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On April 1, 2019, Japan stopped granting GSP tariff preferences to goods from China to Japan.It is estimated that Japan's move will increase the tariff cost of China's goods exported to Japan by nearly 0.3 billion US dollars, which will weaken the competitiveness of China's goods in the Japanese market to a certain extent.Japan is my country's main export market for textiles and clothing. At present, my country's exports of textiles, clothing, shoes and boots account for about 60% of Japan's import market share.Under the current circumstances, are Chinese textile and garment enterprises and Japanese-funded enterprises in China in a good mood?

Competitiveness of Chinese Textile Enterprises Squeezed

According to data provided by the China Chamber of Commerce for Import and Export of Textiles, in 2018, my country's textile and apparel import market share in Japan was 58%, a year-on-year decrease of 3 percentage points, while Vietnam's share was 12.6, a year-on-year increase of 1.4 percentage points. What's more serious is that while Japan cancels my country's GSP treatment, it still retains the GSP treatment for Southeast Asian countries such as Vietnam, Cambodia, Indonesia, and Bangladesh, and these countries are my country's textile and apparel market in Japan. The main competitors, my country's export competitiveness to Japan has been squeezed.

According to statistics,After Japan cancels the GSP with China, the import tariff rate of my country's original textiles and raw materials in Japan will be 1.06 to 14.2 percentage points higher than that of Vietnam, Indonesia, Bangladesh and Cambodia.At the same time, due to the rising production costs such as labor force in China in recent years, the labor costs of textile and garment industries are 1 to 3 times higher than those of Southeast Asian countries.

It is reported that Zhejiang, as a major export province to Japan, has deeply felt this change.Textile ClothingIt is Zhejiang's dominant export product. According to Hangzhou Customs statistics, in 2018, there were 6078 visas for textile and garment products exported to Japan in Hangzhou Customs, with a value of 0.808 billion yuan, 3785 visas for chemical industrial products, with a value of 1.867 billion yuan. The two types of products accounted for about 44% of Zhejiang's visa value. according to this calculation,After the implementation of the new policy on April 1 this year, only these two types of export products will enjoy a tariff reduction of 80 million yuan in Japan.

According to Wenzhou Customs statistics, from January 2018 to March 2019, Wenzhou Customs District issued about 720 GSP certificates for enterprises to export to Japan, with a visa amount of US $19.8919 million, which is about US $596800 for enterprises to export to Japan based on an average tariff preference rate of 3%. Export products mainly includeFootwear, Electromechanicaland other products. Among them, there are 487 visas for footwear products with a visa amount of US $12.78 million. There were 189 visas for mechanical and electrical products with a visa amount of US $4.8623 million.These two types of export products account for about 88.7 per cent of Wenzhou's visa share to Japan and are entitled to a tariff reduction of $529300.

Japan no longer gives preferential tariffs on goods exported from China to Japan, and Fujian textile enterprises have also been greatly impacted. According to statistics, in 2018, Xiamen Customs issued 4853 GSP certificates of origin to Japan, involving goods worth US $298.3505 million. The main export products areTextile ClothingWait.PressIt turns out that the goods enjoy tariff reduction and exemption due to the GSP certificate of origin. After the "graduation" of Japan's GSP, the export enterprises in Xiamen will increase the tariff cost by about US $14.9175 million.

Japanese Enterprises in China Feel "Centrifugal Force"

Expert analysis,Japan's abolition of GSP tariff treatment will not only affect the profits of Chinese textile products exported to Japan to a certain extent, but also have an impact on Japanese textile enterprises that organize production and processing in China.In fact, China's textile and garment products exported to Japan are still in a favorable position in the supply chain controlled by Japanese enterprises in China to a large extent. For some Japanese enterprises that have set up production bases in China, the increase in tariff costs may make them reconsider the allocation of global production bases. In order to save procurement costs, Japanese importers will transfer more textile and clothing imports to countries that still enjoy tariff relief, especially Southeast Asian countries.

At the same time, the Japanese government has also formulated a series of preferential policies to encourage Japanese enterprises to move back to China from abroad. In order to promote the revitalization of Japan's local economy, Abe's government has formulated an economic "growth strategy" to encourage enterprises to move their headquarters and factories to small and medium-sized cities in Japan, and has introduced corresponding incentive measures and preferential tax policies.

