China-Indian Silk Trade: Current Production and
Future Prospects
Liu Feng 1,2, Sun Shimin 1, Qiao Xianjuan 3
1. School of Economic Management, Shandong Agriculture University, Tai’an Shandong 271018, China;
2. Shandong Silk Group Co., Ltd, Shandong, Jinan Shandong 250001, China;
3. Shandong Forestry Administration, Shandong, Jinan Shandong 250014, China
nated development of regional economy, but also meet the requirements of the scientific concept of the environment friendly sustainable development. Mulberry plantations, which produce excellent ecological and social benefits, play a critical role in checking winds and fixing drifting sand, conserving water and purifying air. There are almost 70 countries and regions producing silk, among which China, India, Vietnam, Uzbekistan, Brazil and Thailand are the ma-jor ones (Gu, 2001). China is the world’s largest cocoon silk producer and trading country. India is the world’s second largest cocoon silk and raw silk producer and the largest silk cloth consumer. Meanwhile, it imports lots of cocoon silk and then exports it after processing. In the 21st century, although the production of the two countries and the China–India silk trade grow rapidly, bilateral competition also causes trade friction. Therefore, it is of great significance to study the cocoon silk resources and current status of China–India silk trade and analyze existing problems in order to promote stable trade development.
2 Cocoon silk resources in China and India
As a labor-intensive industry, cocoon silk industry con-tributes a lot in promoting the economic development of China and India. With a history of over 5000 years, the Chinese cocoon silk annual production has exceeded that of any other country over the past 30 years. China’s silk trade, mainly the export trade, is absolutely dominant in the international silk industry. In recent years, although propor-tion of silk industry in generating foreign exchange slows down, silk is still one of the largest exported products, tak-ing an absolute leading position in silk industry home and abroad. Export volume of Chinese cocoon silk and pure silk accounts for 87 and 55% of the total world trading volume respectively in 2000, and both figures have increased to
Abstract: As an important traditional labor-intensive industry
of both India and China, the cocoon silk industry has long made great contributions to the ecological environment protection, rural economic development and the increase in export income of both countries. India is not only a very important cocoon silk trading partner, but an important production competitor of China. In recent years, there has been a large increase in the production and trade of the cocoon silk between China and India; however, China relies heavily on Indian market, which leads to a tendency of further deterioration in the silk trade environment between both countries. The present article makes an empirical study of the cocoon silk resources of the two countries and the scale, product mix and market structure of China–Indian silk trade from 2001 to 2007. Overall silk trading volumes from China to India and market concentration rate are on the increase because of the superiority of Chinese cocoon silk production over that of India. Owing to scat-tered market share and export that mainly focused on raw materi-als product, there has been a phenomenon of price reduction and quantity increase. India carries out fierce competition with China in the international market and even imposes antidumping sanction on Chinese silk, which are key factors restricting further increase between China–India trade. Based on the abovementioned facts, the authors aim to put forward suggestions for steadily developing the production and trade of China’s silk.
Key words: silk trade, export structure, trade environment
1 Introduction
Silkworm cocoons and silk are the raw materials of silk industry and trade. At present, the overall production of silk fibers account for 0.175% of world’s fiber produc -tion. Silk is called ‘Fiber Queen’ and is winning more and more popularity around the world. Feeding silkworms and growing mulberry trees not only increase farmers’ income, provide jobs, improve environment and promote the coordi-Corresponding author: Liu Feng (liufenglf@https://www.doczj.com/doc/de8853241.html,)
90 and 70% respectively in 2005. With the restructuring of agricultural industry system, profound changes have taken place in silk industry. The transformation of silk produc-tion industry has been sped up and the production of silk increases quickly. The main cocoon producing areas have shifted from the south of Yangtze River and other regions of south China to the west areas, from economically de-veloped areas to those less developed areas. Besides, there is a trend for the stated-owned silk industry transforming towards private-owned form. The Chinese cocoon silk in-dustry at currently involves almost 20 million farmers and supplies jobs for about 1 million labors and plays a critical role in maintaining social stability, especially of the less de-veloped areas in Guangxi and Yunan, where the cocoon silk industry is now superior to other crop economies with local characteristics in the new socialist rural-area construction. It creates the economic benefits of over 45 000 yuan RMB per ha far more than other crop economies. From 2001 to 2007, the mulberry plantation area, amount of silkworm eggs, outcome of silkworm cocoons and silk have respec-tively increased at the rate of 27.3, 32.7, 52.5 and 48.9%, from 720 666 ha, 15 940 000 pieces, 512 700 tons, 87 300 tons in 2001 to 917 333 ha, 21 160 000 pieces, 782 100 tons, 130 000 tons in 2007. The industry has brought farm-ers who feed silkworms an income of 14 billion yuan RMB in 2007.
