BEIJING — China’s textile manufacturers are busy preparing for an expected major increase in production after the Jan. 1 end of the quota regime.
A report issued last month by Global Strategies found that 91 percent of summer garment suppliers across China are expanding their production capacity to meet the expected surge in post-quota business. About half of those companies say they will increase their capacity between 20 and 50 percent, with another 16 percent planning an increase of more than 50 percent.
“Many of the companies have high expectations in the long term. In the short term, they know there will be many challenges to face,” said Michael Kleist, general manager of content development at Global Strategies and the head of the survey team.
Despite the potential boom for China’s textile companies, there is growing concern that problems may quickly follow the quota removal. The biggest issue that companies may have to deal with is future safeguard or antidumping legislation by the U.S. or the European Union.
“The more sophisticated textile companies are now realizing that this is not a golden era about to dawn, like they had earlier thought,” said William McCahill, senior international business adviser in the Beijing offices of Wilmer Cutler Pickering Hale & Dorr LLP. “We’re just beginning to see some awareness that, if imports surge, it will just invite retaliation and the imposition of various antitrade measures, like special safeguards in the U.S.
“The danger is that the Chinese industry has made so many new investments in capital goods to make more textiles and garments. If they bought these with borrowed money and against the expectation of increased exports as a revenue stream to help them pay off the loans, they might find themselves in some real trouble if markets should close to them.”