‘China may attract investment from Indian wool segment’

Ashok B Sharma in New Delhi

The wool industry should gear up well to participate in joint ventures in China when the latter opens its economy prior to joining the World Trade Organisation (WTO) by January 1, 2005, said the regional director of The Woolmark Company, Dr SK Chaudhuri.

He said that already foreign direct investments (FDI) from Japan, Hong Kong and Taiwan have played an important role in the development of Chinese textile industry. Japan has built up a number of joint ventures mainly in the north-eastern region and its influence on production and organisational setting can be clearly noticed from market statistics.

In the first three quarters of 2000, the sales revenue of the textile industry grew by 23.9 per cent, as compared to its previous year and reached $70.2 billion. This generated a net profit of $2.2 billion which was 174.5 per cent up as compared to its previous year. The state-owned textile mills have scored a profit of $0.78 billion in 2000 as compared to its negative figure in the previous year. The non-state owned textile mills continued its improvement in profit margin and reached $2.59 billion in 2000. The profit of the total wool industry grew by 223.30 per cent over its last year’s figure and reached $ 0.18 billion in 2000.

Dr Chaudhuri stated that the Indian branch of The Woolmark Company and the India Woollen Mills Federation (IWMF) arranged a visit to China. The delegation could get a good cross-sectional view of Chinese industry and trade. The cost of finance is much cheaper in China and the labour laws of the country are more industry-friendly.

There is advantage of the economies of scale in China and the country has favourable duty and tariff structure. Better infrastructural facilities also ensure a favourable climate for investment in China, he said. He said that since 1992, the import duty on raw wool has been reduced from 15 per cent to one per cent and similarly the duty on tops has been reduced from 20 per cent to 3 per cent.

The quota system has been modified for the benefit of the industry. In China the power rates varies from province to province and it is between $0.10 to $0.20 per kwh. The textile labour cost in China is only $0.69 per hour, which is one of the lowest in the world. The state technical reform and financial aids programme has also helped to upgrade the wool-textile industry.