China Companies Ponder Safeguards
By Staff -- Home Textiles Today, 9/12/2005
Shanghai —It's been more than eight months since the last quotas were dropped from home textiles products, and export-oriented manufacturers in China have one particularly pressing concern: the prospect of quota reinstatement.
At the recent Intertextil Shanghai trade show here, it was a rare exhibitor who did not ask how likely U.S.-imposed safeguards appeared from the American point of view. Europe already slammed the door on rising levels of textiles imports from China in early summer, and $500 million worth of barred goods stood backed up in the ports by mid-August.
“The European decision has definitely had a great negative impact on the home textiles business in China,” said Lu Wei Zu, general manager of Nantong Bermo Home Textiles.
The company's primary fabric customer is Europe, although it also exports some bedspreads to the United States and produces bedding sets for the domestic Chinese market. “We had a (European) customer that had placed large orders, but now we cannot fulfill it,” he said.
In addition to worrying about potential U.S. caps, manufacturers already expanding their business in the market primarily said they are working OEM — or as factories for hire — for American suppliers that furnish their own designs and specifications.
It is a position several said they felt more comfortable with than taking on retailers as clients.
“We don't have any plans to do direct business with retailers,” said Steven Liang, assistant general manager with Yeken, which produces sheets, bed ensembles and decorative fabrics.
“We'd rather help our customers grow their own business in the U.S. The more customers, the better.”
Still, with several leading retailers ramping up internal product development, their overseas buying offices increasingly pressure manufacturers to jettison their U.S. alliances in favor of a direct deal.
Bedding manufacturer Shanghai Worldbest Hometex has been subjected to such overtures, according to Zhi Ming-Qu, chairman of the board and general manager. The company has a standing — and signed — agreement to supply the United States exclusively through Springs Industries and would prefer to do business that way, he said.
So what does Worldbest do when retailers coming calling?
Zhi smiled. “We show them the contract.”
The spectre of Springs as a partner looms large for many manufacturers that have expanded their capacity, perhaps because the American mill bought a sourcing operation in the country five years ago. Several manufacturers interviewed by HTT mentioned Springs as a company with which they would like to expand their business, or land business.
By mid-2006, Yueda Hometex R&D will have finished building a completely vertical home textiles mill from scratch in the span of less than 18 months. The operation had offered to lease Springs its entire capacity, said Chen Rong, general manager. Springs passed, but Yueda is still hopeful of landing a big fish.
“We especially want one big strategic partner,” Chen said. “If you get small companies, they have an order today but tomorrow they don't.”
Several manufacturers that foresee dealing directly with U.S. buyers to be inevitable noted that the market is still a relative unknown and it will take time to grasp.
“We need to gain in proficiency and market understanding, said Tian Kun Jin, general manager, Yashiju Fabric Products, which supplies silk fabric and upholstery fabrics to the States through U.S. manufacturer buying offices in China.
“I need some veterans in foreign trade, and one who understands foreign intellectual property rights,” he added. “It is also very necessary to recruit design talent to address the U.S. market.”
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