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BUSINESS OPPORTUNITIES: GARMENT AND TEXTILE SECTORS IN CHINA . In conjuction with Asia-Interprise Euro-China Fashion Business Meetings, CHIC 2004 Beijing, 30th – 31st March 2004 Implemented by Consorzio Italasia Industrial Relations. CHINA OVERVIEW. Area: 9.6 million sq Km

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BUSINESS OPPORTUNITIES:

GARMENT AND TEXTILE SECTORS

IN CHINA

In conjuction with

Asia-Interprise Euro-China Fashion Business Meetings, CHIC 2004

Beijing, 30th – 31st March 2004

Implemented by

Consorzio Italasia Industrial Relations



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Area: 9.6 million sq Km

Population: about 1.265 billion people, belonging to over 55 ethnic

Demographic density: 128.8 inhabitants per sq km

33% of population lives in towns

56 nationalities are present in China:the Han people make up 91.02 % of the total population

The national language is Putonghua or Mandarin but most of the 55 minority nationalities have their own languages

China officially entered into the WTO on December, 11th 2001



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Population Evolution, 1990 – 2003 (Billion of Inhabitants)

Very quick growth of Chinese population during the 90’s.

Chinese economy:

- turbulent growth in the early 90’s

- slackening starting from 1996, but continue growing at high rates.

Quick urban and economic development of the strongest towns: Peking, Shanghai, Guangzhou, Canton, Tianjin.


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In the 2003 Chinese GDP has overcome Italian one. Its position is now the 6th, behind USA, Japan, United Kingdom and France.

According to Government estimates it should reach the fourth place by the year 2010.

GDP Evolution in Billion US$, 1990-2003


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CONSUMER BEHAVIOUR position is now the 6th, behind USA, Japan, United Kingdom and France.

In particular:

  • consumers living in Peking are the most conservative and traditionalist;

  • in Shanghai they pay more attention to fashion trends and are more inclined to buy branded products;

  • in Guangzhou they get more influenced by Hong Kong fashions.

    In general:

  • a low perception of the product quality;

  • high attention to the brand;

  • the price as determining factor of purchase.


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Consumption Composition position is now the 6th, behind USA, Japan, United Kingdom and France.

Population’s average income has increased during the last 5 years. The target for foreigner products:

about 10-15% of income spent in items of clothes

NOUVEAU RICHE


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TEXTILE SECTOR position is now the 6th, behind USA, Japan, United Kingdom and France.

Textile Production in January-October, 2003


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Chinese Import and Export in the garment and textile sector (unit: 100 millions of USD)

Percentage of importation and exportation per category in the textile and garment sector (Period; January – March 2003)


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THE ORGANIZATION OF COMMERCIAL DISTRIBUTION (unit: 100 millions of USD)


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THE SUBDIVISION OF CHINA IN COMMERCIAL AREAS (unit: 100 millions of USD)

  • Bejing: Peking area

  • Northeastern China: Dalian, Shenyang, Harbin

  • Shanghai: Shanghai area

  • Central China: Provinces of Jiangsu, Zhejang

  • Southern China: Guandong and Fujan area

  • Southwestern China: Province of Sichuan


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THE DISTRIBUTION FRAMEWORK IS QUICKLY EVOLVING

100,000 STORES ORGANIZED IN CHAINS WITHIN 2005

NEAT PREDOMINANCE OF SMALL RETAIL DISTRIBUTION

MIXED SHOPS


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ORGANIZED DISTRIBUTION EVOLVING

CHINESE COMPANIES

NO. 1, LIANHUA, HUALIAN

30% of large retail distribution

FOREIGN CAPITAL COMPANIES

CARREFOUR, METRO, WALLMART

JOINT VENTURES & MIXED COMPANIES

PARKSON, PARK’N’SHOP, CITYSHOPPING


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In particular for the fashion sector: EVOLVING

  • The number of existing chains in the fashion sector is about 150.

  • The number of associated firms is about 37.500.

  • The total turnover (year 2001) is about 90 billion RMB, with an estimated average of about 2.4 million RMB per sales outlet per year.

  • In general, the “franchisee” managers are companies of distribution (in large towns) or sub-distribution (in medium size towns).


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E-COMMERCE EVOLVING

- the type of firms that work with e-commerce is that of producers;

- the main firms that sell via Internet are divided as follows:Fashion Stock Sales (25%), T-Shirts (15%), Underwear (9%), Shirts (8%), Jeans (7%).

