparel industry had maintained a basically steady operation， whose efficacy growth rate was significantly improved. The National Bureau of Statistics pointed in its data that there were 14，827 enterprises above the designated scale （with an annual main operating income of no lower than 20 million yuan） in the apparel industry， and the cumulative main operating income from January to December 2018 totaled at 1.710657 trillion yuan， registering a year-on-year increase of 4.07%. The total profits were 100.675 billion yuan， registering a yearon-year increase of 10.84%. Compared with the same period last year， the profitability and fund turnover efficiency of Chinas apparel industry both considerably increased compared with the same period last year.

Development characteristics of Chinas apparel industry in 2018

In 2018， Chinas apparel industry forged ahead against a volatile business environment and tremendous growth pressure both at home and abroad， focused on technological advances and cultural innovations， seized opportunities provided by new technologies， new models and new industrial forms， and accelerated transformation between old and new dynamic energies. All this suggested that Chinas apparel industry had realized a leap from the scale development to qualitative development.

A high-quality development pattern under formation

With accelerated penetration of new technologies， such as cloud platforms， Internet of Things， “Internet plus，” “big data，” and “AI，” and new concepts， the model reform and efficiency improvement triggered by technological innovation have sped up changes of the apparel industry pattern. There has been a growing strengthening of the apparel industrys proprietary and coordinated innovation capability and supply quality. The highquality innovation has made high-quality development and transformation of the apparel industry to a brand， intelligent and service orientation possible.

2018 was a year for integration of Chinas mens wear brands. Mens wear enterprises gradually transformed themselves to “brand ecosphere”and “brand management platform.” A large number of mens wear designer brands emerged. Personalized and customized mens wear brands enjoyed robust development. Based on the technological support the intelligent manufacturing soft production line and the growing customer demand， Chinas mens wear enterprises demonstrated a striking characteristic of returning to the essence of industry.

In 2018， Chinas womens wear enterprises stuck to product innova-tion and technological innovation. Revolving around environmental protection， comfortability， health， functionality， and differentiation， Chinas womens wear enterprises kept on building up their product and brand competitiveness. The retail network construction gained more input. In particular， construction of smart offline stores and warehousing logistics centers embarked on the full-channel， intelligent and interactive experience path. At the same time， womens wear enterprises accelerated their internationalization by actively promoting their overseas market layout.

In a bid to accommodate to the changing market environment， casual wear brands in 2018 constantly optimized channel layout， strengthened standardized management of terminal stores， sought coordinated development of online and offline， and strengthened consumers brand engagement. Meanwhile， enterprise operation and management were intensified， and the talent incentive system was improved. An all-aspect upgrade of the development scale and development quality was gradually realized.

In 2018， Chinas childrens wear brands increased their design and R&D input. Industrial exerts as well as professional design and fashion institutions， either at home or abroad， were introduced to seek a constant optimization of the product structure， professionalism and competitiveness. Additionally， with the growing input of digital technological transformation， new retail achieved further development. Cross-border cooperation with renowned IPs and artists became more common to see， which contributed to improvement of brand awareness and reputation.

Intelligent manufacturing driving quality and efficiency improvement

In 2018， Chinas apparel industry steadily promoted its intelligent manufacturing. Intelligent and digital technologies realized in-depth applications to key links， including R&D design， production and manufacturing， logistics warehousing， operation management， and after-sales service. Intelligent manufacturing demonstration projects of Chinas apparel industry at the national level were far ahead of other sectors of the textile industry.

Intelligent upgrade and transformation of Chinas apparel enterprises in 2018 were mainly reflected in two aspects — intelligentization improvement of the production and manufacturing termination and establishment of intelligent stores of the brand retail terminal. So far， the utilization rate of automatic equipment has reached 80%， which has basically realized the full-process automatic manufacturing of apparels， and largely improved the precision of three-dimensional body measurement and apparels 3D visualization and simulated technologies. At the same time， the full-process automatic manufacturing model featuring “l(fā)ifting system + automatic sewing unit or automatic template sewing system + fully-automatic three-dimensional warehousing logistics system” has been widely adopted， thus leading. With extensive applications of the flexible manufacturing system and fully-automatic three-dimensional warehousing and logistics system， modern smart factories have kept on popping up.

