China’s man-made fibre industry is set to grow significantly over the next five years, as Asia recovers from the financial crisis of 1997-98, according to Natural and Man-Made Fibres in China, Hong Kong and Taiwan: Forecasts to 2005, a new report from Textiles Intelligence.

In 1997 and 1998 Asia’s rapid growth in fibre demand collapsed as the Asian financial crisis hit textile producers in the region. But demand has now picked up. For the future, the report predicts substantial growth in Chinese production of polyester industrial filament yarn between 2000 and 2005 (up 61%), as well as polyester staple fibre (up 34%), acrylic staple (29%) and polyester textile filament yarn (24%).

Growth will also be rapid -- but from a low base -- in the case of polypropylene staple (up 33%) and polyamide bulk continuous filament yarn (up 133%).

China’s man-made fibre production will have to expand rapidly over the next five years if the industry is to satisfy future growth in demand for textiles and clothing. Demand will rise as China steps up its exports of yarns, fabrics and apparel to Western nations. Also, Chinese domestic consumption is expected to expand significantly over the next five years as incomes grow rapidly among certain sections of the population -- especially given that Chinese consumer demand has been suppressed for several decades.

Demand for Chinese fibres will also be boosted by China’s membership of the World Trade Organisation (WTO), which is expected later this year. WTO membership will lead to more liberal trade between China and the West. The result will be growing demand for Chinese textile and clothing exports -- which will, in turn, lead to greater demand for fibres by Chinese mills.

Chinese fibre demand will also receive a boost as quotas restricting global textile and clothing trade are eliminated between now and the beginning of 2005. China’s man-made fibre industry stands to benefit from the quota phase-out for two reasons. First, the liberalisation of world textile and clothing trade will lead to an expansion in global demand as more players enter the market and prices come down. Second, China will gain market share at the expense of exporters in places such as Hong Kong, South Korea and Taiwan, who have only managed to hold on to their markets in the West by virtue of their historically high quota holdings.

It is unlikely that the extra demand can be satisfied by natural fibres. Although China accounts for almost 20% of the world’s production of raw cotton, Chinese output is expected to be static between the 2000/01 and 2004/05 crop years. Similarly, wool production will rise by a mere 3% between 2000/01 and 2004/05, according to the report.

China will need to upgrade its man-made fibre capacity if it is to compete in world markets. China has some big, modern plants employing the latest equipment. However, most of its plants are small and inefficient, and are equipped with outdated technology. Faced with global competition, China is planning and constructing large capacity polycondensation plants which are equipped with continuous process technologies. These plants will utilise one-step direct spinning for producing polyester textile filament yarns and textile staple fibres.

China’s capacity for making polyester staple fibre now exceeds 1.8 million tons. This is almost four times that in Western Europe, where capacity is just 500,000 tons. By 2005 Chinese polyester staple fibre capacity is forecast to reach almost 2.4 mn tons.

Future growth of China’s man-made fibre industry will depend to a large extent on the supply of raw materials. In fact Chinese capacity for making mono ethylene glycol (MEG) and purified terephthalic acid (PTA), both used in the manufacture of polyester, are already well established and plans for self-sufficiency are looking good. Since 1990 China’s capacity for making MEG has expanded from 310,000 tons to an estimated 1.3 million tons -- and further expansion, to 1.7 million tons, is forecast over the next five years. Similarly, Chinese capacity for producing PTA has grown from 735,000 tons in 1990 to an estimated 2.5 million tons in 2000. By 2005 Chinese PTA capacity is expected to reach 3.6 million tons.

However, international competition is intensifying. Chinese producers are therefore looking at alternative strategies for the future. Some are engaged in backward or forward integration. Others are forming joint ventures with multinational companies in an attempt to increase their presence in the global market.

China’s man-made fibre industry has huge potential for growth. But regional and worldwide competition will be tough, especially after China has joined the World Trade Organisation and is forced to open up its market to the outside world. Many of China’s smaller producers seem certain to fall by the wayside over the next five years as only the fittest survive.