As trade friction rises with the United States and the European Union, China is telling its textile and garment producers to locate production facilities in developing countries that enjoy privileged access to the two markets.
Before the expiry of textile quotas on January 1 this year, Chinese textile and garment companies had spent US$715 million to set up 114 factories abroad, nearly half in neighbouring countries like Thailand and Cambodia, to avoid the quotas imposed by the US and EU. With the end of quotas, they had planned to close the plants this year but are now reconsidering the decision, because of the limits that these two major markets are imposing or about to impose on their exports.
Fu Ziying, assistant to Commerce Minister Bo Xilai, told a seminar on Thursday in Ningbo, Zhejiang province, one of the biggest garment producers, that companies should set up plants abroad as a protective measure.
'Resolving trade friction is primarily the responsibility of the mother country, but companies must not sit on their hands. Setting up plants abroad enables them to use foreign human and raw material resources to earn money from foreigners,' he said.
Wang Zhengwang, director of the ministry's foreign economic co-operation bureau, told the seminar that the best choices were developing countries that enjoy privileged access to the US and European markets.
He cited as examples Mexico, Colombia and Ecuador in Latin America; Jordan and Israel in the Middle East; Thailand, Cambodia and Bangladesh in Asia; and South Africa, Guinea and Mozambique in Africa.
The Hongdou (Red Bean) Group of Wuxi, a listed major shirt exporter with sales last year of 7.81 billion yuan and 20,000 employees, said yesterday that it was considering an overseas plant. It has proposed to the Ministry of Commerce the establishment of textile industry parks in foreign countries where different Chinese firms can produce together.
The Guangming Group of Wuxi, which exports shirts, T-shirts, pyjamas and suits to Japan and the US, set up three plants in Mongolia and Cambodia during the period of quotas and was planning to close them this year. But with the rising trade friction it is reconsidering the closure plan.
An official of the Foreign Trade Bureau of Suzhou said some of the city's larger producers have registered companies in Fiji and Cambodia.
A spokesman for Ningbo Shenzhou Knitwear Group said last week it would spend US$33.8 million on a new factory in Cambodia. Cambodia is attractive, because its exports are not subject to US quotas, tax rates are low, money can be easily repatriated and the average wage is US$30 to US$40 a month.