Can get rid of the price advantage is the key

Japan is China's fourth largest export destination and an important trading partner. Japan has implemented the GSP scheme since 1971 and granted China GSP treatment on April 1, 1980. It is one of the GSP preferential countries with the largest tariff preference for China's export commodities. Japan's comprehensive GSP preference has played a great role in promoting the export of China's commodities to the Japanese market. however,In November 2016, the Ministry of Finance of Japan officially announced the readjustment of the target countries of the "preferential tariff" system, and the new standard removed five countries, China, Mexico, Brazil, Thailand and Malaysia, from the list of tariff reductions and exemptions for developing countries.

Expert analysis,The GSP is a universal, non-discriminatory and non-reciprocal tariff preference granted by developed countries to developing countries for the export of manufactured and semi-finished products.When the economic growth rate of developing countries or regions reaches a certain level, developed countries think that these countries or regions can graduate, they will cancel such preferences. Although the "graduated" Chinese textile products will lose their price advantage, they will still maintain a certain comprehensive advantage in the transformation and upgrading.

"From a total trade perspective, while individual products take advantage of GSP preferences to increase profits, China's total exports to Japan will not be greatly affected as exports are gradually upgraded to the middle and high end. Therefore, strengthening product quality and research and development will help increase exports to Japan and offset the impact of the removal of GSP quotas." Some professionals think,The Chinese government should guide enterprises to give full play to their advantages in labor quality, industrial clusters, and supporting capabilities, continuously optimize product structure, improve product quality and brand value, accelerate industrial upgrading, technological development and independent brand building, and transform low-cost advantages into The comprehensive advantages of complete industrial chain, gathering talents, and huge market, and gradually get rid of dependence on price advantages.

A person in charge of a garment manufacturer from Shandong said in an interview with a reporter from China Textile News,Relying only on price advantage to earn meager processing fees faces too many uncertain risks, and it is not a long-term solution for enterprise development.He said that in the past, a considerable part of his company's orders came from the Japanese market, mainly including uniforms and tooling. Through the processing of supplied materials and the in-depth cooperation with Japanese buyers, the company has a comprehensive and profound understanding of Japan's exquisite surface materials, and has mastered Japan's advanced board making and technology. At present, this company has made great progress in the process of technological improvement and equipment replacement, has first-class production capacity and product quality, and is gradually reducing the scale of external processing and manufacturing, and instead seeking benefits from its own brands.

Why do Japanese companies have confidence in the Chinese market?

As for Japanese-funded textile enterprises in China, some experts pointed out,The vast majority of Japanese companies have not given up the Chinese market. Their withdrawal from China is not a real withdrawal but an adjustment. They only withdraw some sectors with weak competitiveness and poor profitability.

As early as 2016, when Japan's Ministry of Finance officially announced the readjustment of the preferential tariff system for the target countries, Fengshima President Fengshima Hanqi said that he still attached great importance to the production and processing business in China: "Due to the unstable production and processing quality in Southeast Asia, the orders of Fengshima Textile Division in Southeast Asia have not increased. For example, additional production when there is a color deviation phenomenon, although gradually reduced, but not completely eliminated. Therefore, we continue to retain the processing and production business in China."

It is worth noting that,When most Japanese enterprises entered China many years ago, it was based on the layout of China's industrial economy at that time.However, at present, China's economy maintains a steady growth momentum, and market consumption is increasingly expanding to mid-to-high-end products, especially in the context of the transformation and upgrading of the textile industry,We hope that foreign funds will gradually be invested in the middle and high-end manufacturing links.

Today, Japanese investment companies in China have to face pressure from China's industrial transformation and upgrading.Asano Tae, President of Asahi Kasei Trading CompanyHe said that it is necessary to expand the sales business of medium and high-end products of Asahi Huacheng Textile Trading (Shanghai) Co., Ltd., give full play to its deep yarn processing and fabric supply capacity in Japan, and continue to invest in China's textile and garment industry in a new form of cooperation. He said,Although the current investment environment is very grim, but the future of the Chinese market is full of confidence.

At the same time, China has not yet given up the Japanese market. At present, my country is actively promoting the negotiations on the Regional Comprehensive Economic Partnership Agreement (RECP) with Japan and other countries and the China-Japan-Korea Free Trade Zone. Export companies and related industry organizations to Japan should also study opportunities in advance and actively provide relevant suggestions for the negotiations. Create better opportunities and environment for export products through rules of origin that are more conducive to China.