Mass retailers like Wal-Mart are among the largest importers of Chinese commoditized textiles. Given that a garment manufactured in a Chinese factory and sold overseas returns so little to the home factory, it seems only a matter of time before the Chinese start looking for a larger piece of the action. At first glance, their best options would appear to be to negotiate better deals with the mass retailers or to develop their own global textile brands.

Fons Tuinstra, the Shanghai-based editor of ChinaBiz, believes it would be a mistake for China to abandon the commoditized textile business (as have Japan and the US) to focus instead on branded fabrics and garments. "Quality and pricing are not problems anymore," he says. "They're doing a pretty good job; that's what they are good at. If they build up anything, they should use that as an asset, not try something completely different, like getting involved in top brands."

A Clothing Crossroads
There are certainly good reasons why China would not want to abandon its grip on a business it already has sewn up. The country suffers from massive unemployment, and losing its textile commodity revenues would only contribute further to that problem—something that would be undesirable for both political and economic reasons. Second, if a transition to high-end branded products resulted in fewer workers employed in what is a very labor-intensive industry, the gains might not really seem worth the cost. Finally, greater trade liberalization down the road could open new markets for the country's commoditized textiles.

On the other hand, it is not guaranteed that Chinese garment manufacturers will be able to negotiate more favorable—or even the same—contracts with the Western mass retailers in the future. Given the existence of alternative sources of commoditized textiles—including Vietnam, Cambodia, Pakistan, and Sri Lanka—a company like Wal-Mart might choose to develop a textile industry in one of these countries instead of yielding to Chinese manufacturers' demands for greater percentages.

The Chinese could, of course, continue to manufacture textile commodities while attempting to build global fashion brands. But given that the "Made in China" label currently carries some rather heavy baggage—"Made in China" hardly adds value to an item of clothing in the same way that "Made in Italy" does—could a country already known around the world as a producer of cheap textile commodities ever successfully market its own high-end textile brands?

In spite of less-than-favorable associations with the "Made in China" label, including cheap labor, sweatshops, and shoddy regulations, Martin Roll, a visiting professor at the China European International Business School (CEIBS) in Shanghai, believes "[p]erceptions about anything can be an impediment only so far. When companies demonstrate some verifiable, tangible claims such as product quality, feature usability, and value propositions, perceptions are bound to change. It surely will take time—a long time, in fact—but [they] will certainly change."

Roll, who recently authored Asian Brand Strategy (Palgrave, 2006), sees no reason why the Chinese shouldn't pursue both commodities and high-end brands. "Given that a great extent of the Chinese economy is still state-controlled (directly or indirectly), the government can charter a strategic plan whereby China treads two parallel paths simultaneously—continue on the current path to becoming the 'textile factory of the world' and invest in branding in sectors which promise current or future potential," he notes.

That said, Roll feels China will face major obstacles to developing its own global textile brands. He points to the country's current lack of reputation as a high-end apparel manufacturer, the domination of the global apparel market by Western apparel brands, and difficulties the Chinese manufacturers will have in responding to consumers' need for self-expression.

The quality of Chinese textile products, contrary to what some may think, is not really an issue, though. Many name brands are already manufactured in China. Commoditized textiles are largely perceived as "good enough" by consumers, especially given their price. So in the case of China, brand building in the textile industry may not need to focus on the perception of quality.

Randall Frost, a freelance writer based in Pleasanton, California, is the author of The Globalization of Trade. His work has appeared in Worth, The New England Financial Journal, CBSHealthWatch and a variety of educational publications.