Trade spats hem in China garment makers
(Reuters)
Updated: 2005-10-02 14:27

"We have to adjust," Sit said. "We're trying to think of ways to do things in countries where there aren't quotas. We're now starting to think of ways to get into the domestic market."

In previous years, 60 percent of his clothes went to Europe and most of the rest to Australia and the United States. Now, he says about 50 percent will be shipped to wholesalers in Australia, where there are no restrictions, and he is aiming for about 20 percent of sales to go to the Chinese market, he said.

BANKRUPT

Yimi, which churns out 270,000 bras, briefs and stringy, lace-fringed lingerie each month, is trying to sell to the United States items blocked in Europe, and vice versa.

In anticipation of the end of quotas, China saw many new companies enter the clothes-making business, while existing firms expanded their capacity or tried to shift into exporting.

The result was disastrous for some.

"Quite a number of them have become bankrupt," said Daniel Poon, Assistant Chief Economist at the Hong Kong Trade Development Council.

"I think for China, and also for the U.S. and the EU, there are no winners. All of them are losers," he said.

Indeed, the only winners appear to be low-cost production bases in Southeast Asia and beyond where orders are being diverted.

Hong Kong, too, has seen re-exports climb as manufacturers with plants in China take advantage of outward processing agreements that let them slap "made in Hong Kong" labels on clothes that are only partially produced in the city.