THE move to replace the Textile Ministry with the China National Textile Council gives the industry greater power over its own affairs, as the department's operations no longer come directly under the control of the State Council. It is believed the move will also improve the management efficiency of the industry. ''This will encourage mainland textile firms to be more market-oriented,'' said Alan Wong Kai-sui, senior lecturer in Hongkong Polytechnic's Institute of Textiles and Clothing. ''Competitive enterprises will benefit from the restructuring while non-competitive enterprises will face severe challenges - they will either have to change their business strategy or close their factories.'' The textile industry is the country's leading foreign exchange earner. Last year, textile exports were valued at US$25.34 billion, accounting for 30 per cent of total exports. Total output in 1992 was 420 billion yuan, 16 per cent of the country's total industrial output. There are 13 million workers in the industry, accounting for 16 per cent of the country's workforce. As one of the oldest industries in China, an overhaul of textile manufacturing was long overdue. According to the new council, 40 per cent of all textile factories suffered losses last year, despite high market demand at home and abroad. Observers believed the poor performance was due to the unprofitable operation of state-owned enterprises. From January to September last year, the total amount of profits tax paid by state-owned textile makers was 5.35 billion yuan, down 10 cent over the previous year. According to the council, state-owned factories account for 70 per cent of textile production. Wu Wenying, who heads the council, attributed last year's results to the rising price of raw materials, over-production and the low quality of output. Beijing had been urged to decentralise the industry since the mid-1980s. But little was done until last July, when the State Council issued seven directives on Regulations for Transforming the Operational Mechanism of State-owned Enterprises. According to the January issue of Textile Asia magazine, those directives cover production, trade, investment, personnel, organisational set-up, management, taxation and profits. The directives impose more specific responsibilities on state-owned textile enterprises. In addition they encourage the industry to follow contractual procedures and settle disputes through legal channels. Factories have also been granted autonomy to recruit workers and to export products. However, so far the reforms have had little effect. Ms Wu said at a conference last December that the industry's progress had been disappointing despite the efforts made to improve profitability, and reduce stockpiles and production. Ji Jun, director of the International Co-operation Department in the council, said: ''Our biggest problem is lack of funds to upgrade worn-out facilities. ''Quite a large proportion of our profits go to the state, so there isn't much money left for investment.'' As a result of price reforms, the cost of raw materials, such as cotton and wool, had rocketed, hitting the industry, he said. ''We are in a transition period. Factory chiefs have to shoulder a great deal of pressures. ''Our focus is how to improve our product quality so that it is up with international standards.'' The development of the textile industry was limited before China adopted its open-door policy in 1978. But now, China together with Hongkong has become the world's biggest textile exporter. In 1980, China and Hongkong exported US$11 billion of textile goods, a 11-per cent share of the US$97-billion world trade. In 1990, exports increased to US$40 billion, 18 per cent of the world trade, then worth US$224 billion. Garments are the major export in the sector, accounting for 28 per cent of all textile exports. The imposition of quotas by Western countries in the late 1980s, combined with an over-production of textile products and the constriction of the domestic economy from 1988 to 1990, resulted in huge stockpiles of textile - which still exist. Total taxes and profits from the textile industry fell from 15.74 billion yuan in 1989 to 9.59 billion yuan in 1990. ''The industry is in a trough, and will pick up over this year and next,'' said a council official. Last year, the investment for fixed capital was 18.5 billion yuan, up 50 per cent over the previous year. Seventy-per cent of the fixed capital investment was for technical renovation. China imported textile machinery worth US$2.55 billion, up 82 per cent. According to Textile Asia, the major problems faced by the industry are bad accounting systems, poor management, and inefficient capital utilisation. The council plans to give managers greater autonomy, upgrade product quality, improve technological development and carry out an efficient diversification of business strategy. ''No effort should be spared in finding ways to rescue loss-making enterprises through merging and changing output,'' said Ms Wu. She plans to cut the workforce in state-run enterprises by 25 per cent. Textile Asia was upbeat about the textile market in China this year, saying it was competitive and offered good prospects. Textile producers will concentrate on increasing product quality and reducing production costs. It says: ''State-run enterprises are obviously at a disadvantage. In 35 major department stores in China, retails sales of textile goods rose by 30 per cent in 1992, yet the stockpiles in state-run textile enterprises keep on rising, suggesting extra business in captured by other producers.''