HongKong-TEXTILE_IN_HONG_KONG

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TEXTILE MARKET IN HONG KONG
TABLE OF CONTENT

                                                                   Page

1.    Introduction ..       ..     ..     ..     ..     ..    ..   2

2.    Hong Kong textile industry ..       ..     ..     ..    ..   4

      2.1    Overview     ..       ..     ..     ..     ..    ..   4
      2.2    Import       ..       ..     ..     ..     ..    ..   4
             2.2.1 Fabrics         ..     ..     ..     ..    ..   4
             2.2.2 Yarns           ..     ..     ..     ..    ..   6
      2.3    Export ..    ..       ..     ..     ..     ..    ..   7
             2.3.1 Fabrics         ..     ..     ..     ..    ..   7
             2.3.2 Yarns           ..     ..     ..     ..    ..   10
      2.4    Local production      ..     ..     ..     ..    ..   12

3.    Italian textile in Hong Kong ..     ..     ..     ..    ..   13

      3.1    Import         ..      ..   ..      ..    ..     ..   13
             3.1.1 Fabrics          ..   ..      ..    ..     ..   13
             3.1.2 Yarns            ..   ..      ..    ..     ..   13
      3.2    Position of Italian textile ..      ..    ..     ..   15
      3.3    Comparison of Italian textile with other countries    16
             3.3.1 Types of textiles     ..      ..    ..     ..   16
             3.3.2 Price ..         ..   ..      ..    ..     ..   16
             3.3.3 Delivery and response         ..    ..     ..   17

4.    Buyers profile..      ..     ..     ..     ..     ..    ..   17

5.    Distribution network ..      ..     ..     ..     ..    ..   18

6.    Import regulation     ..     ..     ..     ..     ..    ..   18

7.    Payment terms         ..     ..     ..     ..     ..    ..   18

8.    Promotion activities ..      ..     ..     ..     ..    ..   19

      8.1    Exhibitions ..       ..     ..      ..     ..    ..   19
      8.2    Journals     ..      ..     ..      ..     ..    ..   19
      8.3    Local associations related to textile sector     ..   19

9.    Conclusion    ..      ..     ..     ..     ..     ..    ..   20

10.   Recommendation to Italian textile suppliers       ..    ..   20


Updated 6-2005 (Figure 2004)
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1.      INTRODUCTION

This research aims at providing ideas to readers about the current situation of
textile market in Hong Kong. Textile in this research includes fabric and
yarns. The content will be focused on the following areas:

•    Trade performance of the current market situation of textile in Hong Kong.
•    Position of Italian textile in the Hong Kong market and competitive analysis
•    Distribution network of textile in Hong Kong
•    Promotional activities for the textile sector in Hong Kong
•    Conclusion and recommendation for Italian company

The statistics of fabric and yarns refer to the HS category as follows. The
source of statistics is World Trade Atlas and they are processed by Italian
Trade Commission Hong Kong.