India is a large agricultural country like China, with rural population accounting for 72%. Owing to its tropical cli-mate, India harvests silk all the year round. From the 1990s, the silk industry of India began to develop quickly with the assistance from World Bank, and countries like Switzer-land, Japan and so on. In 2007, the total production of silk in India was 18 475 tons, which increased at the rate of 6.5% compared with the 17 351 tons in 2001, and China was the only country that produced more than India. At present, its mulberry plantation area is about 180 000 ha, annual silk-worm eggs about 6 600 000 pieces and annual outcome of silkworm cocoons about 120 000 tons. And the silk prod-ucts account for 13% of that of the whole world; 15% of the silk produced in India is exported; about 5 700 000 workers are engaged in the industry. However, the silk products used for export and expensive consumption in India rely heavily on importing raw silk from China. For instance, India silk sari consumption is a key factor that promotes China’s silk export to India. According to the data from Indian Textile Department, annual consumption on cocoon silk reaches at least 26 000 tons. Although it can yearly produce 16 000 tons silk, it still demands about 8000–10 000 tons of silk, which accounts for about 40% of the annual silk export of China (Xu et al., 2002). The silk production of the two countries and the silk trade between them directly influence the global development trend of silk industry.
3 Overall situation of China–India silk trade
3.1 China–India silk trade volume and market concen-tration rise
Chinese market concentration to certain country (re-gion) refers to proportion of market value in such a coun-try (region) to total Chinese export volume, represented by concentration ratio (CR), which indicates Chinese silk concentration in one or several markets. According to sta-tistics from Chinese Customs, in 2007, Chinese exported
Table 1 China–India silk trade volume (106 USD)
Year2001200220032004200520062007 Total global trade volume1856.942273.072521.713245.393751.693714.623610.64 Import V olume from India—— 5.0226 6.1628 6.24828.46568.7078 Export volume to India162.57256.4668303.0015435.1708540.2482471.9266566.3119 Rise and fall in export to India (%)—57.7618.1443.6224.15–12.6420 Market concentration to India (%)8.7511.312.0213.4114.4012.715.68 Sources: Chinese Annual Silk Book (2002–2006); data in 2006 and 2007 are abridged from China Textile Industry Chamber of Commerce Silk Sub Council.
silk commodities having realized USD 3.611 billion, and the exports to India account for USD 0.5611 billion, which was 15.7% of the national export value and increased at the rate of 20%. From Table 1, it can be found out that Chinese silk transaction volume and market concentration to India rise generally since China’s entry into WTO (exception, figure in 2006 lower than that in 2005). What is more, trade surplus is intended to enlarge. In 2001, silk export to India realized USD 0.163 billion, such a figure reached USD 0.566 billion, an increase of 3.47 times. During the same period, although Chinese import volume from India increased, the absolute amount was relatively small, and increased slowly. Thus, Chinese silk export to India market had large space to explore.
