Hong Kong and China Prepare for Quota Changes
HONG KONG—A cautionary wind is blowing through Hong Kong and China as Asian apparel manufacturers wait to see if quotas will really disappear.
Many expect the United States will implement safeguard measures restricting imports on 13 apparel and textile categories until 2008, when World Trade Organization rules stipulate such measures can no longer be invoked. But other changes are in store for this year.
Daniel Poon, assistant chief economist at the Hong Kong Trade Development Council, organizer of Hong Kong Fashion Week, said increased competition among Chinese factories will reduce prices 10 percent to 20 percent this year because several quota categories will no longer have to be purchased by manufacturers working in China.
Also, apparel experts expect the quality of goods coming out of China to improve now that export production is not limited to factories with quotas.
“The quota system formed a twisted situation,” Poon said. “Even though the quality was bad, people would use a factory because that factory had quota.”
Now, Chinese factories that could not obtain quota allotments can export to overseas markets. “Some people before didn’t enter the industry because they did not have quota. Now they will enter the market,” Poon said.
In some ways, Hong Kong manufacturers face the same challenges as U.S. manufacturers that source overseas. Most clothing with a Hong Kong label is really made in China. With quotas up in the air, Poon recommended that Hong Kong apparel companies scatter their production around Asia and not limit themselves to China. He also encouraged Hong Kong businesses to strengthen their ties with overseas buyers. “This is an important area to restructure,” he noted.
Anthony Keung, managing director of Fenix Hong Kong Ltd.—which makes sweaters for men, women and children— noted that Hong Kong manufacturers have about three years to sharpen their competitive skills with China and keep a toehold on the export market. He suggested that Hong Kong manufacturers put more emphasis on their design skills and provide value-added services.
“In the next three years, it is very important for us to invest in people and machinery,” Keung said. “After three years, when all this shifting has taken place, we will face intense competition from China.” —Deborah Belgum
