By  on January 3, 2005

BEIJING — Textile manufacturers in China have spent years preparing for the removal of quotas in 2005. But now that it has come, many of them are not sure what to expect.

Uncertainty over pending safeguard petitions in the U.S., an increase in local competition and new Chinese government-imposed apparel and textile tariffs have left many local industry leaders unwilling to predict what will happen now that quotas have been removed. While the end of quotas should bring a financial boom to many Chinese textile manufacturers, industry representatives point out that companies also have an increasing number of problems to deal with.

“The industry is both excited and worried about the future,” said Su Huaibin of the China National Textile Industry Council. “There is a lot of concern about things like safeguards, but we’re trying to approach it very calmly. The Chinese textile industry has often been able to adjust to face problems.”

One of the biggest questions leading up to Saturday’s quota removal was the new textile tariffs, which were announced only last month by the Chinese government. The tariffs are seen as a way to show that China is actively managing the industry’s growth and to allay fears that its textiles and apparel will flood uncontrollably into foreign markets. Details of the tariffs were released Dec. 27 in the Ministry of Commerce’s daily newspaper, just days before they took effect on Jan. 1.

The tariffs cover 148 types of products in six categories, including underwear, trousers, blouses and overcoats, and will range from $.024 to $.036 per piece or per set of clothing and $.06 per kilogram for parts or accessories, according to the paper.

Though the tariffs could affect products with low per-item profits, such as underwear, they are not expected to drastically curtail the massive growth expected in China’s textile markets this year. Manufacturers, many of which have added workers and production facilities, are already reporting an increase in orders.

“We are expecting to double our production this year,” said Du Jian, managing director of Yantai Tongda Textile & Dyeing Co. in Shandong Province. “We are very confident in the future.”

Over the last two years, China has invested about $5.7 billion alone toward modernizing its 132 seaports that are open to foreign vessels in anticipation of the onslaught of trade this year.Right now, the biggest concern for Chinese manufacturers is the threat of safeguards or antidumping legislation from the U.S., the European Union or other countries that could potentially devastate companies, especially if they’ve already invested in their expected growth.

“Safeguards in the U.S. have already caused trouble for Chinese textile companies,” Su said. “We hope that the U.S. will only impose safeguards for good reasons. After all, can a safeguard really protect the U.S. industry? It may block China, but leaves the door open for other countries to enter the market.”

Just last week, Chinese government officials also announced their strong opposition to new safeguard measures imposed by Turkey on 42 categories of Chinese textiles and asked the country to revoke the policy immediately.

Still, such concerns haven’t stopped China’s entrepreneurs, who, banking on a big boom, have flocked to the textile industry. Thousands of new textile companies have been started in China over the past two years in preparation for the quota removal, said Xu Xiuqing, secretary general of the Shanghai Garment Trade Association.

While the growing number of textile companies — around 100,000, according to the China National Textile Industry Council — could bring more business to China this year, it also creates a significant increase in local competition, which is currently the industry’s biggest concern after safeguards. Already, essential resources such as qualified workers, electricity and factory space are in high demand, which could significantly offset China’s cheap costs, not to mention company profits and overall industry success.

Up and down the eastern coastline of China, cities have spring up that are focused on specific products in apparel.

“Post-quota, the competition between companies will only become more intense,” Xu said. “Companies will start to drop prices to make their products more attractive. It will be harder to make money than ever before.”

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