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SCMP Reporter

With a sixth of its industrial output and a quarter of its workforce dependent on textiles, Zhengzhou has been hit particularly hard by the nationwide slump in the industry.

  'It's an epidemic in the country. We have a special task force to study the issue, but it is not a problem that can be solved by our city alone,' said mayor Zhu Tianbao .

  'We can only strive to control the damage,' he said, pointing out that a considerable number of the city's textile enterprises were barely breaking even.

  The textile industry accounted for 77 per cent of the 130 million yuan (about HK$120 million) in losses incurred by the city's state-owned industrial enterprises in the first five months of this year. Textile firms lost a total of 10 million yuan in the whole of last year.

  More than half of the 17 state-owned textile companies were in trouble by May.

  Zhengzhou No. 3 Cotton Textile is a case in point.

  For the first time in its 42-year history, it plunged into the red, reporting a full-year loss of 3.79 million yuan.

  The company is the largest of the seven companies in the Henan Song Yue Textile Industry Group, controlled by the municipal government.

  Its president and general manager, Zhao Fuqing , said all seven companies in the group had been in the red since March last year, although two had been losing money for some time.

  He said the more than 32 per cent rise in the cost of cotton to 17,220 yuan a tonne last year was the main culprit.

  Sourcing more cotton from overseas enabled the company to make savings of 25 per cent. The proportion of cotton bought domestically went down by five percentage points to 90 per cent.

  Only non-government owned textile companies fared better in this harsh climate as they were far more flexible, Mr Zhao said.

  He said he was determined to steer his firm through these difficult times.

  'We have three 'don'ts': don't wait for cotton prices to fall, don't rely on preferential treatment and don't ask for the central government's support,' he said.

  What it does is face the market, improve management and bring down costs so as to fully utilise its potential.

  As part of cost-control measures, the company will make 500 workers redundant this year.

  It is also moving towards value-added products instead of semi-finished and low-end products.

  The outlook has improved, with the People's Bank of China setting aside seven billion yuan in loans for the textile industry, and the price of cotton is falling.

  Textile firms were also now allowed to bypass middlemen to source cotton directly, which would save 1,000 yuan a tonne, Mr Zhao said.

  The crux of the problem encountered by the industry was over-supply, he said.

  One of seven cotton-spinning bases in the country, Zhengzhou is planning to restructure its textile industry, which will reduce the workforce employed in the sector to a sixth of the city's total working population by 2000. Workers made redundant were expected to be absorbed by more promising sectors such as the vehicle, pharmaceutical and food industries, Mr Zhu said.

  Textile firms are expected to go through another difficult year, said Zhengzhou Economic Trade Commission director Shi Jianjun, adding a turnaround might come soon after austerity measures were further relaxed later this year and early next year.



Textiles weather tough conditions