40 PTJ August 2012

Chinese Review

Pakistan and China are already co-operating closely in thedevelopment of Gwadar Port, which would help economic activ-ity in Pakistan and provide an important access route to the seafor Chinas Western regions, Afghanistan and Central Asianstates. A large number of important projects such as the up-gra-dation of Karakoram Highway, Thar Coal Mining, up-gradation ofPakistan Railways and Power Generation Projects both nuclearand non-nuclear are some of the examples of this expandingeconomic cooperation.

Free Trade Agreement: Pakistan and China signed a FreeTrade Agreement in 2006. The base year for tariffreduction/elimination for China was 2006 and for Pakistanfiscal year of 2006-2007. Pakistan received market access atzero duty on industrial alcohol, cotton fabrics, bed-linen andother home textiles and other goods. China also reduced itstariff by 50% on knitwear and woven garments.

Bilateral trade had reached US$ 5.79 billion in 2011. Thebalance is, however, in favour of China. The balance of tradeincreased from US$ 2.34 billion in 2007-08 to US$ 2.5 billion in2010-11. Important factor of trade deficit with China is grow-ing exports of Chinese products to Pakistan including rawmaterials and capital goods. Since these are more economical,businessmen are inclined to buy more from China.

Pakistan, therefore, should be looking at China not simplyas an export market, but as a primary source for import of cap-ital goods and industrial raw material. Table-1 shows trade bal-ance between Pakistan and China. It is however encouragingthat over the last five years, average rate of growth in exportsfrom Pakistan has been 33% while average increase in importsfrom China was 19%. Pakistan and China will enter Phase II ofFTA in 2013 when the present FTA will conclude by the end of2012.

Exports: Exports from Pakistan to China increased fromUS$ 685 million in 2007-08 to US$ 1.64 billion in 2010-11,thus showing an average increase of 33% per annum. Themain items of Pakistans exports to China are cotton fabrics,cotton yarn, bed wear, surgical instruments, tent and canvas,

marble, fish and its preparations and leather. Unfortunately, thevariety of Pakistans products exported to China is very narrow.Almost around 80% of its exports consist of cotton yarn andother textile products. Export of textile and other items fromPakistan to China is given in Table-1. The FTA between Pakistanand China does not include some major value added textile cate-gories such as woven and knitted garments.

Pak- China Trade Relationsby Dr. Noor Ahmed Memon.

China and Pakistan are close and friendly neighbors. Pakistan has treated China as its most important economic partners. Rapid eco-nomic development in China and consequent inter-regional activity has caused increased demand for raw materials, exchange ofparts, components, intermediate products and development of cross country production works and processes. Consistent growth ineconomic relations amplifies the strength of their relationship. China and Pakistan also have witnessed steady growth in mutualinvestments in recent years. The Chinese have invested in Pakistan in telecommunications, energy, infrastructure, heavy engineer-ing, IT, mining and defense related industries.

Table 1: Pak-China Trade(Value: US $ Million)

Year Exports Imports Trade Balance

2005-06 437 1,843 - 1,406

2006-07 548 2,321 - 1,773

2007-08 685 3,029 - 2,344

2008-09 661 2,708 - 2,344

2009-0 1211 3,284 - 2,073

2010-11 1645 4,145 - 2,500

Source : State Bank of Pakistan.

Table 2: Import of Textile Machinery from China toPakistan (Rs. 000) (Major Items)

Machinery 2010-11 2009-10 2008-09

Carding Machines 1,273,960 660,418 88,993

Drawing / Roving Machines 100,653 10,007 14,914

Blow Room Machinery 188,202 39,399 42,886

Machinery Preparing Textile Fibre 199,184 13,972 197,058

Textile Spinning Machines 539,225 362,621 255,450

Textile Doubling /Twist Machines 150,323 157,077 75,867

Weft Winding Machines 6,682 9,775 2,607

Cone / Bobbin Winding Machines 14,702 25,485 14,954

Textile Winding Machines 44,719 13,521 57,958

Textile Fibre Machinery 401,324 113,036 125,080

Weaving Machines/Power Looms 133,425 35,565 719,60

Weaving (Shuttleless Looms) 423,171 247,477 31,612

Circular Knit Machines 27,467 1,978 17,039

Flat Knitting Machines 165 mm 10,307 14,347 46,393

Embroidery Machines 2,619,091 2,861,692 1,121,603

Circular Knitting Machines 321,556 90,008 71,256

Dobbies Jacquards 93,364 45,740 28,590

Top and Flat Card Clothing 160,698 111,912 73,495

Other Card Clothing 136,572 105,356 101,134

Spindles Textile Machines 275,938 179,627 2,527

Spinning Rings 189,986 194,141 142,540

Reeds for Looms 30,453 48,813 39,270

Healds and Healds Frame 197,056 157,582 93,322

Shuttles 9,667 5,915 11,068

Parts of Weaving Machinery 109,661 71,506 43,862

Source: Federal Bureau of Statistics, Government of Pakistan.

