The transformation of silk from an exclusive fabric into a mass market item has been one of the fashion stories of the past decade, but it has been of little benefit to the Chinese producers which dominate the industry. Indeed, the fall in price and the saturation of world markets has damaged the image of silk to the detriment of everyone in the industry. When silk is regarded in similar terms to other fabrics, industry observers argue, then it is easily outperformed by other fibres in areas such as crease resistance and easy care.
The fashion boom for sandwashed silks which began in the late 1980s was already starting to recede in 1994, with serious implications for Chinese raw silk suppliers. A recent report by the Economist Intelligence Unit (World Markets for Silk) shows that weak silk prices have shaken the industry, depressing production severely.
Introduction of quotas
Before the 1990s, China exported raw silk to foreign processors and supplied locally-made garments to the domestic market. The country's subsequent move down-stream to become an exporter of finished goods was an attempt to increase margins; instead, it precipitated a plunge in prices to the extent that silk garments in the US were competing with items made of cotton and manmade fibres. Chinese-made garments arrived in Western Europe at prices that were lower than those which European producers were paying for the raw material. At the retail level, lower quality silk and production standards were damaging silk's image.
Because silk was not covered by the Multi-Fibre Agreement, the EU and US reacted by imposing quotas on finished garments in a bid to protect their own processing industries. Retailers were critical of the move. For example, Marks & Spencer had paid by irrevocable letter of credit for goods that could no longer be bought on the market. Others described the move as harsh, hasty and heavy-handed. The quotas nearly halved EU imports of made-up silk goods from China from 4,700 tons in 1994 to 2,500 tons in 1995.
The impact on producers was almost as rapid. Estimates based on last year's cocoon harvest indicate that Chinese raw silk production fell by up to 40 per cent in 1996 compared with the previous year. Mulberry trees were already being uprooted in 1995. Processors in Japan and Western Europe have become alarmed at the prospect of future shortages.
This uprooting marked an abrupt end to a long period of expansion. Since 1970, China's raw silk production grew by an average of 10 per cent a year, with the result that the country dominated the world silk trade supplies and pricing. In 1994, national production reached 72,000 tonnes. The1price set in China effectively determined the world price and low prices discouraged other producer countries from seeking to gain a share of the world market for high quality silk. The second largest producer, India, has barely one-fifth of China's capacity. Other countries have been deterred by low prices and the high technological investment required.
The report concludes that world silk consumption is likely to fall in volume terms in the near term. But it says that it could grow by value up to the year 2000 as a result of population growth and improvements in living standards. By then, prices should have firmed and supplies are likely to return to normal.