Surge in China textile exports alarms key trading partners
Toh Han Shih
US and Europe may resort to imposing safeguard quotas to prevent job losses
A sharp rise in mainland textile exports since global quotas were scrapped on January 1 threatens to ignite trade tensions between Beijing and its key western trading partners.
China's exports of major apparel products to the United States increased an average of 546 per cent year on year in January, according to Chinese customs data. The largest increases were in cotton knit shirts and trousers, which surged 1,836 per cent and 1,332 per cent, respectively.
The export leap to Europe was similarly dramatic, stoking fears that the US and the European Union would exercise their right to apply one-year 'safeguard quotas' on Chinese textile exports. The surge could also prompt the Chinese government to try to pre-empt such moves by voluntarily slowing exports.
EU imports of China-made garments in January far exceeded figures for the first three months of last year. China exported 85.5 million jumpers and waistcoats in January, compared with just 10.2 million in the first quarter of last year. Prices in this category, meanwhile, dropped 36 per cent.
According to Chinese data, mainland-made cotton knit shirts were 45 per cent cheaper in January than a year earlier, while cotton trouser prices fell 28 per cent.
'Many people believe the US textile industry will file petitions for safeguard quotas on categories that showed a huge surge,' said Peter Liu Sin-shing, chairman of the American Chamber of Commerce in Hong Kong's textile and apparel committee. Under US procedures, it would take three months to approve a petition to limit imports of China-made textiles.
'The US government is now the only entity that can prevent plant closings and job losses in the US textile and apparel sector,' said Cass Johnson, president of the US-based National Council of Textile Organisations.
'A drawn-out safeguard petition process will only ensure that thousands of US textile workers will lose their jobs to China's unfair and predatory trading practices.'
The surge was even felt in the tiny US territory of Saipan. The Pacific island's garment factories reported last month's orders fell 28 per cent from December, as overseas buyers moved their orders to China. Saipan's textile industry employs about 15,000 workers, most of them mainland migrants on two-year contracts.
'There will be another factory closure at the end of this month,' warned Richard Pierce, spokesman for the Saipan Garments Manufacturing Association.
'Almost all factories are now downsizing and closing sewing lines.
'Our two largest manufacturing companies will reduce their workforces, production and sales, by 50 per cent by the middle of this year. This is an economic catastrophe.'
'It's not just Saipan,' added Luen Thai Holdings chief executive Henry Tan. 'It's global. You will see these changes ... in places like Malaysia, Thailand and Mexico.'
Luen Tai, which operates in China and on Saipan, is considering reducing its 3,000-worker Saipan factory.
Some industry executives, however, disputed that much had changed. They argue that with the scrapping of quota controls, firms that once disguised their China-made goods as Hong Kong, Macau or Taiwan exports are simply reporting the real country of origin.
'A large part of this increase is just a switch from declared 'Hong Kong origin' to 'China origin', rather than an actual increase in China manufacturing,' said one French textile trader.
'China quotas used to be more expensive than Hong Kong quotas, so people used Hong Kong quotas for goods made in China. What you see is just the reality that used to be the case for many years.'
As evidence, the trader argues that mainland logistics firms have not seen any large rises in textile shipments from China in recent months.
That is unlikely to appease critics in the US or Europe. EU trade commissioner Peter Mandelson said recently China's trade figures were 'troubling' and urged Beijing to moderate its textile exports.
China is sensitive to such criticism. On March 1, the mainland implemented a licensing system to monitor its exports. Mainland garment firms fear tougher restrictions will follow.
'If you talk to textile traders in China, nine out of 10 believe the export licence is a prelude to the Chinese government imposing quotas on its own textile exports,' said Michael Sun Yang, the general manager of mainland garment manufacturer MS International.
A Hong Kong garment maker said the Chinese government was considering imposing minimum prices on textile products whose exports had risen significantly, and disqualifying Chinese textile exporters that violated labour laws.
'Minimum prices are good for Hong Kong garment firms because we cater to the higher end,' he added.
However, Willy Lin Sun-mo, a vice-chairman of the Hong Kong Textile Council, said Hong Kong's textile industry had been lobbying Beijing not to interfere.
'We don't believe in self-restraint,' said Mr Lin, who expected a tough road ahead. 'If the numbers continue to rise and prices continue to drop, the European textile industry will pressure the European Commission to do something.'
Germany's textile workforce has shrunk from more than 500,000 to just 30,000 over the past decade, according to Roland Rohde, a German trade official. 'My cousin worked in the German textile industry for many years and lost her job six times,' said Mr Rohde, who attributed the surge in part to inventory held back from last year in anticipation of the quota removal.