The Hindu Business Line : China textile cos have fresh taste of western markets

WESTERN companies on both sides of the Atlantic have greeted the latest decision by the Chinese authorities to self-impose tariff on textile exports with mixed feeling.

At best China is seen buying respite from western protectionists but global garment industry cannot yet breath easily as global system of textile and garment quota expires from the beginning of 2005 or next week.

China has now published details of its plans to impose export duties on a range of domestically manufactured textile products - mainly garments.

The Chinese authorities are, hence hoping that in global market place, pressure could be reduced on western fears that "cheap" Chinese garment and textile exports will be "flooded" once the global system ends in January 2005.

The worst hit countries facing competition from China are Sri Lanka, Mauritius, Bangladesh, Thailand and to some extent India. India is fast trying to move to up-market designer fashion garments, as Indian fashion designer make their modest mark in key western markets. However, by any criterion China is expected to be the main beneficiary — once the multi-fibre arrangement is scrapped by WTO on January 1, 2005. To placate, international business opinion China proposes to impose a modest — equivalent of Rs 8 or Ramb 0.20 per article of set of clothing. Then there are various duties on man and women's clothing items - shirts, trousers, and sleepwear and underwent - total about 148 clothing types. It is also an open secret that Chinese garment and textile factories, distribution network today rank among the world's most efficient.

What impact the self-imposed modest export duty tariff will have remains to be seen. According to analysts, the impact will have a minimal effect on the Chinese sales and export figures and hence, the whole strategy is rated as best public relations and damage limitation exercise to buy respite from the lobby of western protectionists.

The Bush administration has already imposed quota restrictions and special tariff on important garment items such as Chinese made ladies brassieres, dressing gowns and knitted fabrics. Items already produced by US manufacturers. How the European Union manufacturers and governments respond to this challenge remains to be seen. Last week when Turkey imposed new restrictive tariffs on Chinese textile imports, the Chinese authorities promptly expressed their criticism.

According to current estimates, China will control more than 50 per cent of the global textile market in foreseeable future compared to its current share of 17 per cent. Such an alarming rise would obviously cause concern in major textile manufacturing sectors on both sides of the Atlantic, especially in background of rising unemployment and job losses. China enjoys "huge competitive advantages" not only because of its low wage structure but also because of its "work oriented and pragmatic mentality" of its workers and management.

Chinese textile units currently rank among the best and most competitive in the world. Hence, as China's economic weight grows it inspires both fear and attraction. Many European and American garment and textile manufacturers, for example, are seriously considering shifting their production and manufacturing base in China to retain their competitive edge. The Chinese authorities have been ardently wooing global brand name manufacturers to come to China.

The West Europeans are in a deep quandary amid latest revelation that China produces "higher quality goods" than Eastern Europe, where many member states are opting to become members of the 25-nation European Union. The West Europeans have traditionally looked at emerging markets of Eastern Europe to locate their new manufacturing bases in background of high wage and social security cost of skilled workers in Western Europe. But China is seen "fast eroding" this competitive advantage as Chinese factories and management prove to be more competitive and efficient.

In fact, the Chinese companies have now acquired a fresh taste for western markets, companies and brand names. And like the Japanese and South Koreans, the Chinese are making efforts to establish manufacturing bases in major European markets to escape the wrath of European protectionist lobbies. China is now offering a fertile new market for western investment bankers who are scouting the European and American horizons for "best buys" to satisfy Chinese trading and manufacturing units.