3.2 Singularity in China–India silk product mix; price reduces despite volume increase
Silk exporting from China to India is primarily raw materials – cocoon silk and gray fabric that is not dyed. Re-cently, India silk cloth develops very fast, whose production and export volume also increases, imposing more and more demands on cocoon silk. India silk is mainly yellow cocoon silk. Owing to poor quality, it can only be used as horizontal silk in manual and machinery spinning. India has to import white cocoon silk from China as a mechanical vertical silk. Besides, India also imports raw silk from China to produce silk products, most of which export overseas. In 1991, India only imported 1598 tons raw silk. The figure roared to 9258 tons in 2003, with 7579 tons from China. From 2001 to 2007, China–India trade volume in cocoon silk and raw cloth has risen from 7954 tons and 8 431 000 meters to 10 280 tons and 71 630 000 meters respectively. Since China’s entry into WTO in 2001, China–India trade volume in cocoon silk and raw cloth rockets up; however, prices fall continuously, far below that of global trade. Especially, price gap in raw cloth is huge, having ‘impoverished in-crease’ for three consecutive years (Jiang, 2007). Such a phenomenon was inhibited as export price began to increase since 2004.
3.3 Stronger inter-enterprise competition due to loose market pattern in Chinese silk exporters to India Market concentration is a key index to judge market structure. In order to evaluate monopoly and competition level, top four enterprises or proportion of eight enterprises’ export volume to total trade volume within the same field
Table 2 Chinese silk product varieties to India
Year2001200220032004200520062007 Cocoon silk
(ton)
7 95410 64210 92311 39211 5537 97710 208 Rise and fall rate (%)—33.8 2.6 4.3 1.4–3128
Unit price
(USD /kilograms)
20.4415.6514.0817.1920.7826.423.5 Average global price20.7516.114.8717.4320.1925.4323.55 (USD/kilograms)
Nulberry cocoon silk
(ton)
7 9547 2147 5767 2108 165 5 3207 947 Raw cloth
(106 meter)
8.43134.2561.1192.8690.8853.4571.63 Rise and fall rate (%)—30678.451.9–2.1–41.234.0
Unit price (USD/me-
ter)
1.98 1.48 1.36 1.66 1.94
2.51 2.29 Average global price
(USD/meter)
2.552 1.85 2.02 2.21 2.83 2.75 Source: data are abridged from Chinese Silk Yearly Book (2000–2006); 2005 and 2006 mulberry cocoon silk data are abridged from Indian Investigation Report by Chi-nese Agricultural Department in April 18, 2007.
are usually selected to calculate CR4 and CR8. It has been proved by scholars that market concentration and economic performance are positively correlated; meanwhile, econom-ic performance of large enterprises is apparently better than that of medium and small ones (Qi, 1998). Low market con-centration has a negative impact on competitiveness. There were 55 raw silk exporters, 96 silk cloth exporters in China in 2000. China repealed qualification management on raw silk exporters in October 2001, as a result, the number of raw cloth exporters increased to 193 in 2005, 68 of which are to India, accounting for one third, with a single price at USD 1.94 per meter, apparently lower than the global single price at USD 2.21 per meter. The market concentrations of Chinese exporters to India in cocoon silk and raw cloth (CR4 and CR8) are shown in Tables 3 and 4 respectively. Gener -ally speaking, market concentration of Chinese silk industry is relatively low, which is inclined to reduce constantly. The transference from oligopoly type IV (35% 4 Impact factors on China–India silk trade In accordance with data from Chinese Silk Yearly Book and Chinese Textile Industry Chamber of Commerce, the author calculates China–India silk trade competitiveness index from 2003 to 2007, which was 0.967, 0.972, 0.977, 0.965 and 0.969 respectively, close to one for five consecu -tive years, indicating very clear competitiveness for Chi- Table 3 Market concentration for Chinese cocoon silk exporters Year 20012002200320042005 2006Total export volume for cocoon silk (106 USD) 474.957 421.1651 418.5312 479.1616 614.7718 634.6504 Export volume of top four enterprises (106 USD) 192.5793 161.3074 139.7497 135.1223 162.1753 110.415 Export volume of top eight enterprises (106 USD)295.5423247.2685202.3861207.4564264.6326 203.6893CR4 (%)40.5538.3033.3928.2026.38 17.35CR8 (%) 62.23 58.71 48.36 43.30 43.05 32.0 nese cocoon silk and raw cloth exporters to India. However, China–India trade situation has further aggravated in recent years. Main unfavorable factors are analyzed in the follow-ing sections. 