'Made in Hong Kong' tag bypasses sanctions but cuts into efficiency, profits
Buyers in the United States have warned Hong Kong's largest-listed garment maker that they will buy fewer China-made products, forcing the company to hire hundreds of new workers in Macau, Hong Kong and Cambodia.
Luen Thai Holdings' customers were unwilling to place confirmed orders in light of escalating Sino-US trade tensions and the prospects of new import quotas, wrote Eddie Lau in an ABN Amro report.
Luen Thai's five biggest customers, including US brands such as Liz Claiborne and Polo Ralph Lauren, account for half its sales.
'For categories at risk from US quotas, our customers have asked us to produce garments through the Outward Processing Arrangement [OPA] and outside China after July,' Luen Thai chief executive Henry Tan said.
OPA allows garments manufactured on the mainland but finished in Hong Kong to be deemed 'made in Hong Kong', thereby avoiding any quotas imposed on China-made goods. Factories in Macau can also function under OPA.
Luen Thai plans to hire about 500 OPA workers in Macau and Hong Kong in the next few months. It had 300 OPA workers in Macau and 79 in Hong Kong, Mr Tan said.