-Caveat Lector-
THE WASHINGTON POST China Ready to Take On All Competitors and Markets Wednesday, November 17, 2004; Page A19
In China, the textile boom has been building for a decade. As the local industry began refashioning itself in the 1990s, it experienced what much of the rest of the world now fears: massive layoffs. Between 1997 and 1999, the Chinese textile industry shed more than 1 million jobs as the government dismantled a network of outmoded, state-financed textile and apparel factories and allowed the free market a much greater hand.
Executives at Shanghai's Shenda Group Co. have closed 20 factories and fired 50,000 people in the past six years. Reequipped with modern machines and with only 10,000 employees left on the payroll, the company boosted annual sales from $170 million to $415 million.
"We can beat any competitors in international markets," said Yao Xiyi, Shenda's general manager. "We're prepared for expansion."
The transformation is industry-wide. Rich in labor and raw materials, China has also invested in the full array of textile and apparel operations, allowing it to spin, weave and dye the fabric, cut and stitch the clothing, and manufacture and attach the buttons and zippers.
In 2002, China accounted for nearly three-fourths of all worldwide purchases of advanced weaving machines known as shuttle-less looms, according to a recent study by the U.S. International Trade Commission. Brother Industries Ltd., the Japanese sewing machine company, has doubled sales within China every year for the past three and expects to do so again this year. Overall, Chinese textile and garment factories bought $2.4 billion worth of imported machinery over the first half of this year, according to a Chinese trade group.
With highways and ports that allow delivery to the United States in as few as 18 days -- compared with 28 to 45, for example, for Sri Lanka -- the result is an increasingly efficient operation that has pushed up labor productivity and pushed down the cost of its exports by as much as 30 percent over the past five years, according to Chinese government figures.
The potential impact on world trade is demonstrable. In Japan and Australia, two major nations that have no quota restrictions, China has already captured 70 percent of the textile market. In the United States, quotas were eliminated in 2002 on products such as baby clothes and robes, and China's share of those U.S. imports jumped from 11 percent to 55 percent by the end of last year, according to data analyzed by Pietra Rivoli, a trade expert at Georgetown University's McDonough School of Business.
About the same time, China supplanted Mexico as the largest supplier of textiles and apparel reaching the United States, accounting for about 17 percent of U.S. imports.
The end of the quota system is expected to cut the price of Chinese goods even further. Companies currently compete with one another in a widely tolerated black market for shares in China's allotted exports to the United States and Europe. Shanghai Shenda officials, for example, say that they can make a pair of blue jeans for $10 but that the cost climbs to $13 after tacking on the expense of obtaining a share of the export quota. Once the quota limits are lifted next year, that expense will disappear.
Countries that are serious about free trade, Chinese officials argue, should welcome the change.
The apparel trade has always migrated toward lower-cost producers, and "now it's coming to China," said Gao Yong, vice chairman of a Chinese textile trade group. "This is an economic phenomenon that should not be interfered with for political purposes."
With about 18 million employees in the textile industry, the stakes are as significant for China as they are for Sri Lanka and others. The estimated average wage of 68 cents an hour isn't much. But it compares well with the less than 50 cents an hour paid to textile workers in places such as Bangladesh, India and Pakistan, and it has become a main source of support for many rural families.
Though wages are higher, China remains cost-competitive because its workers are more productive -- a fact that some attribute not just to the country's new investments and management skill, but also to the fact that employees are forbidden from organizing independent unions and are at the mercy of bosses who often violate overtime and minimum-wage laws.
"If China is going to work their people to death, have them work seven days a week, then there's simply no way Sri Lanka can compete," said Peter Wilson, a British textile industry consultant overseeing a training program for the Sri Lankan Ministry of Industry aimed at making domestic factory workers more productive.
"In China, the workers have no rights," said Wang Hua, a Chinese garment factory technician who spent several years in plants in southern China and now works at a factory in Sri Lanka. "Here, if the workers are sick, if they have a problem, if they have to take care of a relative, if they get married, the boss allows them to miss work. In China, they have to work no matter what. The boss keeps much greater control."
Workers in Chinese factories routinely talk of forced 12-hour shifts with no overtime pay and no days off. Government reports have documented similar abuses and blamed localized labor shortages in some parts of the country on the mistreatment of workers.
A Chinese technician now working at a garment factory in Cambodia said labor strikes are a common occurrence in that country. "Here, you have Saturday and Sunday off," said the technician, Ling Li, who came to Cambodia two years ago. "In China, there's no such thing as Sunday. We work every day."
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