Together for the future high-quality development of the industry

　　Editors note： On December 5th， 2019， four conferences including the Sixth Session of the Fourth Executive Council Enlargement Meeting of China National Textile and Apparel Council， 2019 China Textile Innovation Conference， 2019 National Textile Industry Cluster Review Conference， and the Eighth National Conference on Promotion of Management Innovation Achievements in Textile Industry were held in Beijing. During the conference， Mr. Sun Ruizhe， President of China National Textile and Apparel Council， made a work report entitled “Together for the future highquality development of the industry”. The report is divided into four parts： The goal of building a textile power in China has been basically completed； the main work carried out by CNTAC in 2019； the new situation and fresh changes in the current industry development； the main work to be done in the next stage by CNTAC. The first part has been published in the December Issue of 2019， and the following are the second and the third parts.

　　Part 2 The new situation and changes facing the current industry development

　　At present， the world is experiencing changes that have not occurred in a century， and technological advances have accelerated the progress of the industry. The core capabilities of different countries， regions， and enterprises are rapidly updated， and future development is highly complex. We need to follow the trend and grasp the times.

　　Seize the key adjustment period of the world industrial structure and find a right positioning

　　The power contrast is adjusting. Emerging market countries and regions are rising collectively. This is particularly evident in Asia. Asias share of global GDP in 2017 has reached 36.5%， exceeding North America and Europe； in 2018， the worlds regional R&D investment accounted for 40%. Asia has become the most active region in the global economic development， and the worlds textile and apparel industry is mainly distributed in this region. In 2018， the top ten countries in global staple fiber and yarn production accounted for 84% and 87% of the worlds total output， of which Asian countries and regions accounted for 66.1% and 82.1% of the top ten countries； the top ten countries and regions in textiles and clothing exports accounted for 86.2% and 83.3% of the worlds total， of which the Asian countries and regions accounted for 68.46% and 65.75% of the top ten countries， respectively. The prosperity of the region has enriched a large number of high-quality resources， creating conditions for the sustainable development of the entire industry. The rise of economies such as Vietnam， India， and Bangladesh have also changed the pattern of division of labor and trade. Chinas textile industry needs to speed up adjustments to its product structure， capacity structure， and trade structure to better integrate into regional development.

　　Organizational structure is being adjusted. Global value chains have become an important form of international division of labor. More than two-thirds of world trade is generated through global value chains. The formation of global value chains has profoundly explained the trend of “connected manufacturing”. The deep development of the value chain has made the global division of labor more detailed， and cooperation has become a trend. The economic systems of different countries have generally evolved towards a more specialized direction， and it has become increasingly difficult to form large and comprehensive industrial systems. China has a complete industrial system， and its pivotal role in traditional trade and global value chain connection has become increasingly prominent.The refinement of division of labor has also continuously enriched the content of trade. Many products and services that were not traded before have been commercialized. According to World Bank data， 65% of trade categories in 2017 did not exist in 1992. Technology is a key factor in the value chain. The technical characteristics of the product determine the governance structure of the value chain and the distribution of benefits to the participants. Currently， the United States and Germany remain the most important hubs in the global value chain connection. In order for China to improve its position in the global value chain， it must continuously strengthen technological innovation.

　　Trade rules are being adjusted. Rapid development of global regional and bilateral trade agreements. There are currently 696 regional free trade agreements on record in the WTO， of which 481 have already entered into force. The regionalization of trade has profoundly affected the industrial structure. On the one hand， the simplification and unification of rules has promoted the flow of resources in the region and reduced transaction costs and risks. On the other hand， the content agreement of regional agreements is easier to reach and fuller. For example， the digital economy and intellectual property rights are usually among them， which paves the way for future regional industry cooperation. For example， the RCEP to be reached early next year will strengthen regional industrial cooperation， change the cost structure， and reshape the supply chain relationship. We should pay great attention to this.

