International competitiveness of Chinese textile and clothing industry – a diamond model approach

Abstract

PurposeThe purpose of this paper is to analyze raw materials, labor, capital, demand, related industries, strategies and policies influencing international competitiveness of Chinese textile and clothing industry.Design/methodology/approachThe analysis is conducted using “Diamond Model”, in which raw materials, labor, capital, demand, related industries, strategies and policies are included as explanatory variables, and the impacts of international competitiveness on market share (MS), trade competitiveness(TC) and revealed comparative advantage(RCA) are examined based on the estimated coefficients of these variables.FindingsThese factors have different effects on TC, MS and RCA. While their effects on TC and MS are similar in sign even though their degree of significance differs, their effects on RCA are opposite to TC and MS except for capital. Raw materials and capital have negative effects on TC and MS, while the other factors have positive ones. Raw materials have positive effects on RCA, but all other factors have negative ones.Practical/implicationsThe results from this study imply that it is necessary to increase investment in fixed assets of Chinese textile and clothing industry, speed up the pace of upgrading equipment, improve the level of industrialization, while strengthening the supply of textile raw materials, and lowering raw material prices, thereby reducing the cost of textile and clothing enterprises.Originality/valueTo the best of the authors’ knowledge, this is the first empirical research made using econometric model about the impact of the main factors of trade competitiveness in Chinese textile and clothing industry based on the “Diamond Model”.