Chinese Domestic Textile Demand: Where They Buy Does Matter

The purpose of this paper is to examine the effects of distribution channels on demand for apparel, home textiles, and other textiles (including shoes) in urban China. The estimation procedure used in this study is implemented in three steps: first, the price/unit value information is estimated; second, the parameters for a set of demand systems are estimated; and third, the J-test and likelihood ratio testing are used to determine the most suitable model for the data set. The results indicate that households spend more on apparel than home textiles and other textile products if they purchase textile products from small stores. It also indicates that they would spend more on home textiles and other textiles if they purchase from chain stores and supermarkets. The estimation of Chinese textile consumption presents a significant challenge to both academic researchers and industry, due to China's large population, income inequality, different consumption channels, and other related issues. First, the results presented in the paper provide a clear indication for textile producers, exporters, and others to choose their distribution channels to target specific customers; second, the disaggregated textile expenditure and price elasticity estimates from this article can be used in various analytical procedures (i.e. simulation models) to evaluate the welfare effects of domestic policies and international trade policies. Quantification of the welfare impacts of domestic policies and international trade policies would be more meaningful if disaggregate textile elasticity estimates are used in simulation models.