Fabric firms shifting production to China
04/07/2005
The Asahi Shimbun
With the abolition of U.S. and European textile and apparel import quotas at the end of last year, Japanese manufacturers are planning massive investment in production-but not at home.
Billions of yen for new plants will be flowing to China instead.
Toray Industries Inc. alone plans to spend 17 billion to 18 billion yen to construct a new factory in the country.
China's commodity-grade textile products are expected to overwhelm world markets, and there is little Japanese companies can do but set up shop in the burgeoning behemoth. Labor costs in China are about a twentieth of those in Japan.
The planned Toray plant would produce cotton cloth with polyester mix, which is widely used for apparel. The company aims to gradually increase its total production capacity for mixed fabrics by 30 percent in three years.
The textile maker will consign sewing to a Chinese firm affiliated with Toray subsidiary Chori Co., a trading house. Along with increases in the capacity of Ningbo Shendie Fashion Co., Toray plans to move all of its sewing operations to China by fiscal 2010.
Toray's Chinese operation is expected to post a consolidated operating loss of hundreds of millions of yen on sales of 79.5 billion yen in the year ended March. The company expects to raise sales and operating profit by 20 billion yen and 4 billion yen, respectively, within three years.
Teijin Fibers Ltd., a member of the Teijin Ltd. group, is considering increasing by 10 percent the capacity of the dyeing facility at its local unit in Nantong, Jiangsu province, and eventually concentrate its textile productions in China.
Mitsubishi Rayon Co. will start full-scale production of acrylic staple fibers at its plant in Ningbo, Zhejiang province, in October.
The world's top producer of acrylic fibers is considering doubling the production capacity of Ningbo Rayon Acrylic Fibers Co., a subsidiary that operates the plant, to 100,000 tons. That production level would account for 40 percent of the company's global production.
According to estimates by the World Trade Organization, the share of textile products made in China will eventually grow to 50 percent in the U.S. market from 16 percent in 1997. In the European Union, growth is projected to reach 29 percent from 18 percent.
The Japan Chemical Fibers Association forecasts that synthetic fiber production in China will grow by an average 13 percent a year between 2003 and 2008, which would give the country a 50 percent share of the global market.
Katsunosuke Maeda, chairman of the Japan Textile Federation, said the combination of high-quality textile developed by Japanese companies and low sewing costs in China will create world leading products.
However, success in China could harm the operations of Japanese manufacturers in Southeast Asia.
Japanese textile companies advanced into the region in the 1980s, seeking cheap labor.
Teijin Fibers President Yasutoshi Noguchi said Chinese products could impair profitability of its Southeast Asian units in three to five years.
To preserve the value of their investments, Japanese manufacturers are shifting their Southeast Asian operations to products that are still difficult to produce in China.
Some industry officials said, however, the tactic might not work because there is little technological difference between the two regions.(IHT/Asahi: April 7,2005)
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