4.1 India promotes domestic silk development to carry out fierce international competition Since India’s independence in 1947, the government en -couraged cocoon silk industry to develop national industry and generate foreign exchange. India central government began to formulate a Five Year Cocoon Silk Development Plan since 1951 to increase fiscal support on silk year by year. By the accomplishment of the Tenth Five Year Plan in 2007, Indian government has totally invested 39.85 bil-lion rupees, with an average growth rate of 14.59%, much higher than the economic growth rate of India. In particular, Indian government set a higher target in the Tenth Five Year Plan (from 2002 to April 2007), requiring total silk produc-tion volume at 31 000 ton per year, doubling the figure in 2000 and supplying jobs for 7.7 million people. Besides, India specially established Indian Silk Export Promotion Council to encourage silk export. According to relevant report, India’s silk cloth export to USA surpassed China in 2000 for the first time, which then increased to 2.56 times of the United States’ silk cloth export. Accord-ing to statistics from India Textile Department, India’s exchange on silk export in 1996 and 1997 was USD 0.277 billion, which increased 2.61 times to USD 0.722 billion in 2005 and 2006. In overseas market, China–India silk trade relationship has escalated from potential competitor to di-rect competitor, with competition growing much fiercer. 4.2 India enhances its antidumping on Chinese silk ex-port In the 21st century, Chinese raw silk and raw cloth have cost and quality competitiveness; meanwhile, there is over-lapping between China–India silk markets. India thinks the rapid increase in Chinese cocoon silk resources and the large raw silk sale have brought substantial harm to their counterpart industry in India. In July 2002, Indian Ministry of Industry and Commerce carried out antidumping investi-gation on Chinese low-level mulberry cocoon silk (2A and below), and began to levy antidumping tax. Therefore, in May 2005, India began to propose antidumping on Chinese silk again with USD 0.2 billion, involving more than 100 enterprises, which is the largest antidumping proceedings against China (Du, 2007). Therefore, antidumping friction has swept from upstream to downstream. In December 2007, corresponding to appealing of Indian Central Silk Bu-reau, Indian Ministry of Industry and Commerce initiated re-investigation on Chinese silk antidumping. Chinese Tex-tile Industry Chamber of Commerce solicited suggestions from silk enterprises, which were inclined to quit suing. To some extent, it indicates that Chinese silk enterprises have collectively involved in ‘Olson dilemma’—individuals pursuing their own interests regardless of public interests. Within a community, it is not in favor of public interests for an individual to maximize his own interests (Luo, 2005). Despite common objects, there are interests’ conflicts be-tween silk enterprises. Psychology for personal interests and high transaction costs cause barrier to form uniform pricing negotiation against outside competitors.4.3 Chinese silk trade increases slowly due to Indian antidumping In line with abovementioned measures, India inhibited Chinese silk export through tariff restricting effect. In 2003, India finalized high antidumping tax on Chinese raw silk below 2A, driving low-level raw silk completely out of India market. Owing to export barrier, Chinese raw silk price reduced by 10,000 yuan RMB per ton in June 2003, silk enterprises reduced income of 0.5 billion yuan RMB and income of more than 20,000,000 farmers all over China reduced about 1 billion yuan RMB (Chen, 2004). Cocoon production reduced by 6.65% compared with 2002, ‘impoverished growth’ emerging clearly. Chi-na–India trade began to slow down since 2003. In 2006, China exported 7977 tons cocoon silk and 53,450,000 pieces of raw cloth to India, reducing by 31% and 41.2% respectively compared with those in 2005. Increasing price of exported silk inhibited price reduction in Indian domestic market, which provided adequate protection for silk industry. Indian government, on the one hand, forcefully rejuve-nates domestic silk industry, and on the other hand, inhibits Chinese export relying on trade protectionism and reduces dependence on raw materials from China. Under relatively stable global demand, bilateral relations between China and India are quite similar with oligarch ‘Stackelberg model’ Games, imposing fluctuations on China–India trade. Trade frictions will occur more frequently. Meanwhile, Chinese silk exporters are similar to ‘Cournot model’ between en-terprises, with market clearing price acting as a decreasing Table 4 Market concentration for Chinese raw cloth exporters