Download Factors Impact Comparative Advantage in Regional Textile Industry

Factors Impact Comparative Advantage in Regional Textile Industry
WANG Li Ping
School of Economics and Management, Henan Polytechnic University, Jiaozuo 454000
Abstract: Factor analysis aims to find out hiding and determinative basic factors from variable
correlative data structure to recognize profoundly subject. The computation of factor analysis utilize
mainly the relation of original index and factor, classify original index via factor, and judge practical
meaning of these factors. Noticeably, we can use factor rotation in factor analysis. Therefore, factor
analysis tends to associate with economic phenomenon of objective society, which makes the property
of factors confirmed, understood and analyzed synthetically.
Key words: Factor analysis, Textile industry, Competitiveness, Industrial scale factor; External
environment factor; Industrial management factor
1 Introduction
The mathematical model of factor analysis is to denote m original variables into linear weighting
sum of p < m common factors and a unique factor. Formula denotes:
p
X 1 = a 11 f 1 + a12 f 2 + L + a1 p f p + ε 1 =
∑a
1i
fi + ε1
i =1
p
X 2 =a 21 f1 + a 22 f 2 + L + a 2 p f p + ε 2 =
∑a
2i
fi + ε 2
i =1
…
…
…
p
：f
Hereinto
X m =a m1 f1 + a m 2 f 2 + L + a mp f p + ε m =
∑a
mi
fi + ε m
i =1
i
is a common factor; ε i is a unique factor; cov( f i ,ε i ) = 0 , set ε i = 0 , aij be
coefficient of the i th variable in the j th common factor, namely factor burden or factor loading.
Factor loading is the correlative coefficient, reflecting the relative importance of the i th variable in the
j th common factor, that is to say, factor loading reflects the magnitude of contribution of the j th
common factor in the i th variable information generalization. So, factor loading is not only a key of
judging the property and function of common factor, but also the important foundation for explaining
and analyzing factor.
2 Factor Analysis
After deciding the factor model, we can determine the property of common factor according to the
coefficient of factor loading. In order to make the meanings of common factor more evident and
emphasize certain common factor delegating which variation information, this paper adopts varimax
rotating techniques to polarize factor loading towards the direction of 0 , ± 1 . The table of factor
loading matrix from SPSS13.0 is shown below:
Table 1 Rotated component matrix
Component
Index System
1
2
3
Export amount of textile industry
.679
.645
.221
Import amount of textile industry
.111
.971
.102
Gross asset of textile industry
.907
.320
.266
371
Total profit of textile industry
.907
.161
.296
Total output value of textile industry
.899
.336
.262
Total output value of regional industry
.498
.630
.532
Total output of tertiary industry
.481
.670
.515
Total retail sales of consumer goods
.369
.736
.515
.935
.126
.140
Employment scale of textile industry
.895
.339
.266
Output of chemical fiber
.822
.354
.363
Output of clothing
.598
.734
.199
Profit rate on capital of textile industry
Profit rate based on the cost of production
and expenses of textile industry
Rate of profit payments and tax turnover
based on output value of textile industry
.339
.160
.896
.224
.247
.909
.179
.177
.924
Enterprise scale of textile industry
From the rotated factor loading matrix, the loading coefficients of the first common factor is very
large in seven indices, namely, total export, total assets, total profit, gross industrial output value,
enterprise scale, employment scale and chemical fiber output. Most of them are between 0.8 and 0.9,
which shows that the first common factor mostly indicates competitive advantage of total scale of textile
industry. Therefore, we define the first common factor into industrial scale factor. The second common
factor is related with six indexes, namely, total import, gross regional output value, gross tertiary
industry output value, total retail amount of commodities and garment output. The loading coefficients
concentrate between 0.6 and 0.7, indicating that the second common factor reflects mostly exterior
environment of textile industry, such as economic environment, industry foundation, and market
potential, and so on. So, we call the second common factor external environment factor. The loading
coefficients of the third common factor in profit rate on capital, profit rate based on the cost of
production and expenses and rate of profit payments and tax turnover based on output value concentrate
between 0.8 and 0.9, showing that the third common factor reflects mostly the management ability of
textile industry in capital utilization, cost saving and society effect, and so on. Thereby, we call the third
factor industrial management factor.
Specially, why is garment industry as a subsidiary industry largely related with the second common
factor? It can be explained from two sides, one of which is the traits of garment industry. Just from the
angle of production, garment is the terminal manufacture of textile industry, which is tightly related with
upstream subsidiary industry. Garment fabrics are produced by one after another upstream working
procedures involved with spinning, weaving and dyeing subsidiary industry, from initial fabric raw
materials(cotton, hemp, wool, silk, chemical fiber), and so on. Hence, garment industry is different from
other textile subsidiary industry. On the other hand, from the angle of social production, it also relates
tightly with other industries. The prosperity and decline of garment industry deals with many aspects of
social production, including transportation, information, logistics, trade and market assistant or service
industry. Thus, garment industry reflects basic industry strength of textile industry, the extent of
development of pertinent sustaining industry or assistant one and the extent of perfection and healthiness,
which is the epitome of social environment and basic condition. Consequently, output of garment relates
mostly with the second common factor.
