Sun, Aug 28, 2005 - Page 11 News List

Taiwan may profit from textile dispute

CONVENIENT QUOTAS As the EU and US try to stem the flow of cheap products from China, Taiwanese firms like Far Eastern Textile are polishing their sales pitches

AP , TAIPEI

Weekend shoppers hunt for bargains in Taipei's Wufenpu cloth market yesterday. Taiwan's far Eastern Textile Ltd expects its factories in Taiwan and South East Asia to get more orders as the EU and the US crack down on shipments of China-made textiles.

PHOTO: AP

Taiwan's Far Eastern Textile Ltd (遠東紡織) expects its factories in Southeast Asia and Taiwan to get more orders as the EU and the US crack down on shipments of textiles from China, the company's chairman says.

Exports of Chinese textiles have rocketed since the abolition of a global quota system at the start of this year, and the US and EU fear that the flood of cheap China-made goods will leave their local industries in tatters.

However, "if [demand for goods from] China turns bad, my output from Southeast Asia and other areas outside China would pick up," said Douglas Hsu (徐旭東), chairman of Far Eastern Textile and its parent, Far Eastern Group (遠東集團).

Like many Taiwanese companies, Far Eastern was quick to use China as a manufacturing base because of its low costs. But it can still tap its other overseas factories to meet demand if production in China drops on the threat of protectionist quotas.

The company, Taiwan's largest maker of chemical fiber and textiles by capacity, derives 70 percent of its revenue from chemical fiber production and the rest from textiles. One-third of Far Eastern Textile's polymer production last year, or about 400,000 tonnes, came from its factories in China, according to the company's data for last year.

Hsu said Far Eastern Textile's production outside China has grown in the wake of US and EU restrictions on different categories of Chinese textiles, but he didn't give specific figures.

The European Commission in June set limits on 10 kinds of textile products from China. Six categories -- shirts, bras, flax yarn, sweaters, men's pants and blouses -- exceeded limits in July and August. Chinese and European officials met this past week in China to seek a compromise on the textile issue.

The US, meanwhile, has imposed emergency quotas on eight Chinese apparel products and is considering 11 more. The US and China have also agreed to hold another round of negotiations on textile shipments before the end of this month.

The textile industry in China could be hit by the new quotas in the second half of this year, but would not affect his business very much, Hsu said.

"We're cross-border," Hsu said. Overall, "the new quota has little impact on us."

Far Eastern Textile, also the world's fifth-largest chemical fiber maker by capacity, posted a modest decline in second-quarter net profit from the same period last year, Hsu said, but declined to give specific figures. The company reported net profit of NT$3.89 billion (US$120.4 million) in the second quarter of last year.

He said the company's chemical fiber business was hit by excess capacity in China.

"In the second quarter, China's excess capacity in the chemical fiber industry remained high, resulting in falling prices in the country," Hsu said.

"At the same time, the cost of raw material was rising," he said. "There was a [margin] squeeze."

Hsu said the huge market for chemical fibers and textiles in China has created many competitors.

"Businesses and trading activities are mostly liberalized now. Everyone's production volume is quite big ... so competition is getting fierce," he said.

He said the company's second-quarter net profit was also pressured by lower earnings from its investments.

The company holds stakes in 67 companies, more than half of which are publicly traded, according to Far Eastern Textile's annual report for last year.

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