HS Code of the Category of Fabric for this research
5007      WOVEN FABRICS OF SILK OR SILK WASTE
5111      WOVEN FABRICS OF CARDED WOOL OR FINE ANIMAL HAIR
5112      WOVEN FABRICS OF COMBED WOOL OR FINE ANIMAL HAIR
5113      WOVEN FABRICS OF COARSE ANIMAL HAIR OR HORSEHAIR
5208      WOVEN COTTON FABRICS, NU 85% COT, WT NOV 200 G/M2
5209      WOVEN COTTON FABRICS, NU 85% COT, WT OV 200 G/M2
5210      WOVEN COTTON FABRICS, UN85%COT, MMFMIX, NOV200G/M2
5211      WOVEN COTTON FABRICS, UN85%COT, MMFMIX, OV200G/M2
5212      WOVEN COTTON FABRICS NESOI
5309      WOVEN FABRICS OF FLAX
5310      WOVEN FABRICS OF JUTE OR OTH TEXT BAST FIBER NESOI
5311      WOV FAB OF OT VEG TEXTILE FIB WOV FAB OF PPR YARN
5407      WOVEN FAB OF SYN FIL YN, INCL MONOFIL 67 DEC ETC
5408      WOVEN FAB OF ART FIL YN, INCL MONOFIL 67 DEC ETC
5512      WOV FABRIC, SYNTH STAPLE FIB NU 85% SYNTH ST FIBER
5513      WOV FABRIC, SYN ST FIB UN85%, COT MIX, NOV17OG/M2
5514      WOV FABRIC, SYN ST FIB UN85%, COT MIX, OV 170 G/M2
5515      WOVEN FABRICS OF SYNTHETIC STAPLE FIBERS NESOI
5516      WOVEN FABRICS OF ARTIFICIAL STAPLE FIBERS
5801      WOVEN PILE & CHENILLE FABRICS NESOI (NO TERRY ETC)
5802      WOVEN TERRY FABRICS NESOI; TUFTED TEX FABRIC NESOI
5803      GAUZE (OTHER THAN NARROW FABRICS NOT OVER 30 CM)
5804      TULLES & OTHER NET FABRICS; LACE IN PC, ETC. NESOI
5806      NARROW WOVEN FABRICS EXCEPT LABELS ETC IN PC ETC
5809      WOVEN FABRICS OF METAL THREAD & METALIZED YARN NEC
5901      TEXTILE BOOK COV FAB; TRAC CL; PAINT CANVAS ETC
5903      TEXTILE FABRICS (NOT TIRE CORD) COAT ETC, PLASTICS
5906      RUBBERIZED TEXTILE FABRICS, OTHER THAN TIRE CORD
5907      TEXTL FABRC,COATD,ETC,THEATRCL SCENERY,BACK-CLOTHS
6001      PILE FABRICS, KNITTED OR CROCHETED
6002      KNITTED OR CROCHETED FABRICS, NESOI
                                                             Page 3



HS Code of the Category of Yarns for this research

5004    SILK YARN, NOT SPUN FROM WASTE, NOT RETAIL PACKED
5005    YARN SPUN FROM SILK WASTE NOT PUT UP RETAIL SALE
5006    SILK YARN & YARN FROM WASTE RETAIL PK; SILKWM GUT
5106    YARN OF CARDED WOOL, NOT PUT UP FOR RETAIL SALE
5107    YARN OF COMBED WOOL, NOT PUT UP FOR RETAIL SALE
5108    YARN OF FINE ANIMAL HAIR, NOT FOR RETAIL SALE
5109    YARN OF WOOL OR FINE ANIMAL HAIR, FOR RETAIL SALE
5110    YARN COARSE ANIMAL HAIR PUT UP OR NOT RETAIL SALE
5205    COTTON YARN (NOT SEWING THREAD) NU85%COT NO RETAIL
5206    COTTON YARN (NOT SEWING THREAD) UN85%COT NO RETAIL
5207    COTTON YARN (NOT SEWING THREAD) RETAIL PACKED
5306    FLAX YARN
5307    YARN OF JUTE & OTHER TEXTILE BAST FIBERS NESOI
5308    YARN OF VEGETABLE TEXTILE FIBERS NESOI; PAPER YARN
5402    SYNTHETIC FILAMENT YARN (NO SEW THREAD), NO RETAIL
5403    ARTIFICIAL FILAMENT YARN (NO SEW THRED), NO RETAIL
5406    MANMADE FILAMENT YARN (NO SEW THREAD), RETAIL PACK
5509    YARN (NO SEW THREAD), SYN STAPLE FIB, NOT RETAIL
5510    YARN (NO SEW THREAD), ART STAPLE FIB, NOT RETAIL
5511    YARN (NO SEW THREAD), MANMADE STAPLE FIBER, RETAIL
5605    METAL YRN WHET O NT GIMP TEX YRN O STRIP W/METAL
5606    GIMP YRN & STRIP, 5404/5405 CHEN YRN LOOP WALE-YRN
5609    ART O YRN LIKE OF HEAD 5404/5405 TWINE O CABLE NES
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2.     HONG KONG TEXTILE INDUSTRY

2.1    OVERVIEW

Hong Kong is the second largest exporter of textiles in the world after
Mainland China. Hong Kong is reputed as a supplier of quality dyed and
printed fabrics. It is also strong in cotton spinning, denim weaving, knit-to-
shape panel knitted and fine-gauge cotton knit manufacturing. This industry
has made contribution in supporting the Hong Kong clothing industry as well.
In 2004, Hong Kong exported US$6660.3 million of fabrics and US$3689
million of yarns that the industry was one of Hong Kong's major export
earners among other industries.