　　The development mode is being adjusted. The concept of sustainable development has become an international consensus and has accelerated its implementation， which has affected the global industrial pattern extensively and deeply. This effect is achieved through three mechanisms. The first is the policy mechanism. Globally， the number of environmental protection policies and regulations has grown exponentially， requiring stricter and higher requirements， and deepening the content. Although some emerging economies started late， they have higher environmental protection requirements. The second is the market mechanism. Sustainable development is becoming a key factor affecting market decisions. More and more international buyers are beginning to select partners based on sustainable requirements. In 2019， Nike introduced the “The Future of Cycle-guided Design”workbook， which requires suppliers to adhere to 10 sustainable development practices. The Boston Consulting Group survey shows that 75% of consumers consider product sustainability to be important. The third is the financial mechanism. Sustainability has become an important indicator for the capital market to measure systemic risks and evaluate corporate development. From the establishment of the Principles for Responsible Investment （PRI） to April 2018， the size of assets managed by signatories has increased from USD 6.5 trillion to USD 81.7 trillion. Green finance is booming. Under the influence of these forces， the companys green technology innovation， process innovation， and model innovation are becoming increasingly active. The global industry chain structure is more cyclical， balanced and coordinated. Some links with higher pollution and higher environmental protection costs are undergoing upgrading or replacement.

　　Seize the important window period of the fourth industrial revolution and speed up the assault

　　The fourth industrial revolution is reshaping the worlds industrial ecology and profoundly changing the global production and lifestyle， innovation and development paradigms. In this wave， technological innovation is becoming the core variable to reshape the industrial landscape.

　　· The fourth industrial revolution presents three major technological trends.

　　The first is intelligence. Information technology is the underlying architecture of the fourth industrial revolution. The world economy is accelerating to build on the information infrastructure， many of which have the power to change the entire industry chain.For example， blockchain technology with distributed accounting， asymmetric encryption， and peer-to-peer transmission as its content can achieve data tamperresistance， full traceability， and great potential in solving trust issues. The integration of industrialization and informatization is promising. Dayang Trandssmart clothing customization factory can complete all categories of suits and womens clothing. The production cycle is as short as four days and the daily output is close to 20，000 sets. Technological development also brings new risks to information security in the industry. Data shows that more than 90% of logins to global e-commerce sites come from hackers. We must make good use of new technologies and guard against new risks.

　　The second is integration. From micro to macro， from physics to information， from chemistry to biology， cross-fusion of technology is an important feature of this industrial revolution. The convergence of technologies drives the convergence of industries. Concentrated performance is the emergence of a large number of crossover formats such as intelligent manufacturing and new retail. The disappearance of industrial boundaries has promoted the enrichment of product functions. Major projects such as large aircraft and Shenzhou spacecraft are the result of technological integration. As far as the industry is concerned， the top ten textile innovation products selected by China National Textile and Apparel Council have also fully reflected the trend of technological integration. Such as singlelead intelligent electrocardiographic clothing of Aide Intelligent Technology Co.， Ltd.， graphene smart heating down jacket jointly developed by Septwolves & Aika Technology. The integration of technology makes technological innovation a “complex system”. In order to achieve breakthroughs in innovation in a single individual and a single field， capacity has been stretched. Only multi-party collaboration and open cooperation are the way out.

　　The third is green. Compared with the past， the development of technology for social good and green is one of the most distinctive characteristics of this industrial revolution. According to statistics， the global green technology industry market share exceeded 3 trillion euros in 2016， and by 2025， this number will reach 5 trillion euros. Green technology is profoundly changing the development model. In the energy sector， the share of renewable energy in the global energy structure is increasing. Over the past 10 years， renewable energy has grown at an average rate of 5.4% per year. In the field of materials， the greening of materials throughout the life cycle is advancing. For example， corn， chitin， and other biomass are used to replace petroleum to prepare “green fibers” and “bio-based materials”. In the manufacturing field， clean production and green manufacturing are developing rapidly， intelligent manufacturing is widely used， and the production process is shifting to low entropy. The digital dyeing and printing factory built by Huafang Co.， Ltd. is a good example. Technologies such as waste sorting and separation and pretreatment continue to advance， and circular economy is accelerating， such as Ningbo Dafa Chemical Fibers “integrated technology for efficient recycling of waste polyester and industrialization of fiber preparation.”

　　Manufacturing is the art and science of making raw materials into new products to meet new demands. The textile and apparel industry is a development aesthetics that integrates production， ecology， and life. Intelligent manufacturing， connected manufacturing， custom manufacturing， and green manufacturing will be the core of the future industrial revolution. The transformation of production methods will determine whether it can occupy the commanding heights of future development.