WHOLESALE TRADE

  • The difficulties of local wholesalers depend on:

  • difficulties of going out of the local areas;

  • lack of dynamic payment forms;

  • small distributors’ risk of insolvency.



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THE MARKET POSITION OF MADE IN ITALY DISTRIBUTION

Natural market

TOP END MARKET

STATUS SYMBOL OF “RICH & POWERFULL”

Italian brands


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Italian direct investments are rilevant: DISTRIBUTION

GFT, Gruppo Inghirami, Zegna are present with some of their production structures and distribution societies.

The sectors with the largest potential for further growth of MADE IN ITALY are (% of Italian products in the Chinese market):

Men’s clothes 70%

Women’s fashion 50%

Women’s knitwear 45%

Ties 35%

Sportwear 15%


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THE MAIN CHARACTERISTICS OF THE DISTRIBUTION CHAIN OF ITALIAN PRODUCTS

  • HIGH LEVEL PRODUCTS

  • Large hotels

  • Department stores

  • Shopping centres

  • LOWER QUALITY PRODUCTS

  • Specialized dress stores

  • Mixed shops

  • Department stores at lower prices than imported products


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SMALL DISTRIBUTION ITALIAN PRODUCTS

Specialized dress shops in shopping centres

Mixed dress shops in department stores or shopping centres

Boutiques in 4-5 star hotels and luxury shopping centres (Max Mara, Ferragamo, ecc..)

LARGE DISTRIBUTION

High level department stores

Distribution organized in shop chains: Benetton, Sisley, Zegna, Reporter

Franchising with local operators

Hyper- and supermarkets for some sportswear brands


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REGULATIONS AND CONCESSIONS ITALIAN PRODUCTS


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2001: ENTRY OF CHINA INTO THE WTO ITALIAN PRODUCTS

OPENING TO FOREIGN INVESTMENT

REDUCTION OF CUSTOMS DUTIES


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REDUCTION OF CUSTOMS DUTIES ITALIAN PRODUCTS

Fashion products imported to China are subjected to:

- Import Customs Duty (ICD)

- Value Added Tax (VAT)

Textiles product imported to China are tested for:

- Composition Test (for the materials that have been used);

- OZA Free Test;

- Workmanship (Absence of dying stuff);

- Color fastness test.


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Textiles must carry the following information on their label ITALIAN PRODUCTS:

  • Textile composition;

  • Size;

  • Washing instructions;

  • Country of origin of the cloth;

  • Country of origin of the textile;

BRAND

ATTENTION: REGISTER YOUR TRADE MARK IN

CHINA!!!


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OPENING TO FOREIGN INVESTMENT ITALIAN PRODUCTS

NEW REGULATION:

1/02/2002: PRC Regulations on Administration of Foreign Invested Insurance Companies

1/04/2002: Foreign Investment Guideline Regulations

China FDI

In 2002 China surpassed the USA as the world’s largest foreign investment receiver, with an inflow of 52.7 US$.


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  • Top 4 FDI destinations:

  • Jiangsu

  • Guangdong

  • Shandong

  • Shanghai



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SHORT-TERM ECONOMIC IMPACTS OF SARS ITALIAN PRODUCTS

  • Consumer confidence has dramatically declined leading to a significant reduction in private consumption spending

  • Service exports had been hard hit

  • Investment is affected by reduced overall demand, heightened uncertainties and increased risks

  • While increased government spending will mitigate the impact, the ability of governments to revive economies facing widespreadreductions in private spending is limited



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THE SARS EPIDEMIC DEMONSTRATES THAT: ITALIAN PRODUCTS

  • The accurate, timely and transparent provision of information on the nature and extent of diseases by governments is critical for educating the public about the real risks

  • Early identification and containment is critical, as any delays will create greater costs later on

  • To minimize the occurence of “all contagious” diseases

  • Effectively respond to emergency situations

  • To strenghten health systems

  • Governments need to intensify cooperation and coordination

  • An appropriate amount of funds should be set aside to cope with such contingencies



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  • Carry out a market research in order to: THE MARKET

    evaluate the potential success of your products

    correctly place your products

    define the right strategy of distribution

  • Every product must be adapted to the Chinese market, in terms of taste, size and price

  • Allocate your products with a suitable positioning strategy

  • Select the right partner evaluating:

    organizational efficiency

    financial strength

    strategic ability

  • Take into consideration the cross cultural communication differences and differences in business attitudes


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