On the other hand, Hong Kong is lack of development and technology in new
fibres, yarns and fabrics. Therefore, sourcing textile from overseas such as
China, Taiwan, Korea and Italy are very important for supporting the Hong
Kong clothing industry. Besides, after China’s accession into WTO, the
import tariff will be gradually reduced; this is anticipated that the import of
textile will increase. Hong Kong, being an international sourcing hub, has
geographical advantage to the Mainland China. For overseas suppliers which
want to develop the market in China, this is important to establish a good
relationship with Hong Kong in order to further develop the market in the
Mainland China in the future.

2.2    IMPORT

Hong Kong’s lack of research and development on new fibres or yarns and
absence of specialty fabric manufacturers impede product development and
diversification of its textile production. In addition, the local textile industry
manufactures mainly cotton yarns and woven fabrics, so other fabrics like
knitted fabrics, silk, linen, ramie, wool, animal hairs, man-made fibre and
blends thereof are mostly imported.

2.2.1 FABRIC

In 2004, the import value of fabric increased by 9.39% when compared with
2004. China was still the leading supplying country with market share of
48.33% in 2004, amounted to US$3067.6 million, increased by 10.72%.
Other major countries supplying textile to Hong Kong were Taiwan (shared
15.15%, US$961.26 million, +1%), South Korea (shared 10%, US$634 million,
-5.3%), Japan (shared 8.06%, US$511.82 million, +14.38%) and Italy (shared
5.29%, US$335.56 million, increased by 29.44%).
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              Hong Kong Imports of Fabric – Top 10 Countries
                     (value: US$) (2002, 2003, 2004)
                                                                                      %
                            Millions of US Dollars             % Share             Change
Rank    Country            2002         2003       2004   2002   2003  2004       - 04/03 -

    0   --The World--   5,648.87   5,802.08   6,346.92      100     100     100        9.39
    1   China           2,480.41   2,770.56   3,067.60    43.91   47.75   48.33       10.72
    2   Taiwan          1,048.80     950.89     961.26    18.57   16.39   15.15        1.09
    3   Korea, South      721.24     669.48     634.01    12.77   11.54    9.99        -5.3
    4   Japan             460.41     447.49     511.82     8.15    7.71    8.06       14.38
    5   Italy             221.09     259.25     335.56     3.91    4.47    5.29       29.44
    6   Pakistan          130.31     119.55     141.93     2.31    2.06    2.24       18.73
    7   United States      94.34      93.90     103.86     1.67    1.62    1.64        10.6
    8   Malaysia           76.71      59.74      83.02     1.36    1.03    1.31       38.97
        United
    9   Kingdom           51.85      58.44       71.82     0.92    1.01    1.13       22.89
   10   Indonesia         50.63      46.70       47.00      0.9    0.81    0.74        0.65



In 2004, category HS5209 woven cotton fabric was the top imported item.
The import amount was US$1265.34 million that shared 20%, +17%. The 2nd
and 3rd were HS5407 (woven synthetic fabric) and HS5208 (woven cotton
fabric). The import amounts were US$1151.85 million, shared 18.15%,
+7.35%; and US$1112.12 million, shared 17.52%, +17% respectively when
compared with 2003. The 4th top item was HS5903 textile coat fabrics (not
tire cord), that was imported US$487.91 million and shared 7.69% among
other categories, and dropped 3.66%. The 5th largest imported item was
HS5512 woven fabrics of synthetic, amounted to US$259.78 million, recorded
an increase of 11.41% and shared 4%.
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2.2.2 YARNS

