Textile bosses to study foreign investment chances

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Last updated at: (Beijing Time) Monday, February 23, 2004

Textile bosses to study foreign investment chances

Chinese textile company representatives will head off soon to the United States, Mexico and Colombia to look at the possibilities of extending their business ties in those countries.

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Chinese textile company representatives will head off soon to the United States, Mexico and Colombia to look at the possibilities of extending their business ties in those countries.

Cao Xinyu, deputy director of the China Chamber of Commerce of Import and Export for Textiles, explained that the bosses' mission was to get a first-hand view of "whether it is feasible to set up or acquire local textile companies."

A large number of Chinese textile firms have expressed an interest in taking part in the delegation, with the final schedule and list of participants having yet to be drawn up.

The visit comes amid a rising tide of protectionism in developed countries that seeks to both limit Chinese textile imports and try to blame China for job losses in their own nations.

But, since all quotas restricting textile and clothing trade between World Trade Organization (WTO) members will be scrapped by December 31, 2004, battling protectionism is not the purpose of the visit.

"The companies just want to have manufacturing facilities close to the source of their raw materials and the final market, a move which will also give an impetus to these foreign industries," Cao said.

Africa, Southeast Asia and North America will be the most popular destinations for Chinese textile investment as China's rate of outward investment continues to rise, Cao predicted.

Some local textile firms need to be shown that overseas acquisitions are neither a far-off prospect, or merely something of interest to the industry's major players.

Many local textile firms have gained enough purchasing power because of the rapid development experienced by the industry in recent years, Cao said.

They have good profit rates, healthy debt-asset ratio and a strong financing ability, Cao said.

The garment sector's top ten companies have average assets of 1.45 billion yuan (US$175 million).

Buying up foreign firms is not as distant a prospect as some local investors imagine, Cao said.

Most of the foreign textile companies are small-scale, Cao said.

For example, a Spanish textile company, on an average, employs merely 34 workers and just 0.4 per cent of them hire more than 500 staff.

In fact, some Chinese firms have already made successful forays into this field, Cao said.

Shanghai-based Haixin, the country's largest plush maker, acquired US firm Glenoit's plush-fabric factories in Tarboro, North Carolina, and Elmira, Ontario in 2002 for US$25 million. The deal made Haixin the world's largest plush firm, with a quarter of the world's production.

The takeover also allowed Haixin to use Glenoit's sales network and 46 trademarks, as well as its team of managers and technicians.

Many countries welcome an inflow of Chinese capital, said Cao.

The French and German governments and the countries' industrial associations have welcomed Chinese companies to invest in their local textile industries.

Textile industry analyst Cao Yitang said purchasing of foreign companies is a better option for Chinese companies who are harassed over the label of original equipment manufacturing (OEM) providers and struggling to make a name for themselves.

But setting up a factory is trickier in foreign countries, requiring more efforts to promote both the Chinese brand and Chinese style in these overseas markets, Cao said.

Source:China Daily

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