Textiles going hi-tech
CHEAP labour will not be enough to keep China's textile industry competitive much beyond the end of the century.
Other countries in the region are already moving ahead of the low-wage game, and China's own inflation rate is further blunting the edge its garment-makers have enjoyed since they started to target export markets in a big way.
To stay in business, the textile firms must raise productivity, using the latest equipment and constantly keeping up to date.
This is good news for China's growing list of quoted textile machinery manufacturers, who are offering world-class equipment to their customers.
The image of Chinese garment factories as Dickensian sweat-shops crammed with workers pumping at old cast-iron sewing machines is becoming a myth as the leading manufacturers upgrade with state-of-the-art machinery.
Shanghai Industrial Sewing Machine (SISM), the latest arrival on the Shanghai B-share market, is one of the best-placed companies in China to take advantage of the soaring demand for the latest textile machinery.
It has 23 per cent of the domestic market in high-speed lock-stitch sewing machines, and 33 per cent of the high-speed over-lock machines.
Like others in the industry, including Shanghai Erfangji and China Textile Machinery, SISM has entered into partnerships with foreign firms, and has developed its range with the help of Japanese groups Juki Corp and Nikko Singer.
Its strategy now is to build on the hi-tech story by steadily switching to more sophisticated products, including computer-assisted machines.
The proceeds of the 125 million yuan (about HK$111 million) A-share issue in October last year, and the US$29.6 million B-share launch, will fund the purchase of further sewing machine production and technology from Juki, as well as the construction of a new factory in the Pudong development area of Shanghai.
According to sponsoring brokers Crosby Securities, the demand for industrial sewing machines is firmly underpinned by strong domestic demand in the garment sector.
The domestic market has been enjoying strong demand as living standards have risen.
Clothing sales, measured in numbers of garments, have grown by around 16 per cent a year for the past decade.
In the cities, the rate has been much higher.
In the first quarter of last year, sales growth at the largest shopping complexes in the country was approaching 50 per cent.
Crosby reckons that sales of SISM will grow from 511.8 million yuan in 1992, and an estimated 746.3 million yuan in 1993, and on to 960.4 million yuan in the current year and up to 1.17 billion yuan in 1995.
The group's main competition could be from outside manufacturers, benefitting from relaxations of the market barriers that would follow a successful Chinese application to re-join the General Agreement on Tariffs and Trade (GATT), but the sponsoring brokers reckon its price advantages still leave it in a strongly competitive position.