Similar to import of fabric, the import performance of yarns also increased by
8.34% in 2004, amounted to US$4101.56 million. China again was the
largest supplying country that shared 57%.           Besides, China showed
continuous growth in the past 3 years. In 2004 the import value increased
slightly by 6.19% when compared with 2003, amounted to US$2,330.5 million.
Other major import countries were Taiwan (shared 10.5%, increased by 7.5%)
and Pakistan (shared 9.5%, increased 23%). Italy ranked the 4th. Italy was
nevertheless the no. 1 European country in supplying yarns to Hong Kong.
This year, it showed strong increase of 8.6%, increasing the amount from
US$240.81 million to US$261.5 million. South Korea was the 5th largest yarns
supplying country with a slash of 15.6% in 2004 when compared with 2003.

In the whole year of 2004, 44.56% of yarns that Hong Kong imported were
HS5205 Cotton Yarn. The import value reached US$1846 million and
increased by 9% when compared with 2003. The 2nd major import item was
HS5402 Synthetic filament yarn that amounted to US$645.64 million, shared
15.5% among other items, but decreased by 1.28%. Other major import
products as usual included HS5509 Synthetic staple fiber yarn, HS5108 yarn
of fine animal hair and HS5107 Yarn of combed wool.
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Hong Kong Imports of Yarns – Top 10 Countries
(2002, 2003, 2004)

                                                                                              %
                                   Millions of US Dollars             % Share              Change
 Rank      Country                2002         2003       2004   2002   2003       2004    04/03

       0   --The World--     3,325.80     3,785.95    4,101.56     100      100      100      8.34
       1   China             1,811.97     2,194.68    2,330.50   54.48    57.97    56.82      6.19
       2   Taiwan              347.54      401.29       431.32   10.45     10.6    10.52      7.48
       3   Pakistan            297.55      314.78       387.52    8.95     8.31     9.45     23.11
       4   Italy               212.83      240.81       261.50      6.4    6.36     6.38      8.59
       5   Korea, South        193.56      197.29       166.46    5.82     5.21     4.06    -15.63
       6   India               103.21        83.60      137.76      3.1    2.21     3.36     64.79
       7   Indonesia           93.17        95.05       111.39     2.8     2.51     2.72     17.18
       8   Japan               103.39       99.41       95.34     3.11     2.63     2.32      -4.1
       9   Thailand            22.09        19.30        33.01    0.66     0.51     0.81        71
      10   United Kingdom      19.80        22.76        27.82      0.6      0.6    0.68     22.22

Source of data: Hong Kong Census and Statistics Department




2.2        EXPORT

2.3.1 FABRIC

In the whole year of 2004, Hong Kong's total exports of fabric recorded a
slight increase of 8%. Asia was Hong Kong’s leading market for exporting
fabrics. As this was found that in the top 10 destinations for textiles exported
from Hong Kong, nine of them were Asian countries. The Mainland China was
the predominant export market of fabric, shared 73.28% in this period and
amounted to US$4880.68 million. Major countries that follow included
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Bangladesh, Indonesia, Cambodia that shared 3.19%, 2.31% and 2.28%
respectively.
              Hong Kong Export of Fabric – Top 10 Countries
                     (value: US$) (2002, 2003, 2004)
                                                                                                %
                                 Millions of US Dollars                   % Share            Change
                                                                                             - 04/03
Rank      Country               2002        2003          2004    2002     2003     2004     -

      0   --The World--     6,140.26    6,156.62     6,660.30       100      100      100       8.18
      1   China             4,473.49    4,451.45     4,880.68     72.86     72.3    73.28       9.64
      2   Bangladesh          169.60      176.54       212.39      2.76     2.87     3.19      20.31
      3   Indonesia           130.17      144.97       153.63      2.12     2.36     2.31       5.98
      4   Cambodia            141.93      153.19       152.14      2.31     2.49     2.28      -0.68
      5   Sri Lanka           119.23      132.06       142.93      1.94     2.15     2.15       8.23
      6   Philippines         149.17      148.29       134.46      2.43     2.41     2.02      -9.33
      7   Vietnam              77.91      112.09       129.87      1.27     1.82     1.95      15.86
      8   Thailand             98.49       90.05       102.66       1.6     1.46     1.54      14.01
      9   United States       137.92       91.22        90.10      2.25     1.48     1.35      -1.23
     10   Macau                72.39       62.67        67.15      1.18     1.02     1.01       7.16

