Chinese exporters hesitate on textiles trade

With the global textile quota system ceasing to work on January 1. Chinese textile exporters now face a dilemma of whether to sign export orders for the second half of the year instead of doing the business freely.

Yang Weidong, general manager of the Jifa Group Co., Ltd., the second largest textiles exporter of east China's Shandong Province, said: "We began to take orders for the latter half of the year, but we feel a headache and get lost on whether to take the orders. "

The Commission of the European Union (EU) last Thursday decided to open an inquiry into Chinese exports to Europe of nine categories of clothing, a move that could lead to the imposition of formal limits on such shipments. EU commission launched its probe based on the statistics of the first quarter which it subjectively held that Chinese textile imports have exceeded a certain growth margin. Meanwhile, US authorities also launched a formal inquiry procedure to examine a possible re-imposition of quotas following a request from US textile producers.

The United States imposed quotas on socks imported from China last October. Relevant statistics from the US show that socks made in China exported to the United States have surpassed 60 percent of the limitations.

"We must now take into account the risks on the EU and US markets when signing orders for the second half of the year," Yang acknowledged, "We especially dare not to sign orders of big deals. "

Yang's dilemma epitomizes the situation Chinese textiles exporters are facing.

Many said they hesitated as they did not know what "restricted measures" would be taken by EU nations and the United States.

"2005 is the hardest year for my business," said Zhu Dongfeng, deputy manager of a Shanghai-based textiles firm which have done export business for 20 years, who is also in a similar dilemma.

"It's unfair to impose limits on Chinese textile exports just based on the data of this year's first quarter and it's a too early and a harsh move," said Yang, "As many exports done in the first quarter were ordered before the end of last year."

Yang's firm saw a 20 percent surge year on year in its exports to the United States in the first quarter this year, but the ratio could be as high as 200 percent if not for fearing the potential risks on the EU and US markets, said Yang.

Yang's Jifa group began exporting textile products to the EU and US markets three years ago. The exports to the two regions account for about 10 percent of the group's total.

In fact, China has adopted a range of measures by its own to stem large quantities of cheap textiles products from flooding into the European countries and the United States since December last year. These measures include adding tax on 148 types of textile goods, curbing investment in the textile sector and encouraging big textile firms to invest in less-developed and developing countries.

Yang said, the export tax alone added some 40 million yuan (4. 83 million US dollars) to his firm's cost, which means a drastic drop in export profits.

The export volume of three kinds of Chinese textile goods, namely cotton trousers, cotton knit shirts and cotton and man-made fabric underwear, targeted by the US "restrictions," produced by Shandong Province rose by 246 percent, 549 percent and 520 percent year on year in the first two months this year. But prices for the three kinds of products dropped by 28 percent, 39 percent and 31 percent year on year in the same period, according to Lu Wei, an official with the provincial foreign trade and economic cooperation bureau. (More)

Lin Houyu, chief engineer with the Jiangsu Textiles Group in east China, said a surge in textile export and a drop in price is normal in a certain period of time following the lifting of textile export quotas. The surge is not likely to last for long when considering such factors as raw materials supply, power consumption and influence of environment.

Lin said it was an improper step taken by the EU and the United States to restrict Chinese textiles export only by judging their imports from China in the three-month period following the lifting of textile quotas.

Figures from the Ministry of Commerce show that China's textile exports grew steadily by 19.1 percent year on year to reach 22.4 billion US dollars in the first quarter of 2005. The growth rate dropped 5.6 percent year on year.

Chinese Minister of Commerce Bo Xilai said the growth rate is likely to continue dropping in the next few months.

China is in firm opposition to the inspections of EU and the U.S. for special restrictions of Chinese textile export. Officials say the move violates basic policies of the World Trade Organization (WTO) and relevant specifications in No. 242 section of China's report on joining the WTO.

"The former quota system has distorted world textile trade and oppressed China's textile export," said Zhao Yumin, a researcher with the International Trade and Economic Cooperation Research Institute under the Ministry of Commerce.

"The surge in China's textile export in a short period of time following the end of quotas is a normal phenomenon in the development course of the world textile and clothing industry from a quota era to a free trade era," Zhao said.

The WTO agreed in 1995 to remove textile export quotas this year, giving member states 10 years to prepare so as to avoid large trade disruptions. But the United States, Europe and other developed nations waited until the very last moment to remove the greater part of the import quotas.

Two candidates vying for head of the WTO, former EU trade Commissioner Pascal Lamy and Carlos del Castillo of Uruguay, warned the EU and the U.S. last week against blocking increasing Chinese textile imports. They said the EU and the United States should have been better prepared as they have a decade to adjust to the agreement that removed limits on Chinese textile and clothing exports in January.

Meanwhile, China has called for self-discipline in Chinese textile businesses to improve product quality and to stabilize prices in order to make Chinese products more competitive on the world market.

Minister of Commerce Bo Xilai has expressed the hope that China's textile industry would maintain steady growth as it integrates with the global economy.

Source: Xinhua