Hong Kong's function dispersing

In Shanghai, there are large-sized textile firms which are targeting the market within China. In contrast, there are many export-oriented small- and middle-sized firms in Guangdong Province. Hong Kong has promoted its apparel trade utilizing the production capabilities of these firms in Guangdong Province.

There were several outstanding highlights to the Chinese economy such as the start of Japan-China diplomatic relations in 1972, the beginning of reform and open-door policies in 1978, Deng Xiaoping's Southern Tour Lecture in 1992 and the return of Hong Kong to China in 1997.

In the Hong Kong and Guangdong area, the Guangzhou Trade Fair was first used as the only channel for Chinese trade, and established the reason for its existence. After Deng Xiaoping's Southern Lecture, gigantic investments focused on the Pearl River Delta in the Guangdong area. After the return of Hong Kong to China, investments in Shanghai increased. The presence of the Shanghai area has rapidly increased in the textile trade in particular regarding relations with Japan.

Large flow has become visible that the function of Hong Kong has been dispersing and transferring to various places on Mainland China focusing on Shanghai. In the past three years, both Hong Kong and foreign firms in Hong Kong have successively established their branch offices in Shanghai, Dalian and Qingdao while leaving the head office function in Hong Kong. This is a move to transfer actual working points such as merchandizing, quality and production progress control and inspection bases to somewhere else while keeping Hong Kong as a control base and headquarters. The main purpose is to reduce management costs.

However, Hong Kong still holds 40% of the total Chinese trade quantity and 70% of the processing trade quantity. It took Hong Kong 15 years to develop its fashion business to the current level. It will probably take Shanghai a similar period to become a leading fashion city. The matter of greatest interest for the textile industry is how much the gap between Hong Kong and Shanghai will decrease in the next five to ten years, or if Shanghai will overtake Hong Kong and reverse their relationship.

European and U.S. textile firms are in the mood to utilize the Pearl River Delta area even more than at present. Because this area is competitive as a knit-producing district, its exports to the U.S. have also been favorable this year. Concentration of women's underwear production is also the highest here in China. This area has had a long history of being a special economic zone, and its own Chinese-style processing deal system was both introduced and developed here. It is recognized in Europe and the U.S. as the area with the highest freedom in China. This year, Shenzhen announced that it would give three foreign firms export rights for the first time. It is also possible that import and wholesale rights will be given in the future as well. The supremacy of Hong Kong and the Guandong area as a control tower for apparel production in China still remains.

Rapidly Decreasing Apparel Exports to Japan

Apparel exports to Japan handled by Japanese apparel trading houses have drastically decreased this year. One of the reasons is a decrease in orders from a major Japanese apparel retailer Fast Retailing Co., Ltd., the operator of casual wear shops "Uniqlo". However, exports through other channels have also been sluggish due to continued dull consumption in Japan.

Among Japanese firms, Tredia Fashion Co., Ltd. has the largest share of apparel exports to Japan utilizing Hong Kong and Shanghai, but its sales have also decreased this year. Cooperating with Mitsubishi Corporation, its head office, Tredia Fashion controls production in Guandong, Shanghai, Qindao, Tianjin and Dalian. As for products, sales of fleece jackets and chino pants have decreased whereas those of high-priced women's wear have increased. By sales channel, those for low-priced casual chains have decreased and those for department stores and special stores have increased instead.

Sales at Nichimen Orient Wear Ltd. have decreased this year. This is because sales to casual wear stores have decreased. Cooperating with Li & Fung, a major corporate group in Hong Kong, Nichimen Corporation started sales activities in Hong Kong and Shanghai on February 18, 2002. Nichimen has expressed on intention to increase exports to Japan by improving its product supply capabilities by using the production capacity of Li & Fung for materials and sundries for Europe and the U.S. However, actual results will only surface next year at the earliest.

Between Nichimen and Li & Fung, the "Production Tracking System", an information technology network linking these two firms has started operation. It links the head office of Li & Fung in Hong Kong with its offices at 69 places in 40 countries around the world so that production state in 7,500 factories under the control of these offices can be immediately checked. The latest connection has enabled Nichimen to directly check some of these factories. The "Fabric Library" is now producing the Japanese version for displaying the stock level of fabrics and knitting yarn on the Internet together with other relevant information such as prices and lead-time.

Sales at Passport Fashion Company Limited have also decreased due to a decline in orders from casual wear stores. Its theme for this year is to decrease the share of exports to Japan and to increase offshore trade with the U.S. and other countries.

Apparel exports to Japan have also decreased for Prominent Apparel Limited (PAL). As for the future plans, PAL intends to develop its own designs through cooperation with a manufacturer with plan proposing capabilities and sell then them. PAL also intends to expand its business area so as to cover fashion sundries, toys, kitchen sets and gardening equipment. Prominent Apparel will also adopt a sales method to directly sell its products to retailers. In addition, PAL intends to strengthen those products in which Hong Kong is traditionally strong, namely sweaters, cut-&-sewn wear, active sportswear and denim.

