China Looms Large:
Reform and Rationalization
in the Textile Industry
THE previous chapter documented China's successful response to the MFA, a response marked by export upgrading, adjustments to the product mix, and market diversification among export destinations. This chapter will explore how that record of industrial restructuring was built, with special emphasis on the policy environment. It begins by reviewing the problems that China's textile industry faced as it sought to cope with quotas. It then discusses the various administrative measures and economic reforms that were taken in an effort to improve the industry's performance. Here, the main argument is that bureaucratic coordination gave way over time to market coordination as the primary means for pursuing economic adjustment in the textile industry, albeit only after administrative measures failed to produce the desired changes. Next, the chapter provides an overview of rationalization efforts within the industry. Lastly, it examines the system of quota allocation as a detailed case study of China's adjustment to life under the MFA.
Although legendary for their immensity, the problems affecting the textile industry are little different from the basic challenges that all Chinese industries have faced during the post-Mao era. Indeed, the textile industry has at one time or another suffered from just about every affliction one could mention: stockpiled output; idle equipment/surplus capacity; unplanned development; outmoded technology; deteriorating physical plant; a crushing tax burden; redundant workers; poor management; an unreasonable price structure; the heavy burden of providing wages and other support for huge numbers of retired employees; wasted investment funds; lack of financial profitability; and persistent shortages