In summary, the gap of the regional competitiveness of China’s textile industry is industrial scale,
external environment and industrial management. Specifically, in the first place, the uppermost gap of
the regional competitiveness of textile industry is the scale of regional textile industry. The textile
industry of the east occupies two-part of Chinese textile industry whether in throughput or in practical
industrial output value, showing powerful scale advantage of textile industry. In the next place, the
competitiveness of textile industry is strongly affected by external environment due to its great
correlation, such as industry foundation, economic strength, market mechanism, potentiality of
consumption market, and so on. The east provide better external environment than the west. Finally,
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there are also gaps in Chinese regional textile industry management, but the gap of management is less
than industrial scale and external environment, which is connected with low whole management ability
and modern management level of Chinese textile industry. This paper will describe these three regional
gaps of Chinese textile industry in detail.
2.1 Industrial Scale Factor
To develop the textile industry, through cultivating the superiority of the scale, is conform to both
the modern production rule of the textile industry and Chinese national conditions. The developing
countries, such as China with a great deal of population, obtain the excellent opportunities of investment.
As we all know, the textile industry is typically labor-intensive, which has no strict limit for the
specialized technical and no demand of the professionals. Moreover, in the current world, the textile
production center is moving to the low cost production area. Eastern China holds a historical
opportunity to construct the textile industry actively. Compared with other provinces, the scale of textile
industries (in Zhejiang, Jiangsu, Shandong and Guangdong) are on the top of China, including enterprise
quantity, assets scale and employment scale.
Therefore, because of the historical reasons and the limitation of reality condition, there is a huge
disparity of textile industry between the eastern and western area. But, with the implementing of the
western development and adjusting of industry policy, the employment, the quantity of enterprises, and
the growth of investment are all gradually getting more and more gratifying growth.
2.2 External Environment Factor
The textile industry has a relatively high sensibility among the industries, with a coefficient larger
than 1. Therefore, the textile industry is subject to the external environment such as the economic
environment, social foundation and other industries. Specifically manifested in the following aspects:
firstly, the local economic situation would provide a powerful economic support and demand impetus to
push forward the development of the textile industry; and the social culture relative to the economic
base will penetrate textile companies’ organization, management, inter-enterprise competition and so on.
Secondly, although the textile industry may choose to import raw materials and production equipments
from abroad, it had to rely on local infrastructure and social services systems for the production,
distribution, sales and other aspects of industrial activities. Thirdly, the textile industry may also be
impacted by related industries’ upgrading so it may change its organizational structure and management
style. The information transfer and technical exchange between textile industry and related industries
will increase the possibility of acquiring new technologies or opening up new markets, even accelerating
innovation and upgrading of the textile industry. Therefore, this article focuses on economic strength,
tertiary industries and social foundation these three forces of the external environment to analyze
external environmental differences that impact the regional competitiveness of the textile industry.
Regional GDP reflects the region’s total scale of economy. The greater the scale of economy is, the
greater the opportunity for development and investment has the textile industry. The index of consumer
demand elasticity would grow with the increasing social wealth; particularly the developmental potential
of top-grade textiles or new textiles’ applications will be greater. According to the statistics study in
China’s regional GDP of the year 2004, the strength of China's regional economic disparities greatly
(table 2), the former four provinces of textile making are the only four areas with a regional GDP of
more than one trillion Yuan, as against, Hainan, Qinghai, Ningxia and Xizang regions’ GDP was only
dozens of billion Yuan. Regional economic gap is bound to affect the long-term investment in
developing the local textile industry and market vitality.
Table 2 Comparison of economic strength in China’s different regions (unit: 100 million Yuan)
Strong Regions
Regional GDP
Weak Regions
Regional GDP
Guangdong
16039.5
Hainan
769.4
Shandong
15490.7
Qinghai
465.7
Jiangsu
15403.2
Ningxia
460.4
Zhejiang
11243.1
Xizang
211.5
373
Source: National Bureau of Statistics of China, 2004
The textile industry and other industries are also very closely linked. Take the tertiary industry for
example, the retail, transport, finance, consulting, as well as the authorities, associations for social and
public needs are essential supporting elements for the healthy development of the textile industry, and
the textile industry’s dependence to the service industry will continue to enhance with the industry’s
modernizing process. Therefore, this article takes the tertiary industry’s output value as the
representative of the tertiary industry’s strength. After a comparative study, it is found that the gap
between the east and the west is quite obvious. In 2004, the tertiary industry output value of Guangdong
province ranks first in the nation for 590.38 billion Yuan, followed by Jiangsu province for 537.17
billion Yuan, Shandong province and Zhejiang province for 498.79 and 438.2 billion Yuan respectively;
Hainan, Qinghai, Ningxia and Xizang tertiary industry output value are characterized as follows : 30.51,
18.09, 15.58 and 11.06 billion Yuan, such a low output value shows that the local conditions and social
services systems are relatively underdeveloped, it is difficult to provide powerful auxiliary support for
the textile industry’s development. Therefore, the central and western regions should speed up the
construction of social services system, exclude social barriers encountered by the textile industry, and
provide convenient, rapid, integrated services to boost the competitiveness of the textile industry.
