Knitwear firm sets up Cambodian plant to skirt quotas

One of the biggest knitwear companies in Zhejiang province plans to start production at a large factory in Cambodia later this year to avoid export quotas imposed by the United States and the European Union.

A spokesman for Ningbo Shenzhou Knitwear said yesterday that it would spend US$33.8 million, in three phases, on a new factory in Cambodia that would, when completed, produce 230,000 shirts a day.

'Many companies are doing this,' the spokesman said. 'It is the only way to increase our exports to the US and the EU, our two biggest markets. Cambodia has no quota restrictions and the import taxes are very low.'

Production will start on October 1, with an initial daily production of 30,000 pieces.

Shenzhou employs 17,000 workers, with a daily capacity of 110 tonnes of grey fabric and 300,000 garments, earning more than US$200 million from exports a year.

An official of Shaoxing Guangda International Trade, named Gao, said many mainland companies were establishing plants in Cambodia because its exports were not subject to quotas in the US, tax rates were low, money could be easily repatriated and the average wage was US$30 to US$40 a month.

Langsha Group, one of Zhejiang's biggest sock manufacturers, has gone one better. It said it had decided to set up a plant in the US as the only way to get round quota restrictions.

'It is the world's biggest market, using 1.5 billion to two billion pairs a year. We are moving our sales from Japan to the US,' a company spokeswoman said.

The mainland's biggest exporter of textile and garment products, Zhejiang is the hardest hit by quotas that have been imposed by the US on several categories of mainland textiles since May 13, including cotton trousers, cotton-knit shirts and underwear. The EU is investigating whether to impose similar protective measures on 12 categories of mainland textiles.

On Monday, Commerce Minister Bo Xilai said in Beijing that in retaliation, the mainland would revoke the imposition of export tariffs on 81 categories of textile products it had promised as from June 1.

The move to set up production outside the mainland is the opposite of what was supposed to have happened on January 1, when global quotas on textiles were abolished. Without quotas, the mainland was widely expected to become the best production base.

The Shenzhou spokesman said the firm had been considering the Cambodian plant before January 1.

'Our products are very competitive in the international market and were bound to stimulate protective measures after the end of quotas. There will be anti-dumping suits or even stronger steps.

'Overseas production is the best way to avoid these measures, but not every firm can do it. You need a certain level of capital and technological standard,' he said.