Year20012002200320042005 2006 Total export volume for raw cloth (106 USD)266.968254.3515296.5814415.3201521.2969 547.552 Export volume of top four enterprises(106 USD)144.9279132.4644123.7059169.7736175.8512 144.593 Export volume of top eight enterprises(106 USD)192.4991170.9385171.1895231.7107235.0507 221.516 CR4 (%)54.2952.0841.7140.8833.73 26.41 CR8 (%)72.1167.2151.7255.7945.09 40.46 Data in Tables 3 and 4 are abridged from: Chinese Silk Yearly Book (2002, 2003, 2004, 2005, 2006 and 2007 version). function for total products volume in India market. Any en-terprise’s export turnovers depend not only on its unit price and export volume, but also on export volume decision of other enterprises through price. Inter-enterprise trade deci-sions are mutually dependent. Non-cooperative games be-tween different enterprises owing to independent decision-making and lack of coordination can not maximize the collective’s as well as the individual’s interests (Xie, 2007). Even if there is cooperation, such a cooperation is usually unstable, which shows that it is quite necessary for govern-ment to implement macrocontrol and regulation. Therefore, the government should emancipate minds and take neces-sary measures to balance silk trade at home and abroad. 5 Policy proposals Achieve the sustainable development of cocoon silk industry through volume control. The quick expansion of Chinese cocoon silk production heavily hits the world market, leading to the lowering of silk prices. Therefore, China should take an ‘intension-development’ path, re-duce global market fluctuation through volume control and transform the cocoon silk industry from ‘quantity ex-pansion’ to ‘acquiring victory relying on quality and effi-ciency’. The quality of silkworm cocoons and the compo-sition of export-item should be improved in order to better prevent the sudden boom and recession of the cocoon silk industry. Standardize export operation and enhance market concentration. The government should strengthen macro-control, provide incentives for merger and acquisition and reduce overpricing competition and enhance overall pricing negotiation capacity. Exporters should abide by relevant States laws and regulations on foreign trade, strengthen self-discipline, resist low-price competition, integrate itself into sustainable development of total industry and shoulder more responsibilities for national silk’s secure development. Vigorously face growing silk trade barrier. Indian silk antidumping on China has brought unfavorable effects. In the foreseeable future, besides India, other developed countries will also impose barriers on Chinese silk export through trade means. New international trade protection-ism will be strengthened and more and more antidumping cases will emerge. Government and Chamber of Commerce should study international trade barriers and establish all-round pre-warning system. What is more, enterprises should actively defend antidumping lawsuits. When necessary, WTO disputes resolution mechanism should be resorted to in order to find out proper solutions. Implement diversified strategy, stimulate domestic de-mand and reduce market risk. Silk enterprises should cul-tivate global perspective. On the one hand, the enterprises should explore market channel, reducing cocoon silk and raw cloth’s single high dependence on India market; on the other hand, the enterprises should reform the thought that foreign trade is more important than domestic trade, and should transform from ‘coming out’ to ‘getting back’ and forcefully explore domestic market. There is a great poten-tial to develop domestic market with 1.3 billion people. References C hen H J, 2004. Thought on the Indian antidumping to the raw silk from China. Sichuan Silk, (1): 29–30 (in Chinese) Du M, 2007. Responding to anti-dumping silk enlightenment experi-ence. Silk, (2): 24–25 (in Chinese) Gu G D, 2001. Silk Industry Economy and Silk Trade. Beijing: China Agricultural Press, 3 (in Chinese) Jiang H F, 2007. The trend analysis and the solution on the impover-ished increase of silk foreign trade. Sichuan Silk, (4): 38–41 (in Chinese) Luo B L, 2005. New Institutional Economics (The First Edition). Taiyuan: Publishing House of Shanxi Economy, 577–588 (in Chi-nese) Qi Y D, 1998. Positive analysis on concentration and performance of China’s industry. Management World, (4): 99–106 (in Chinese) Xie S Y, 2007. Economic Game Theory (The Third Edition). Shang-hai: Publishing House of Fudan University, 17–18, 61, 121 (in Chinese) Xu A Y, Li L, Ren Y L, et al., 2002. Silk industry in India. World Ag-riculture, (12): 32–33 (in Chinese)
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