Most textile companies in Shenzhen, a boom city neighboring Hong Kong, are taking fewer orders from foreign clothing dealers for fear that the US re-imposed quotas and China's export tariff hike will slim profits.

"It's not possible to renegotiate prices for orders taken before the tariff increase was announced," said Wang Huijun, president of Shenxin Textile Co., one of the biggest textile exporters in Shenzhen. "It'll bring huge losses: if we're exporting 200,000 pieces of clothing a month, we would sustain a loss of 200,000 yuan (24,000 US dollars)."

China announced a week ago it would raise export tariffs on 74 sorts of textile products, with a 400-percent hike for most of the products, beginning June 1, 2005. That means the export tariffs on each piece of concerned textile or clothing product would increase from 0.2 yuan (2.4 US cents) to 1 yuan (12 US cents).

Wang said the orders her company has taken so far is 40 percent fewer than the same period of last year. "We have to wait and see whether to take more," she said Friday.

For smaller companies the loss will be still heavier -- but not necessarily unbearable, according to Zhai Xiaoping, general manager of Huasi Apparel Co. and president of the city's apparel association.

"Companies would have to file bankruptcy anyway if their profit margin was as small as one yuan (12 US cents)," he said. "By raising export tariffs, China aims to encourage textile companies to readjust their product mix and turn out more high-end products with higher added-value."

If higher tariffs are likely to cause short-term profit losses, export restrictions from the United States have come as an ill omen in the long-term.

"As the US customs have not given any detailed figures on sensitive Chinese product categories, it's very difficult for us to decide now what export orders we should take," said Zhai, noting that many US clients are equally hesitant about whether to place any more orders.

The only way to protect his company is to avoid taking orders for the restricted categories, he said.

"I hope the US and China will solve their trade disputes through consultations and establish an early warning and reporting system for sensitive products to protect their businesses from huge losses," said Zhai.

Source: Xinhua