　　· Correctly treating the fourth industrial revolution

　　The fourth industrial revolution has given the industry the opportunity to restructure its comparative advantages and achieve “asymmetric” catch-up. We must speed up the layout and move faster； but at the same time， we must avoid the tendency of generalization and deification.

　　The fourth industrial revolution cannot be simply understood as the information revolution. Information technology is an important component of this technological revolution. Combining the “Top Ten Breakthrough Technologies in the World” released by MIT from 2001 to 2019， it can be found that the number of information technologies accounts for 50% of the total. However， the development of information technology is only the foundation and precursor of the industrial revolution. The broader space of the digital economy is not the industrialization of information but the informationization of the industry. The structural changes of the worlds top ten breakthrough technologies over the years can well illustrate this point. Eight of the top ten breakthrough technologies in 2001 were information technology. By 2019， there will be only three information technologies， and the rest are industrial application technologies. The “New Vision of the Global Digital Economy” also shows that in 2018， the industrial digitization of the countries it follows accounted for more than 50% of the digital economy， and the scale of Chinas industrial digitization reached 24.9 trillion yuan， about four times the scale of digital industrialization. The greater space for the new industrial revolution lies in the industry， and it should not fall into the illusion of “de-manufacturing”.

　　Individual technologies in the fourth industrial revolution cannot be regarded as a “panacea” that solves all problems. At present， the fourth industrial revolution is still in its infancy. Many technical applications are immature. Throughout history， the application of new technologies has never been immediate， but has to withstand a long-term test of economic and social development. The instability of the new technology makes the initial investment large and the cost of trial and error high. At the same time， in the process of industrialization of new technologies， it is necessary to get rid of the path dependence of the original mainstream technologies， which has a large conversion cost. Too aggressive technology strategies often carry significant risks. For example， Adidas will close its speed-factory in Germany and the United States， and transfer its capacity to Asia. For the industrial application of emerging technologies such as quantum computing， we must take a positive， prudent， rational and pragmatic attitude.

　　The technological divide in the fourth industrial revolution is widening， and if it does not keep up， it will be locked in the lower end of the innovation chain. WIPO statistics show that the top five countries in the world in terms of total patent applications increased from 76.9% in 1994 to 77.5% in 2018. Driven by global value chain cooperation， technology tends to be standardized and modular. Encapsulated technology products make many low-tech countries simply call， but cannot go deep into the bottom of technology. On the other hand， the integration and complexity of technology in the new industrial revolution means that scientific and technological innovation requires diversified and deep accumulation in the early stage， highquality infrastructure support， and high-level technological investment. At the same time， rapid changes in technology mean high trial and error costs. This is often unbearable for countries with weak economic strength. The technological innovation of the Chinese textile industry has accumulated certain innovation advantages in several cutting-edge technological fields and has the basic conditions for leading international technological innovation. We must firmly grasp the time window of the fourth industrial revolution and accelerate the upgrading of the value chain and innovation chain.

　　Seize the period of strategic opportunity for the great rejuvenation of the Chinese nation and take active actions

　　A high-quality national governance system and governance capacity are being formed. After years of exploration， especially since the 18th National Congress of the Communist Party of China， Chinas system has been continuously improved， the state governance system and governance capacity have been accelerated towards modernization， and the institutional advantages of socialism with Chinese characteristics have been brought into full play. The Fourth Plenary Session of the 19th CPC Central Committee will raise the governance system and governance capacity to a new height， providing a fundamental basis for Chinas comprehensive deepening reform in the new period. With the continuous improvement of governance capabilities， the boundaries between government management， social management， and market coordination will become clearer， and functions will be more coordinated and scientific. The state is continuously creating a competitive market environment to support the development of the private and real economies； it is continuing to deepen market-oriented reforms and remove institutional barriers that hinder the free flow of factors， and market vitality will be further stimulated. With the continuous progress of the rule of law in China， there will be fewer and fewer special services and more inclusive benefits. The management activities and business activities of enterprises will be more rule-based. And the gray areas of the new economy will gradually disappear. Enterprises need to adjust their business models in a timely manner to adapt to a more legal and clear market environment.

