China : Textile Orders Shifting to India, Pakistan and Turkey

The shifting of overseas order to India, Pakistan and Turkey due to SARS outbreak is hitting China's textiles export juggernaut, with overseas orders dropping abruptly.

Most of China's export industries have until this week reported little impact from Sars, but as the disease spreads further into the hinterland, and authorities in Beijing fail to contain it, evidence of trade dislocation is growing. Textiles are particularly badly hit because face-to-face contact is required to finalise most garment orders.

"The internet can't solve the problem, as many textile products must be seen by eyes, and felt by hands," said Yao Ting, head of Hangzhou Textile Association. Hangzhou, a scenic city near Shanghai, is one of the centres of the textile trade.

Mr Yao said increasingly competitive rivals in India and Pakistan, which had low labour costs and cheap cotton, were well positioned to take orders which otherwise would have gone to China. In Beijing, a director at the national textile association said orders were already being transferred from China to India, Pakistan and Turkey. But he said such transfers could be temporary because Chinese textile quality and cost were second to none.

"We should have controlled this Sars epidemic by the second quarter of the year, so the impact should be transient," he said.

Industry executives said it was difficult at this stage to quantify the impact from Sars, but many were predicting zero growth in the second quarter after a booming first quarter. Textile exports in the first two months totaled $9.6bn, up 23.25 per cent from the same period a year ago.

For the whole of 2003, exports were officially forecast to rise just 3 per cent to $62bn, again ranking as China's biggest single export item. This forecast had been considered conservative but now may appear optimistic, industry analysts said.

In Wuxi, another traditional textile centre near Shanghai, Wu Huiming, the general manager of Wuxi Textile Industry group, said domestic sales to Sars hotspots such as Beijing and Guangzhou had been hit too.

"Many orders have evaporated. The whole chain - from garments, to textile materials, to dyeing and spinning factories - will be affected," he said. "If Sars is not under control soon, there will be an even bigger problem in the second half of the year."

An executive at Shandong Demian group, the biggest textile company in the northern province of Shandong, said exports to South Korea, a big market for local companies, had virtually dried up. In recent months, he said, the company had been sending seven containers of yarn a month to South Korea but this month only one container was going.

"Many of the smaller private textile companies in Shandong province have temporarily closed down," he added.

The slump in demand has hit domestic cotton prices, which had risen to Rmb14,000 ($1,700, ?1,500, £1,000) a tonne in March partly because of hoarding by traders hoping to drive the p rice up as demand for the raw material boomed. Now such speculators are ruing their decision.

The price of cotton had fallen to Rmb12,700 a tonne in recent days, said the head of Demian's resource procurement department. Another reason for the fall in cotton prices was that o il prices had fallen since the end of the Iraq war, pushing prices of synthetic materials down and thereby increasing competition.

Aside from textiles, there is evidence that Sars is hitting other export sectors too. Food and agricultural produce appears to be badly affected, partly because of a belief among customers that the virus could survive in a shipment. A study published recently in the medical journal Lancet said that the virus can live for up to 24 hours on surfaces and for days in fecal matter.

Still other overseas importers are switching their supply to other countries because of concern that the supply chain within China could be affected by the disease.