New retail bringing about sales reform

In response to new consumption concepts and new consumption demands， big data analysis was used to improve consumption experience of bookstores. At the same time， the Internet celebrity economy， community consumption， and fan marketing， relying on their feedback mechanism and interaction advantages， recommended product information to target consumer groups three-dimensionally. New consumption channels and scenarios fully oriented towards different consumer groups were built. The new scenario experiment model started the iteration and upgrade of the sales model. Apart from technological reform， channel reform， and supply chain reform， achievements of the Internet technological reform were fully utilized， with various small apps， micro-videos， group buying， social media and other two-way communication media adopted to achieve group， community and user marketing and interaction. All this suggested a new business model featuring “all scenarios， all groups， all data， all channels， all periods of time， and all-around experience” was shaped.

Overseas M&As accelerating globalization

2018 was a year witnessing vigorous development of overseas mergers and acquisitions （M&As） of Chinas apparel industry. Driven by “border-free” demands and segmentation of lifestyles， Chinas apparel industry， in addition to accelerating its upgrade and transformation， also constantly improved its integration speed， scale and level. Globalization of production and market activities created a favorable opportunity for made in China and Chinese brands to lift its position in the international fashion industries. Through M&As and overseas store expansion， Chinas apparel enterprises built a diversified ecosystem to strengthen their comprehensive competitiveness in brand， product and channel. Meanwhile， an overseas marketing network was set up to expand their international and domestic market scale. All this contributed to Chinas apparel enterprises formation of their own brand development strategies and M&A strategies， and increasing improvement of their brand international image.

Major factors influencing operation of Chinas apparel industry in 2018

Mild recovery of the international market

·Slow growth of major export markets

Since 2018， the global economy had maintained its mild recovery， but its growth momentum gradually weakened. As to performance of three major traditional export markets of Chinas apparel industry， the economic recovery of the United States was robust， which was beyond market expectations， and the personal apparel consumption maintained a slow growth. From January to November， the personal ready-made consumption in the United Stated registered a year-on-year increase of 4.21%. The EU market continued with its steady growth but the recovery momentum weakened. In December 2018， turnover index of wholesale and retail textiles， apparels， and shoes in major EU countries dropped by 1% compared with that of the first half of 2018. Japans market-oriented economy slowed down its pace of expansion， and the pressure of economic downturn was growing.

In terms of apparel import， the apparel import amount of the EU， United States， and Japan realized slow growth. According to the latest data of apparel import published by the Eurostat， U.S. Department of Commerce and Ministry of Finance， Japan， EUs apparel import amount grew by 2.18%， registering a year-on-year increase of 0.76%； Japans apparel import amount registered a year-on-year increase of 6.31%， and the growth rate was 2.59% faster than the same period last year. From January to December 2018， the apparel import amount of the United States grew by 2.9%， whose growth rate was 3.23% faster than the same period last year. During the same period， the apparel import growth rate of the three major markets from China was all lower than the global average apparel import growth rate. To be specific， the apparel import amount of the United States and Japan from China registered a year-on-year increase of 0.91% and 0.11%， respectively， while the apparel import amount of the EU from China dropped by 1.72% compared with the same period last year.

·Intensification of the international market competition

In recent years， China has been enjoying a shrinking share of the import market of the United States， EU and Japan， because of tremendous competition pressure from countries， such as Vietnam， Bangladesh， Turkey， Cambodia， and India. The international trade environment has been filled with more and more uncertainties， and the international market competition has been intensifying. According the latest apparel data of 2018 released by the U.S. Department of Commerce， Eurostat and Ministry of Finance， Japan， apparels imported from China to the U.S.， EU and Japan experienced a year-on-year decrease of 0.65%， 1.29%， and 3.64%， respectively， which， if compared with that of 2010， dropped by 6.07%， 13.31%，and 23.38%， respectively. Import orders of these three major markets were significantly shifted to countries， including Vietnam， Bangladesh， Cambodia， and Myanmar.

Consumption upgrade fueling market reform

·Living supplies as the major driving force of consumption growth

In 2018， Chinas economic growth maintained a steady tune. Consumption played a more vigorous role in boosting Chinas economic growth. The National Bureau of Statistics suggested that the contribution rate of final consumption expenditure to economic growth in 2018 was 76.2%， registering a year-on-year increase of 18.6%. Analyzed by commodity categories， consumption of basic living supplies steadily increased， and the consumption growth driving force shifted from minority commodities， such as automobiles， to majority commodities， which were closely related to peoples livelihoods. From January to December 2018， the retail amount of grains and oils， daily necessities， apparels， shoes and hats， and household appliances above the designated size grew by 10.2%， 13.7%， 8% and 8.9%， respectively， compared with the year before. The contribution of the above four commodity categories to the growth rate of the total social consumable retail amount was 1.3% higher than that of automobiles.