30        Italy                10.25       11.32          11.72    0.17     0.18     0.18    3.51
Source: Hong Kong Census and Statistics Department




HS 5209 woven cotton fabrics was the major export product in 2004 that
shared 26% and +13% when compared with 2003, amounted to US$1719.33
million. The second largest export fabric item was HS5208 woven cotton
fabrics that also increased by 13% and amounted to US$1226.6 million. The
3rd was HS5407 woven fabrics of synthetic filament yarn, amounted to
US$934 million shared 14% among other categories. HS5903 coat fabric
recorded a drop of 5.12%, with value US$440.5 millions. HS5309 woven
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fabrics of flax, increased by 0.6%, amounted to US$266.71 million and shared
4%.



             Hong Kong Re-Exports of Fabric – Top 10 Countries
                      (value: US$) (2002, 2003, 2004)
                                                                                           %
                              Millions of US Dollars                  % Share            Change
                                                                                        - 04/03
Rank     Country             2002        2003          2004   2002     2003     2004    -

     0   --The World--   5,443.63    5,633.47    6,196.67       100      100      100         10
     1   China           4,184.59    4,253.45    4,676.81     76.87     75.5    75.47       9.95
     2   Bangladesh        137.72      148.46      185.28      2.53     2.64     2.99       24.8
     3   Indonesia         109.13      123.46      135.33      2.01     2.19     2.18       9.62
     4   Cambodia          115.88      122.74      134.57      2.13     2.18     2.17       9.64
     5   Sri Lanka         101.12      118.91      129.20      1.86     2.11     2.09       8.65
     6   Vietnam            67.75       98.75      118.31      1.25     1.75     1.91      19.81
     7   Philippines       113.63      121.67      115.80      2.09     2.16     1.87      -4.82
     8   Thailand           88.32       82.15       94.15      1.62     1.46     1.52      14.62
     9   India              40.33       44.77       59.04      0.74       0.8    0.95      31.89
    10   Macau              48.76       48.66       57.72       0.9     0.86     0.93       18.6

    32   Italy               7.33        7.01          6.23    0.14     0.12      0.1      -11.14
Source: Hong Kong Census and Statistics Department

Re-exports accounted for 93% of total exports, which recorded a double-digit
increase of 10% compared with 2003. The re-export amount reached
US$6196.67 million. 75.5% of the fabrics were re-exported to China,
increased by 10% in 2004 and accounted for US$4676.81 million.
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2.3.2 YARNS

Hong Kong’s exports of yarns increased by 7.5% when compared with year
2003. China, the leading market of Hong Kong’s yarns exports, occupied
86% of the total exports of yarns. In 2004, the value of total exports of yarns
increased by 7.4% and reached US$3201.54 million. The 2nd major export
country was Japan, increased by 33% with the export amount increased from
US$49 million to US$65.72 million. Thailand, the 3rd largest exporting market,
the total export value of yarns increased to US$59.47 million, with an extent of
7.8%. Australia remained stable with 0.9% increase. Other top countries
such as Bangladesh, UK, Philippines and Vietnam recorded negative growth
of 5%, 12%, 4% & 12% respectively when compared with 2003. Whereas
Cambodia leaped 107%, amounted to US$38.35 million with market share of
1%.

