WASHINGTON — The Chinese government is giving WorldBest Group Co., a state-operated firm that houses the country’s largest textile and pharmaceutical businesses, a $618 million bailout that has U.S. producers crying foul.
The Xinhua News Agency, China’s official news service, reported Thursday that the state-owned asset-management company China Chengtong Group would provide WorldBest with the funds needed to halt its financial crisis and manage its debt load of about $3.1 billion.
Citing an unnamed source, Xinhua said the move was an effort to increase the government’s share in the most important companies in key sectors. The report did not specify the exact nature of the firm’s financial difficulties or if they were in the textile part of its business.
“This is only the most blatant example of the Chinese government’s wholesale disregard of free-market principles and its [World Trade Organization] commitments,” Cass Johnson, president of the National Council of Textile Organizations, said in a statement.
When it joined the WTO in 2001, China agreed to run state-owned businesses in accordance with the rules of a market economy, said Johnson.
“Textile sectors around the world are competing against China Inc. — a unique marriage of Chinese government resources with private industry that defies all standards of fair play or free-market principles,” Johnson added.
Set up in 1992, WorldBest is the result of roughly 90 mergers that ultimately formed a conglomerate with assets last year of about $6.9 billion.
Chengtong will become WorldBest’s largest shareholder and play the role of investor on behalf of the state-owned Assets Supervision & Administration Commission.
After straightening out its financial problems, WorldBest will focus on pharmaceuticals, but also will work to improve its global textile business, said the Xinhua report.
According to the firm’s Web site, it has textile operations in Mexico, Canada, Thailand and Niger, as well as China, and has been authorized to use Invista’s Lycra spandex trademark.
Ira Kalish, Deloitte Research’s global director of consumer business, disputed the notion that China’s edge in the textile business stems from state involvement.
“That’s not what’s making this industry competitive,” he said. “The competition is coming from the fact that the industry has gotten a lot of foreign capital, has invested in dramatically improving its efficiency and is in a position to compete globally. It’s in other industries where state subsidies exist, things like steel, chemicals. The apparel and textile industry in southern China is globally competitive. It doesn’t require subsidies.”
This story first appeared in the December 2, 2005 issue of WWD. Subscribe Today.