·Consumption growth of apparels significantly slower than consumption growth for personal development

In 2018， Chinas resident disposable income and per capital consumption expenditure synchronized with economic growth. The per capital clothing consumption expenditure significantly increased， but the growth rate was lower than that of consumption for personal development （medical and health care + education and entertainment + traffic and communications）. Statistics of the National Bureau of Statistics suggested that， from January 2018 to December 2018， Chinas resident per capita disposable income realized an actual growth of 6.5%； the per capita consumption expenditure realized an actual growth of 6.2%. Both were faster than the per capita GDP growth， the latter of which was around 6.1%. During the same period of time， Chinas resident per capita clothing consumption expenditure was 1，289 yuan， registering a year-onyear increase of 4.1%， and accounting for 6.49% of the total consumption expenditure. The expenditure of living supplies， services， traffic and communications， education， culture and entertainment， and medical and health care increased by 9.1%， 7.1%， 6.7%， and 16.1%， respectively， whose growth rate was all faster than the expenditure growth rate.

·Integrated development of new and old industrial forms

With the constant expansion of the online shopping users， the penetration rate of social network ecommerce in 2018 gradually increased. Supply from the emerging markets， such as online retail， maintained a rapid growth. The mobile Internet emerged as the primary shopping channel of young people. When the emerging industrial forms made great strides， the traditional enterprises actively sought transformation. Part of physical retail industrial forms gradually made a comeback. According to statistics of the National Bureau of Statistics released for 2018， the retail amount of the physical retail industrial forms above the designated size， such as supermarkets， department stores， and professional stores， registered a year-on-year increase of 4.6%， meaning that the retail amount of these industrial forms had maintained a steady growth momentum on the basis of the recovery growth of the year before. Benefiting from new technologies， such as big data， artificial intelligence and mobile Internet， as well as the increasingly complete logistics and distribution system， supermarkets， professional stores and other traditional retail industrial forms realized an indepth integration of e-commerce platforms. Integration between new industrial forms and traditional industrial forms became a major channel for the consumption market supply.

·Growing number of young and personalized consumers

In terms of the consumption group changes， Chinas domestic consumption market in 2018 demonstrated an obvious M-shaped consumption structure， marked by steady growth of high-end and low-end consumption markets， and gradual shrinking of the intermediate market. Meanwhile， consumption concepts were dramatically changed among Chinese consumers， with a growing rationality in their consumption behaviors. At the same time， consumers became younger， and more and more personalized， internationalized， and concerned more about the product quality and satisfaction of their personalized demands. There was a growing demand for quality and creative products， more reasonable prices， and better shopping experience and service. In particular， young consumers gradually emerged as the major consumption force. Young people attached more importance to personalization and fashion. They were eager to build their emotional link with brands， and express their personal lifestyles through certain products.

Outlook of Chinas apparel industry development trends in 2019

Continued mild recovery of the international market

In 2019， the global economy will continue its steady growth. However， the negative influence of the escalation of trade protection of the United States， continuous interest rate increase and tightening of currency supply of the Federal Reserve on the global economic growth will be deepened， exerting a growing pressure on the global economic downturn. Factors of imbalance， uncertainty and instability have been on the increase. The International Monetary Fund lowers the global economic growth rate of 2019 from the expected 3.9% to 3.7% in World Economic Outlook Reports. The World Bank also lowers from the expected growth rate of global economy of 2019 from 3.0% to 2.9%. These two international organizations predict the growth rate of developed economies to be 2.1% and 2.0%， respectively， which will be 0.3% and 0.2% lower than that of 2018. The economic growth rate of emerging markets and developing economies is predicted to be 4.7% and 4.2%， respectively， which will be generally the same to that of 2018. As to major export markets of Chinas apparel industry， research institutions think that the economic growth rate of the United States might head towards a periodical turning point， dropping from a periodical high to a slow long-term growth， and its consumption growth will be slowed down. The EU economy will return to its relatively weak recovery state， whose support for consumption will be weakened. As to Japan， its economic growth will be faced with growing downturn pressure， and the consumer confidence index has been low since 2017， which is not beneficial to sustainable growth of consumption demands. Therefore， the international market demand growth for clothing consumption will be on a slowdown. In 2019， Chinas apparel export will be faced with significantly growing pressure， but the overall apparel export will tend to stabilize.

