NEW YORK — When Wilbur Ross looks at China, he sees a lot more than factory sites.
The chairman of International Textile Group revealed his company’s first major move into China on Friday, and it includes plans for China Ting Group, a major Chinese textile producer, to roll out a chain of 25 Burlington House Retail stores in the world’s most populous country. It’s part of a bid to capture a piece of China’s fast-growing consumer market.
The deal also calls for ITG and China Ting to build a dyeing and finishing plant in Linping, a city less than 100 miles southwest of Shanghai.
Ross said this marks the first time that Burlington, which he bought out of bankruptcy and merged with Cone Mills to create ITG, has had a retail presence. All retail sales in China currently exceed $500 billion a year, and the country, which has a total population of 1.3 billion, is estimated to have a middle class of about 100 million people.
Ross described the deal with China Ting, which will call for a joint investment of $20 million, as “the first in a series of steps,” as his $800 million firm boosts its presence in China.
“We’re actively working on other transactions,” including some for apparel fabrics, he said.
The Burlington House stores, which will sell home textiles such as sheets and bedspreads, will cater to a growing class of new city dwellers being created by aggressive urban redevelopment programs. The shops will be relatively small in size, occupying a few thousand square feet each.
The first unit already opened in Linping in the last month. All 25 are due to open before the end of next year.
Ira Kalish, a China specialist at Deloitte Research, said a campaign by the Chinese government to shift ownership of homes from the state to its citizens is prompting a wave of consumer spending there.
“Most housing stock until 10 years ago was owned by the government, and people didn’t take care of homes they didn’t own,” said Kalish, who serves as Deloitte’s global director for consumer business. “A lot of middle-class households have been buying their homes. When they own their homes, they treat them differently. That has stimulated a lot of spending on home-related products.”
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Ross said: “When you take a guy from being sort of a squatter in a slum into a property owner, suddenly he wants a rug, he wants furniture, he wants a TV, he wants everything…So outside of all the Chinese cities, enormous home furnishings malls are springing up. So far, they carry imported, high-end stuff or extremely low-end products. These stores under the Burlington name are meant to deal with this middle-class market.”
In addition to upgrading the housing of existing city dwellers, China is experiencing a surge in urban migration, as former rural farmers head into the major cities in search of factory jobs.
Ross said the idea of opening a chain of stores grew out of talks with China Ting, which Burlington for the past several years has dealt with through its Hong Kong-based Burlington Worldwide operation. That unit works as a sales agent, representing 30 Asian mills in the U.S.
“I realize it probably seems somewhat strange, somebody that doesn’t even have stores in the U.S. opening up in China,” Ross said. “There’s a unique opportunity to open the market there.”
The Linping plant, which is also due to open by the end of 2005, will dye and finish fabric primarily made by Burlington Worldwide’s existing suppliers.
Over the past year, Ross has moved to boost ITG’s presence outside the U.S. In addition to exploring China, he has said that the company plans to build a denim manufacturing plant in Guatemala City, contingent on Congressional approval of the Central American Free Trade Agreement.
ITG continues to manufacture fabrics in the U.S., and Ross said the international moves “are not instead of our domestic activity. These are incremental to it.”
He said the retail move played into his overall goal of building the recognition of the Burlington brand name. He added that he’d consider opening other retail operations in China if he found the right partner.