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Local textile sales will offset export curbs
Updated: 2005-05-23 09:09

China's textile makers, who spent $14.3 billion last year on building factories, say local demand will buffer any slowdown in orders from U.S. and European market because of a looming trade war.

"Domestic demand accounts for about 70 percent of industry growth,"' said Wang Donghua, a spokesman for Shandong-based Weiqiao Textile Co., the country's largest cotton textile maker. "Our economy is becoming more consumer-driven instead of investment-driven. That's our main driver of growth."

Textile makers: Local sales will offset export curbs
A Chinese worker sews a dress in a garment manufacturing company at Huaibei, east China's Anhui province in this picture taken on May 19, 2005. China will raise export tariffs on exports of 74 classes of clothing and textile products from June 1, the Ministry of Finance said on Friday, a gesture that might help to appease Western trading partners. [newsphoto]

Weiqiao Textile bought 65 percent more cotton last year, added 35,000 workers and spent 3.6 billion yuan ($435 million) increasing output.

U.S. and European Union governments want to stem the rising tide of apparel exports from Weiqiao and 100,000 other Chinese textile companies since a four-decade-old system of quotas on textile trade ended on December 31. Weiqiao, which makes fabric for jeans and bed linen, says a domestic economy growing at 9.5 percent a year offers plenty of local sales opportunities.

China's textile and apparel sales rose 23 percent to $319 billion in 2004 from a year earlier, the China Textile News reported, citing figures from the China National Textile & Apparel Council. Exports, which account for 30 percent of the total, rose 21 percent to $97 billion.

"Ever since the beginning of this year, the growth of domestic sales clearly surpassed export growth," Sun Huaibin, a director at the council, said in an interview with Bloomberg.

China's per capita disposable income in urban areas, home to a third of the population, rose 11 percent to 2,938 yuan from a year earlier in the first quarter, and those in rural areas increased 16 percent to 967 yuan, official figures show.

China's textile manufacturers "are interested in developing their own brands for their own market with potentially higher margins than churning out millions of low-margin T-shirts for Western retailers," said Roger Tredre, editor-in-chief of Worth Global Style Network in London.

Textile companies in China make 17 percent of the clothes worn in the world, as measured by dollar value. The share is growing as U.S. Wal-Mart and other giant retailers seek to get more of their goods from lower-cost Chinese suppliers.

Wal-Mart was expecting to save 12-15 percent on apparel costs this year with the removal of the quota system, Joseph Teklits, an analyst with Wachovia Securities Inc. in Baltimore, said in a March 18 report.

The U.S. wholesale price of Chinese-made men's blue jeans fell 30 percent in the first two months after the quotas were removed. Underwear prices dropped more than 40 percent.

The U.S. has sided with petitions from U.S. textile companies to cap imports on $914 million of clothing and yarn from China, less than a week after announcing quotas on three other textile products.

China's textile makers started an average of 10 projects a day last year and imported $4.5 billion of new machinery. "They've been gearing up for the end of quotas," said Nicholas Lardy, a Washington-based China specialist at the Institute for International Economics. "This is a product where they have a tremendous comparative advantage."

The U.S. has instituted so-called safeguard measures for men's shirts, man-made trousers, man-made knit shirts and yarn, the Commerce Department said on May 18. It allows the U.S. to set a 7.5 percent cap on import growth of those products this month. It must first request consultations with China.

"The irony is that China demands real high-quality cotton, and that's what's produced in California and Arizona," said Wiley Murphy, who's been growing cotton at Marana, about 25 miles from Tucson, Arizona, for 30 years. "Chinese like to buy our cotton."

The 31,400 cotton farmers in the U.S. are counting on stronger overseas sales to buoy prices as domestic demand shrinks for the 8th-straight year.

"It's a two-edge sword," he said. "It's a healthy situation for the cotton growers. It's not a healthy situation for American textile industry."

Chinese demand is spurring global consumption, expected to grow 8 percent this year, the biggest annual gain since 1987.

"It used to be that our market was dependent on what happened in the U.S." said farmer Murphy. "Now it's a global market, and China is the big dog in the thing."

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