Textile industry seeks way out of barriers
(Xinhua)
Updated: 2005-09-16 16:56

Chinese textile firms, bogged down by quotas slapped by the United States and Europe, are standing up against trade barriers and market uncertainties.

"We've given up 5 million yuan (617,000 US dollars) of US orders in the recent three months because no one knows when the textile trade row can be settled properly," said Huang Jun, vice president of Tianjin Textile Group, in an exclusive interview with Xinhua Friday.

Her company is not alone to shun the US market.

In fact, every textile dealer in China is perplexed at the trade frictions and the unforeseeable prospects in the destination markets.

Climbing costs in the domestic manufacturing, packaging as well as distribution processes have undoubtedly put them under double pressure, now that their export market has kept shrinking.

UNCERTAINTIES LOOM

Merely months after the global textile quota system ended on January 1, 2005, the United States and the European Union reimposed quotas on several lines of Chinese textile products over an allegedly drastic export rise.

According to a latest China-EU deal reached on September 5, Chinese textile blocked at European ports were to enter the European Union again as of September 14, ending a trade row that had items from lingerie to pullovers pile up in customs warehouses.

But China is yet to strike a "win-win" deal with the United States on export quantities and growth rates for the coming few years.

Many domestic textile companies therefore found themselves "bogged" as too many uncertainties loom over their production and marketing.

Tianjin Textile Group, for example, reported a drastic decline in its exports to the US.

In the first eight months of this year, the company exported 10 million US dollars of textiles to the United States, which includes only 4 million US dollars of garments.

In 2004, the company's exports to the US added up to 25 million US dollars, including 10 million US dollars of garments.

"The unsettled trade row has left us too many uncertainties. For example, we cannot project our quotas or predict our costs. Nor can we plan our production with the number of orders the customers place, or sustain our reliable suppliers' network," said Huang Jun, the company's vice president.

According to Huang, a textile firm normally works out explicit production plans and marketing strategies on the basis of sales contracts signed for the coming months.

The forthcoming 98th China Export Commodities Fair to be held in Guangzhou next month will be an important occasion for domestic textile firms to receive orders and plan for next year's production. Observers say if the trade row with US remains unsettled until then, these companies will face the dilemma of whether or not to receive any US orders for next year.

RISING COSTS

Textile firms, where jobs are strenuous but poorly paid, have reported a lack of technical workers starting from last year. The 11 subsidiaries of Tianjin Textile Group, for example, report an average 20 percent shortage of workers -- some as high as 50 percent.

To fill the gap, companies have to pay higher wages and improve the overall compensation packages for their employees.

Besides, climbing prices of oil and other raw materials have caused the operating costs of most manufacturing companies to mount. As a result, the average price of chemical fiber cloth has risen by at least 10 percent year-on-year.

The 2.1-percent revaluation of the Chinese yuan as of July 21 has also burdened domestic textile firms and further scraped their profit margin to five percent from the previous seven.

"Big companies can manage to survive, but some small and medium-sized ones are on the verge of bankruptcy," said Huang.

Her company, Tianjin Textile Group, is the largest textile firm in the northern port city in terms of output and sales. Last year, its foreign trade totaled 250 million US dollars, including nearly 200 million US dollars of exports.

SEEKING WAY OUT

The existence of Chinese textile firms is vital to China's economic and social development because the textile industry directly employs 18 million workers at least.

"God helps those who help themselves," said Prof. Xu Fu with the Tianjin-based Nankai University. "Though support from the government is also important, companies have to rely on themselves to seek a way out."

Some companies have waken up to the fact and taken new opportunities to expand businesses by nurturing name brands, diversifying export markets and even moving some manufacturing facilities to low-cost and unrestricted countries and regions.

Tianjin Textile Group, for example, is trying to bypass the US and EU by further exploiting African, South American and Asian markets. Presently, 50 percent of the company's exports are bound for Southeast Asia and 30 percent to the US and EU, with the remaining 20 percent to Oceania and other parts of the world.

The company has also set up workshops in Mongolia and Egypt which each year produce 600,000 pieces and 1 million pieces of apparel respectively.

Labor cost in these two countries is about the same as in China but raw materials are 40 percent more expensive. "Therefore we buy materials here in China and ship them abroad by sea," said Huang. "The biggest advantage is that we can avoid quota restrictions and trade frictions."