PTJ August 2012 41

Chinese Review

Despite this exclusion Pakistan has ben able to showremarkable increase in the exports of these categories.

Imports: China has become one of the top fiveimport sources of Pakistan. Major imports from Chinaare machinery, chemicals, garments and other textileproducts, stationery products, construction materials liketiles, sanitary wares and crockery, etc. Imports fromChina also increased from US$ 3.03 billion in 2007-08to US$ 4.14 billion in 2010-11, thus showing an averageincrease of 9% per annum. Textile machinery and elec-trical appliances are the major parts of overall exports.

However, amongst other reasons, one of the reasonsfor improvement in trade and investment from China isthe Chinese governments persuasion of its state-con-trolled enterprises to import Pakistani products in orderto improve the trade balance and make more projectspecific investments. Statistics regarding the import oftextile machinery from China to Pakistan is given inTable-3. The excellent political and strategic partnershipbetween Pakistan and China has contributed inincreased trade and economic cooperation, enhancedinvestment and mutual economic prosperity.

Pakistans exports to China represent only 0.65%market share of a range of products constituting 13% ofChinas total imports. This share is very low in view ofthe US$ one trillion Chinese market. However it reflectsthe potential which exists for Pakistans exports toChina. In the negotiations for the Phase II of FTAPakistan should get the same preferential tariff as givento the ASEAN countries and the categories shouldinclude high value added textile products particularlyready made garments.

Table 3: Export of Textile and other products from Pakistan toChina (Major Items)

(Value : US $000)

Item 2010-11 2009-10Raw Cotton 75,819 29,836

Cotton Yarn 914,594 634,029

Cotton Fabrics 137,339 77,474

Knitted FABRICS 1,264 87

Ready made garments 2,654 1,019

Textile made ups 3,359 1,519

Bed wear 16,349 7,422

Tents and Canvas 347 -

Synthetics textiles 2,035 2,140

Leather Tanned 47,862 41,891

Leather gloves 158 128

Sports goods 1,177 1,101

Carpet and rugs 599 259

Surgical instruments 3,194 2,163

Petroleum and its products 18,067 2,037

Fruits 6,892 3,342

Vegetables 267 28

Chemical and its products 61,609 22,809

Marble and Stone 30,677 15,760

Source : Trade Development Authority of Pakistan

Until the 19th century, China was theworlds largest and most advanced economy.In the textile industry it was not different.During the industrial revolution, textile pro-duction was mechanized leading to massproduction and assembly line organization.Sewing machines emerged in the 19th cen-tury reshaping clothing production. Duringthis period, parts of Europe and especiallyEngland, achieved great efficiency gains andChinese competitiveness lagged behind.

In the end of last century, the textileindustry was shaped by the effects of global-ization. Lower transportation costs, reducedcommercial barriers and better informationflows facilitated the relocation of manufac-turing activities in many sectors. The textile industry is highlylabour intensive, thus it benefited greatly from lower labour costs.As a consequence, many textile manufacturing facilities were

relocated, for example, to South EastAsia and Latin America. However, ini-tially China hardly participated in thisprocess due to its restricted access toforeign markets.

China occupies an important shareof total exports of traditional industries,textile machinery exports are the fastestgrowing sector in the past five years. .From the growth rate in 2006, that is,the Eleventh Five-Year in the firstyear, textile exports break billion-dollarmark, reaching US$ 1.237 billion is thefifth during the export. These exportscontinue to grow in 2007, to more thanUS $1.50 billion; despite the global

financial crisis, from 2008 to 2009 the export volume, down fromUS $1.567 to U$1.211 billion. But by 2010, Chinas textileexports picked up again, and reached US $1.60 billion.

Export of Chinese Textile Machinery

YearValue

(US $ billion)

2006 1.24

2007 1.50

2008 1.57

2009 1.21

2010 1.60

2011 2.25

The textile industry is one of the largest industries worldwide. Textiles have varied applications in industries, medicine, householdactivities, construction of roads, defence, manufacture of automobiles, etc. The Chinese textile production and trading stronglyinfluenced the development of the textile industry in Medieval Europe. Through Modern times, England, Italy, France, Spain,Germany and Scandinavia developed sophisticated clothing markets.

Chinese Textile Machinery: Exports reachedUS$ 2.25 billion in 2011by Dr. Noor Ahmed Memon.