Of course, the external environment is much more than what has been mentioned above, all
economic openness, local government, or even geographical conditions would affect the development of
the textile industry, not to enumerate here. In short, when the external environment can accumulate the
assets and skills needed for the development of the textile industry at the fastest speed, when it continue
to provide better public facilities, social services and information exchange platform, when a change in
environment can facilitate textile enterprises ongoing investment and the pursuit of innovation, the
textile enterprises will have a competitive advantage, and continue to enhance it. External environment’s
impact for the textile industry is integrated, comprehensive and long-term, thus the external environment
needs to be improved and optimized with long-term and unremitting efforts.
2.3 Industrial Management Factor
A statistical analysis on economic results has been done in different economic types of textile
enterprises in the nation. These results include the deficit, sales revenue rate per capita, profit margin in
cost, maintenance and appreciation rate of assets value, etc. It is found that, overall, the private textile
enterprises have an effective way of management in all aspects; collective and foreign enterprises, Hong
Kong, Macao and Taiwan enterprises take second place; state-owned textile enterprises worst. Here the
authors focus on the private and state-owned textile enterprises to do a comparative study: in the
nationwide, private textile enterprises’ average deficit is 26%, while the state-owned textile enterprises’
average loss is as much as 51%, almost twice the private sector’s deficit (Figure 2). Private textile
enterprises’ sales revenue rate per capita is 1.2 million Yuan per year, and the state-owned textile
enterprise’s rate is only 0.69 million Yuan, less than 60% of private enterprises, which often has great
relation with state-owned enterprise’s prevailing staff redundant, laxity of working styles. In the aspect
of profit margin in cost, owing to the large amount and scope of loss, state-owned textile enterprises’
average profit margin in cost is -19.48%, on the contrary, the private sector not only has the profitability
but also few enterprises in deficit, as a result, private textile industry’s average profit margin in cost is
21.67%, from which we can see that the profitability of private textile enterprises is far better than the
state-owned textile enterprises, in other words, it would cost much more for state-owned textile
enterprises than private textile enterprises in order to make the same profits. As to the maintenance and
appreciation rate of assets value, private textile enterprises enjoy a rate of 1461.68%, and state-owned
textile enterprises’ rate is 1020.26%, the gap is considerable. In short, the private textile enterprises’
self-financing nature enables its relatively independent autonomy in management, its strong ability to
conduct flexible and diverse market behavior to cope with the market demand change; on the other hand,
the private textile enterprises’ work more and get more regime has also greatly stimulated the pursuit of
business profit, a strong sense of corporate competition, a great enthusiasm in independent research and
development and innovation. Enterprises will be more concerned about the cost of business activities,
thereby enhancing the economic performance of enterprises.
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（）
Deficit %
100
80
State-Owned
Private
60
40
20
0
The provinces listed above (from left to right): Beijing, Tianjin, Hebei, Shānxi, Neimenggu,
Liaoning, Jilin, Heilongjiang, Shanghai, Jiangsu, Zhejiang, Anhui, Fujian, Jiangxi, Shandong,
Henan, Hubei, Hunan, Guangdong, Guangxi, Hainan, Chongqing, Sichuan, Guizhou, Yunnan,
Shǎnxi, Gansu, Qinghai, Ningxia, Xinjiang, Xizang.
Figure 1 The comparison of deficit between state-owned and the private textile enterprises in each province
of China, 2004
The study above shows that the economic benefits of the private textile enterprises are generally
better than the state-owned enterprises and the enterprises of other economic types. We have made a
statistical analysis on the enterprises’ economic types in textile industry. It is showed that 85% of the
private sector centralizes in east China, while nearly half of the state-owned textile enterprises locate in
the central and western regions which account only 17% of the nation’s textile enterprises. With two sets
of data we can draw the conclusion that: large differences in the performance of eastern and western
regions’ textile industries have a great to do with the economy type. Central and western regions textile
industries must start from the reform of state-owned enterprises to reverse the serious situation of great
loss, and introduce market competition mechanism to enable enterprise’s vitality.
3 Conclusion
The factor analysis applied to regional competitiveness assessment indicator system has showed
that: the scale of the industry and the huge gap of external environment are two main reasons for the gap
in competitiveness between eastern and western regions. In contrast, textile industry’s management gap
between these two regions is not pronounced, thus we conclude: China's textile industry’s overall
management level is low, even in eastern areas where the textile industry is relatively developed. Their
management capacity is still poor compared with that of developed countries.
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The author can be contacted from e-mail : [email protected]
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