Sumikin Bussan Corporation has established its New York Office once again. Through cooperation with Hong Kong, the firm intends to win business of top-ranged products at its New York Office, and that of medium-ranged products between buying offices of European and U.S. stores in Hong Kong and Sumikin Bussan Hong Kong.

N.I. Teijin Shoji (HK) Ltd.(N.I. Teisho) will merge a group firm Fashion Force (HK) Ltd. on January 1, 2003 to increase the business efficiency. After the merger, exports to Japan are expected to account for 55%, and offshore trade, 45%. Offices of Fashion Force Hong Kong in Dalian, Qingdao and Wuxi will be reorganized as offices of N.I. Teijin Shoji Shanghai. N.I. Teijin Shoji (HK) has also established a new office in Ningbo. N.I. Teijin Shoji (HK) intends to increase sales efficiency with its integrated control system located in Shanghai. N.I. Teisho sent former staff stationed in Hong Kong to Teijin Shoji Los Angeles in October 2002. N.I. Teijin Shoji (HK) noticed that there is only minimum Asian production with firms on the West Coast compared to those on the East Coast. N.I. Teisho has thus started sales activities targeting apparel retailers and wholesalers who want to start Asian production but have neither sufficient human resources nor connections. In December 2002, N.I. Teijin Shoji (HK) will prepare a presentation room in Tokyo for announcing designs transmitted by Hong Kong. N.I. Teijin Shoji (HK) will launch Hong Kong designs twice a year focusing on men's casual wear made of woven fabrics.

Because Shinko Sangyo (Hong Kong) Ltd. is not exporting to Japan, it is safe from the effects of the sluggish economy in Japan. For January-June this year, Shinko Sangyo (Hong Kong) achieved its planned goal with sales leveling off and increased profits. Similar sales levels have been continuing after July as well. Sales of shirting and shirts for Europe were favorable. Corporate apparel uniforms for Australia also sold well. In addition, Shinko Sangyo (Hong Kong) got new business involving children's wear for the U.S. manufactured in Jordan under the control from Dubai.

Chori Company (H.K.) Ltd. integrated its apparel firm, Chori Fashion Network Co., Ltd. (FANET). Placing great importance on cooperation with Shanghai for exporting to Japan, Chori Company (H.K.) combines products with added values in Hong Kong and price competitive products in Shanghai. The textile business accounts for 70% of sales at Chori Shanghai. For Chori Hong Kong, however, textile accounts for only 30% of its sales. Its major business is already resin and chemical products.

Tomen Hot-Line Hong Kong is a so-called an "offshore-type" trading house with 60% of its exports going to Europe and the U.S., exceeding those to Japan. The firm utilizes bases in Vietnam, Sri Lanka and the Philippines for apparel exports to the U.S., and India, Indonesia and China for those to Europe.

For Sumitex Hong Kong, exports to the U.S. accounted for 40% in 2001. Using only fabrics produced in Guangdong Province, the firm sells products manufactured in the Middle East to stores in the U.S. The main feature of the firm is its specialization by narrowing the production background. The products the firm handles range from cotton skirts, pants, jackets to swimsuits. The person in charge of textiles at Sumitomo Corporation was assigned at its New York office this year in order to attract new customers.

Teijin Hong Kong Limited has been exhibiting its central function in selling polyester products of the Teijin Group in the Asian region. Teijin Hong Kong sells 22 million yard/year of woven fabrics produced by Nantong Teijin Co., Ltd. in China and Thai Namsiri Interetex Co., Ltd. in Thailand. Its sales destinations are Europe and the U.S., 50%; Japan, 35%; and the Middle East, Southeast Asia and southern part of China, 15%. Teijin sells women's fashion fabrics "Rocket", "Milpa" and "Esuviron" as well as active sportswear fabrics "Microft" and "Super Microft".

Toray Industries (HK) Ltd. intends to increase its apparel exports to Europe and the U.S. Toray also places importance on textile sales to the Chinese market including the southern part of China. Its annual sales are US$300 million, and textile sales are worth approximately US$200 million. Apparel accounts for US$50 million. Toray Hong Kong is mainly exporting underwear to Japan. In the future, Toray intends to increase apparel exports to Europe and the U.S. In June 2002, They established Toray Industries (South China) Co., Ltd. for controlling the southern part of China for cultivating new business. In the latter half of next year, They will change its Guangzhou Representative Office to a local firm to make use of it for further sales activities in China.

Kanebo Spinning Corp. Hong Kong Branch has been promoting both the creation of new products and globalization. Although Kanebo's factories have been quick to achieve globalization, the globalization of its sales activities has been slow. In November 2001, the firm established Kanebo Spinning (Shanghai) Co., Ltd. and Kanebo Spinning Co., Shanghai Office. The base of the global product business will be in Shanghai. As for business in Hong Kong, yam and woven fabrics are two major products. Regarding yarn, Kanebo Spinning is specializing by selling only top-- dyed melange yarn "Romancol", while for woven fabrics, The firm features 80s/2 shirting and high-- density soft woven fabrics, and focuses on men's wear fabrics. Annual sales of yarn are US$11 million, and those of fabrics are US$30 million.