THE FLANARANT: Textile investments keep China's cutting edge

Obviously, Western governments don't mean to subsidise - which is what they're doing when they exempt someone from import duty - China's spinning and weaving industry. Understandably, they want to help poorer countries. But scarcely anyone wants to invest in spinning and weaving plants in Bangladesh or Cambodia, even though there's immense interest in developing new garment plants there.

Under today's rules, new garment factories in any very poor country means more demand for China's spinners and weavers.

There are, of course, three other reasons for investor confidence:

• Much of China's oldest textile capacity isn't just inefficient; it's downright dangerous for its neighbours. China's government wants polluting, or energy-inefficient, factories to be closed - and, in China, what the government wants tends to be what businesses do.
• It's a near-certainty that China's garment retail will keep on showing fast growth for some years to come, and that the majority of garments bought in China will be made in China from fabric knitted or woven in China. On that basis, new spinning and weaving equipment in China looks like one of the safest investments around.
• Not least because most new local investment will substantially increase Chinese spinners' and weavers' efficiency. Most operating costs in the Chinese interior are substantially lower than in the coastal provinces where most of the past decades' development has been - though there is some evidence of poor labour productivity (output per textile worker in the first half of 2010 was 44% higher in eastern China than in the country's central and western provinces).

Domestic investment focus
This confidence might of course be misplaced. But there is one other, very odd, fact about the Chinese textile investment boom.

Over the past five years, Chinese businesses have been investing overseas as enthusiastically as Chinese tourists buying handbags in a Western discount mall.

Real estate in Africa, plantations in Brazil, port complexes in Sri Lanka; there's scarcely an overseas investment opportunity someone in China doesn't seem prepared to snap up.

But in spinning and weaving? Hardly a sniffle. Unlike Taiwanese and Korean businesses when they first began to believe factories at home were in danger of becoming uncompetitive, China's textile industry seems to be directing the overwhelming majority of its development activity to its home turf.

Generally, Chinese companies are equal opportunities investors. They put their investment where they think it will make most money. And if they all think that's China, isn't it just possible they might be right?