Xinjiang textile firms hit by US tariffs

By Wang Cong in Aksu Source:Global Times Published: 2019/6/18 22:08:40

Companies eye shift to BRI markets, stay confident

A worker makes winter jacket at the Xinjiang Jinliyuan Garment Co in Aksu, Northwest China's Xinjiang Uyghur Autonomous Region on Monday. Photo: Wang Cong/GT

As the US continues its widely opposed trade war with China, many textile companies in Aksu, Northwest China's Xinjiang Uyghur Autonomous Region have been hit hard by the US tariffs or, more precisely, the uncertainty of the trade war.

Still, many businesses remain surprisingly upbeat about their business prospects, as they shift their focus to the domestic and other markets under the China-proposed Belt and Road Initiative (BRI) and receive policy and other support from the government. 

On a sunny Sunday afternoon, many companies in the massive Aksu Textile Industrial Park were closed for a one-day weekend. But a few remained open, including Aksu Hengchang Textile Ltd, where several workers were rushing to put the last touches to socks bound for the US market.  

"We are trying to rush this to the US before the new tariffs," Hou Jianfu, owner of Hengchang, told the Global Times on Sunday. "If we cannot make it and we get hit by a 25 percent tariff, then we make nothing."

US officials have threatened to impose a 25 percent tariff on about $300 billion worth of Chinese products, including various textiles, apparel and footwear products. Despite widespread opposition, including from hundreds of US companies that have warned of dire consequences, the US appears to be moving forward with the tariffs.

Great uncertainty

"It is the uncertainty about the tariffs that really hurts us," Yang Xiaoqiang, executive chairman of Xinjiang Jinliyuan Garment Co, told the Global Times on Monday. "The whole garment industry is under a lot of pressure."

Due to such uncertainty, many companies in Aksu that make products for US companies such as Disney have already seen the impact, according to Wang Yongfeng, deputy head of the industrial park's management committee."Many companies here have been impacted. Some have seen their orders drop dramatically," Wang told the Global Times on Sunday.

To avoid potential losses, Hou of Hengchang said that his company has already slashed orders from US companies with delivery dates after August by two-thirds.

Yang also said that some US companies have cut orders from his company and one US brand even broke a contract worth 40 million yuan ($5.78 million) and still owes his company a final payment of 2 million yuan. 

Some Chinese companies are trying to negotiate with US companies about prices after the tariffs. "The feedback from our US partners is that they will shift the tariffs to the consumers. But I don't know how that will work," Hou said.

Still confident

Despite the concerns, there was also a palpable level of confidence among the executives.

"The Xinjiang regional government has been a great help in areas such as financial incentives, labor recruitment and security," Yang said, noting that these benefits were the reason his company, which is based in East China's Shandong Province, moved part of its production to Xinjiang.

Aksu has become an increasingly popular alternative for many textile companies in traditional manufacturing hubs in China's eastern coastal areas, where production costs have risen sharply in recent years, prompting many to shift production, with some even moving their factories out of Southeast Asia.

For many companies, Aksu was a better choice than elsewhere in Southeast Asia, because, apart from relatively low labor costs, Aksu also offers a wide range of policy support for companies, including subsidies for construction of new factories, transportation and electricity costs, according to Wang.

In order to boost the local economy and create jobs for ethnic minorities in the region, the local government has invested 6 billion yuan and attracted 24 billion yuan more from companies in the industrial park, which is said to be the largest of its kind in the country with 100 companies so far.

Many companies have also moved to Aksu, which sits on the border with Kazakhstan and Kyrgyzstan, to explore markets in Central Asia and beyond.

"Part of the reason we moved here was to expand into the markets in all the neighboring countries," Hou of Hengchang said, noting that his company is already expanding into central Asian countries and the Middle East.

Jinliyuan has also been looking to other countries, as far away as Brazil. "We are now exploring other markets, as well as the domestic market," Yang said, noting that his company will start new brands and open as many as 150 new stores across China to sell its products. "Ultimately, I think we will be just fine," he said.

Newspaper headline: US tariffs hit Xinjiang textile firms


blog comments powered by Disqus