                Hong Kong Exports of Yarns – Top 10 Countries
                       (value: US$) (2002, 2003, 2004)
                                                                                            %
                               Millions of US Dollars                  % Share            Change
                                                                                         - 04/03
Rank    Country                2002       2003          2004   2002     2003     2004    -

    0   --The World--      3,014.79   3,430.82   3,689.10        100      100     100         7.53
    1   China              2,555.95   2,980.75   3,201.54      84.78    86.88    86.78        7.41
    2   Japan                42.81      49.33      65.72        1.42     1.44     1.78       33.24
    3   Thailand             54.01      55.16      59.47        1.79     1.61     1.61         7.8
    4   Australia            61.51      58.12      58.64        2.04     1.69     1.59         0.9
    5   Bangladesh           41.66      42.66      40.31        1.38     1.24     1.09       -5.51
    6   Cambodia             22.84      18.52      38.35        0.76     0.54     1.04      107.05
    7   United Kingdom       30.48      31.42      27.52        1.01     0.92     0.75      -12.41
    8   Philippines          32.93      28.26      27.16        1.09     0.82     0.74       -3.92
    9   Vietnam               8.15      22.92      20.07        0.27     0.67     0.54      -12.41
   10   Malaysia             16.22      13.19      18.50        0.54     0.38      0.5       40.23

   22   Italy                  1.97       2.46       3.15       0.07     0.07     0.09       28.28
Source: Hong Kong Census and Statistics Department
                                                                     Page 11




HS5205 Cotton yarn was the major exporting item in 2004 that shared 49%
among others and the export amount increased from US$1696.6 million to
US$11796.26 million, up 6%. HS5402 Synthetic filament yarn that was the
2nd largest exporting item, amounted to US$570.72 million, also increased by
6% in 2004. Other major products included HS5509 Synthetic staple fiber
yarn, HS5107 yarn of combed wool and HS5206 Cotton yarn (not sewing
thread).
                                                                          Page 12



2.4    LOCAL PRODUCTION

In recent years, with rising production costs and stringent environmental
regulations, an increasing number of manufacturers have shifted their
production of lower-end products to the Chinese mainland and Southeast
Asian countries. Their manufacturing operations in Hong Kong are focused on
sophisticated and high value-added items, including quality ring-spun, open-
end yarn, fine gauge knitted fabrics as well as complicated dyed and printed
fabrics.

China's WTO accession offers good opportunities for Hong Kong's textiles
industry. On one hand, phasing out the quota restriction on imports of China-
origin apparel in accordance with the Agreement on Textiles and Clothing
(ATC) schedule is expected to encourage Hong Kong manufacturers to shift
more of their production to the mainland, thereby enhancing their cost
competitiveness. On the other hand, China's commitment to further open its
domestic market will facilitate Hong Kong's textiles manufacturers and traders
contemplating or expanding domestic sales on the mainland.

The textiles industry is a major supplier to the local clothing industry. With
textile plants in the South East Asia, Hong Kong textile manufacturers have
an advantage in accommodating orders from local garment manufacturers in
short notice. Meanwhile, a significant portion of textiles exports is destined for
use in Hong Kong companies' offshore production of garment, especially in
the Chinese mainland.
                                                                                                   Page 13



               3.      ITALIAN TEXTILE IN HONG KONG

               3.1     IMPORT
               Italian textile is famous and popular in Hong Kong. In 2004, Italy ranked no. 4
               and 5 in yarns and fabric respectively of Hong Kong imports in terms of value
               and that was competing with the Hong Kong’s adjacent countries such as
               China, Taiwan, Korea, Japan and Pakistan. Italy is undoubtedly the strongest
               European textile supplier in Hong Kong import market.

               3.1.1 FABRIC

               In 2004, the import market of fabric was recovering. Hong Kong’s import of
               Italian fabric also increased by 30% to an amount of US$335.56 million. The
               market share showed slight increase from 4.47% to 5.29%. Italy ranked the
               5th top supplying country.

               In 2004, HS5208 Woven cotton fabrics was the major item imported from Italy
               to Hong Kong market, shared 22% with import amount of US$74 million,
               increased strongly by 62% when compared with year 2003. HS5112 Woven
               fabrics of combed wool, HS5209 Woven cotton fabrics, HS5903 Coat textile
               fabric and HS5407 Woven fabrics of synthetic filaments as well as HS5309
               Woven fabric of flax recorded strong raises of 28%, 7%, 42%, 21% and 20%
               respectively.