　　A high-quality economic system is taking shape. The construction of a modern economic system is an important support for the realization of the Chinese dream of the great rejuvenation of the Chinese nation. The modernization of the economic system is accelerating. The industrial system continues to upgrade. China is the only country in the world with all industrial categories in the United Nations industrial classification. The huge industrial ecology has provided a huge stage for innovation and development. Data from the Fourth National Economic Census shows that the industrial structure is being optimized， and the number of high-tech manufacturing legal entities in the manufacturing industry above designated size has reached 9.5%. The innovation system is constantly improved. China places innovation and development at the core of the countrys overall development. In 2018， Chinas R&D expenditures were 1，965.7 billion yuan， a year-on-year increase of 11.6%； R&D expenditures exceeded 2% for five consecutive years， ranking the top among developing countries. The development of information technology facilities and innovation systems has accelerated. These have created excellent conditions for the industry to enhance its core capabilities. Regional systems are more coordinated. The state continuously optimizes the spatial layout through policy and strategic guidance， promotes the rational flow and efficient concentration of resource elements， and accelerates the construction of a highquality development power system. Regional industry support is constantly improving. On December 1， the CPC Central Committee and the State Council issued the “Outline of the Yangtze River Delta Regional Integration Development Plan”. The outline clearly stated that “the nations advanced manufacturing agglomeration area” should be established， and in the future， a number of national strategic emerging industrial bases will be built around ten major fields such as electronic information， new materials， green chemicals， textiles and clothing， and a number of world-class manufacturing industries clusters will be formed. Industry development is ushering in new opportunities.

　　A high-quality domestic demand market is emerging. In the process of the great rejuvenation of the Chinese nation， the quality of life， income level and consumption capacity of the Chinese people have been continuously improved. Consumption has become the primary driver of economic growth for five consecutive years. In the first three quarters of 2019， the final consumption expenditure contributed 60.5% to economic growth. China has formed the largest middle-income group in the world. Consumption upgrading has become a trend， and demand has shown characteristics of personalization， diversification， and quality. An important manifestation is the continuous strengthening of cultural self-confidence in consumption. For example， the rise of Hanfu， according to estimates， has more than 2 million consumers in the Hanfu market across the country， with a total industry size of about 1.09 billion yuan. With the continuous deepening of urbanization， regional coordinated development， and targeted poverty alleviation， the potential of sinking markets is also being released. At the same time， the cultivation of Chinese consumers online habits has been completed. An interesting phenomenon is that even if the online price of some products is higher than offline， consumers still ignore this reverse price difference due to path dependence. From November 1st to 11th 2019， Chinas online retail sales exceeded 870 billion yuan， a year-on-year increase of 26.7%. Consumption upgrades， the rise of sinking markets， and the maturity of the Internet market are shaping the market opportunities for industry development in the new era.

　　A high-quality open pattern is taking shape. Opening up to the outside world is the only way to realize the great rejuvenation of the Chinese nation. The World Banks “Doing Business 2020” report shows that Chinas business environment ranking has accelerated from 78th in 2017 to 31st in 2019， and has been ranked among the top ten economies with the largest improvement in business environment in the world for the second consecutive year. In the new era， China is forming a new pattern of opening up in an all-round， multi-level and wide-ranging field. In 2019， a series of policies such as “Special Administrative Measures（Negative List） for the Access of Foreign Investment （2019）” and “Industrial Catalog for Encouraging Foreign Investment （2019）” were issued， which strongly promoted the in-depth opening of finance， infrastructure， culture， manufacturing and other fields. According to data from the Ministry of Commerce， from January to October 2019， 33，407 new foreigninvested enterprises were established nationwide， a year-on-year decrease of 32.6%； the actual use of foreign capital was 752.41 billion yuan， a year-onyear increase of 6.6% （equivalent to USD 110.78 billion， a year-on-year increase of 2.9%）. China actively promotes the conclusion of regional agreements such as RCEP， China-Japan-Korea Free Trade Area， and promotes win-win regional cooperation. The quality of “going global” is getting higher and higher. Crossborder mergers and acquisitions， capacity transfer， and technical cooperation have effectively broadened the space for industrial development. The deepening of the opening up pattern provides opportunities for the industry to make good use of both international and domestic markets and resources.

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