Continued steady growth of the domestic market

Currently， Chinas economic development is stepping from the highspeed growth stage to the high-quality growth stage. The total retail of industrial and social consumables has been dropping. Particularly， affected by a volatile and complex external market， Chinas macroscopic economy will be faced with growing downturn pressure. However， in 2019， the domestic economy will still maintain within the reasonable zone， and keep moving ahead steadily. Economic development will fuel steady growth of residents income. Consumer confidence index will hover at a high level， and peoples new demand for a better life will promote consumption upgrade， and improvement of consumption experience and environment. All this has made it impossible for more new retail industrial forms， new products， new services and new brands to enter the consumable market. Additionally， the governments strategy of rural area revitalization will further release the consumable market potential of countryside， and the implementation of preferential policies， such as tax and fee management and consumption boost， will support steady growth of the domestic apparel market. The continuously-upgrading domestic demand market will still be the primary driving force for the development of the apparel industry.

Fashion reform accelerating industry segmentation

With the emergence of new consumption groups， it is impossible for enterprises to capture the consumer preferences of the post-90s and post-00s in the way they did to the post-60s， post-70s and post-80s. This means that the new round of consumption upgrade will be more variable， diverse， and multi-dimensional. Personalized， segmented and differentiated lifestyles have resulted into differentiation of brand demands. A large number of fashion brands have promoted subsidiary brands for young and personalized consumers. More and more brands oriented towards the niche market have gained favor. Launch of youth-oriented and high-end products have been a prevailing trend of the apparel industrys upgrade and transformation.

As consumers fashion taste and personalized demand improve， mens wear consumption has become more brand-oriented， internationalized， outdoor and casual. Formal and casual wear for business occasions， and outdoor casual wear will be further segmented. Precision marketing and customized products will be key competition focuses of mens brands.

In 2019， Chinas womens wear enterprises will deepen their reform and transformation. The market segmentation of womens wear will be more obvious. At the same time， the growing market concentration will promote multi-brand group operation of womens wear enterprises， thus shifting from the previous extensive， homogenous and extended development model to one emphasizing on specialized and differentialized proprietary brand construction through strengthening of brand connotation， R&D and design， and supply chain management.

Following the emergence of the third-tier and fourth-tier markets and the lowering of brand channels， Chinas casual wear brands will be confronted with growing pressure from the rapid growth of international fast fashion brands. Consumers， in addition to pursuing offline experience， will pay more attention to online shopping channels， considering their convenience. Demand for product fashion degree and high performance cost will be on the rise.

Though Chinas adoption of second-child policy has not brought adequate driving force， the improvement of Chinese consumers quality requirement for childrens wear and child bringing-up concepts among the new generation of parents， Chinas childrens wear market scale will hopefully seek further expansion. More and more fashion brands offering adults wear and sportswear will continuously develop their childrens wear business， and seek cross-sector industrial chain layout. All this will lead to intensification of competition on Chinas childrens wear market.

Intelligent manufacturing further empowering industrial upgrade

Currently， a new round of technological revolution and industrial reform is brewing. Formation of big data， computing capacity improvement and evolution of network facilities will ushered artificial intelligence into a new period. Intelligentization and networking will be major directions for technological and industrial upgrade. At the same time， the apparel industrys intelligent manufacturing will step into a digitalized and networked upgrade and transformation period to further realize applications of Internet， cloud technologies， Internet of Things， intelligent robots and other AI technologies to key links of production and marketing. The sewing equipment will significantly improve their automatic and intelligent level. Applications of “big data + AI algorithm” will predict consumer demands and contribute to development of creativity， design and product development. The intelligent showcase and automatic vendor will make use technologies to deepen their interaction with consumers， enabling consumers to acquire more three-dimensional shopping experience. The service robots will make intelligent shopping experience possible， and the virtual fitting room system will optimize the online shopping experience.

Mobile social networks becoming a new engine of consumption growth

Mobile social networks can actively stimulate users consumption demand， and make use of information sharing on social platforms， viral network communication via users word of mouth， acquaints experience sharing and communication to efficiently make products known to more people. While enhancing users trust and consumption confidence， mobile social networks will contribute to growth of consumption frequency and efficiency， ensuring warmer communication between brands and clients. Circle of friends and other communities are built to sustain the tight and direct link to better meet consumers personalized demands.

Culture and creativity endowing fashion with new connotations

Economic and social development will contribute to constant strengthening of consumers cultural awareness and confidence. Consumption upgrade is reflected not only as new consumption concepts and highquality material demand， but also as identification with and pursuit of a moer aesthetic fashion connotation integrated with Chinese cultural ideas.

In 2019， enterprises in Chinas apparel industry will further examine traditional culture， diverse cultures， contemporary prevailing elements， and lifestyles for further brand segmentation while remaining their general brand positioning unchanged. The fine traditional Chinese culture will be further integrated into apparel brands to improve their cultural value， aesthetic value and market value. The mental link between brands and the new generation of consumer group will be reshaped， with culture and creativity serving as a main support for creativity of brand value. （China National Garment Association）