                    Hong Kong Imports of Fabric from Italy – Top 10 Categories (value: US$)
                                             (2002, 2003, 2004)

                                                                                                                      %
                                                              Millions of US Dollars             % Share           Change
                                                                                                                   - 04/03
HS     Description                                          2002      2003       2004    2002     2003     2004       -
       Italy                                                221.09    259.25    335.56   3.91     4.47     5.29     29.44

5208   WOVEN COTTON FABRICS, NU 85% COT, WT NOV 200 G/M2    30.18     45.83      74.11   13.65    17.68    22.09    61.72
5112   WOVEN FABRICS OF COMBED WOOL OR FINE ANIMAL HAIR     49.27     53.31      67.99   22.28    20.56    20.26    27.54
5209   WOVEN COTTON FABRICS, NU 85% COT, WT OV 200 G/M2     19.46     27.79      29.75    8.8     10.72    8.87     7.07
5903   TEXTILE FABRICS (NOT TIRE CORD) COAT ETC, PLASTICS   12.90     16.34      23.14   5.84      6.3      6.9     41.62
5407   WOVEN FAB OF SYN FIL YN, INCL MONOFIL 67 DEC ETC     12.84     17.35      21.04   5.81     6.69     6.27     21.26
5309   WOVEN FABRICS OF FLAX                                13.71     14.88      17.84    6.2     5.74     5.32     19.87
5408   WOVEN FAB OF ART FIL YN, INCL MONOFIL 67 DEC ETC     12.22     13.81      15.60   5.53     5.33     4.65     12.94
       WOVEN COTTON FABRICS, UN85%COT, MMFMIX,
5210   NOV200G/M2                                           10.86     10.31      14.89   4.91     3.98     4.44     44.33
5111   WOVEN FABRICS OF CARDED WOOL OR FINE ANIMAL HAIR     12.81     10.41      11.35    5.8     4.02     3.38     9.08
5007   WOVEN FABRICS OF SILK OR SILK WASTE                   6.79      6.81       9.94   3.07     2.63     2.96     45.9

               Source: Hong Kong Census and Statistics Department


               3.1.2 YARNS

               In 2004, yarns from Italy also increased. Import value was US$261.5 million
               which increased by 9% when compared with 2003. Italy kept the ranking as
               4th top supplying country, apart from United Kingdom, Italy was the only
               European country among the top 10.
                                                                                                          Page 14



        In 2004, HS5107 Yarn of combed wool and HS5106 Yarn of carded wool
        were the top popular items as usual that shared 43% and 15% among others.
        Both HS5107 & HS5106 increased by 9% and 5% respectively. HS5108 yarn
        of fine animal hair still kept dramatic growth of 37% from US$25.54 million to
        34.88 million, which ranked it the top 3rd item. Another top item was HS5205
        cotton yarn also recorded a substantial growth of 15% with import value of
        US$16.64 millions.


                     Hong Kong Imports of Yarns from Italy – Top 10 Categories
                                 (value: US$) (2002, 2003, 2004)
                                                                                                                             %
                                                                    Millions of US Dollars              % Share           Change
                                                                                                                          - 04/03
HS     Description                                          2002          2003          2004    2002     2003     2004       -
       Italy                                                212.83        240.81       261.50    6.4     6.36     6.38     8.59

5107   YARN OF COMBED WOOL, NOT PUT UP FOR RETAIL SALE      89.04         103.39       112.68   41.84    42.94    43.09    8.98
5106   YARN OF CARDED WOOL, NOT PUT UP FOR RETAIL SALE      45.02          37.86        39.80   21.15    15.72    15.22    5.12
5108   YARN OF FINE ANIMAL HAIR, NOT FOR RETAIL SALE        15.18          25.54        34.88    7.13    10.61    13.34    36.6
       COTTON YARN (NOT SEWING THREAD) NU85%COT NO
5205   RETAIL                                               12.95         14.47        16.64    6.08     6.01     6.36    14.97
5509   YARN (NO SEW THREAD), SYN STAPLE FIB, NOT RETAIL     16.15         18.76        15.00    7.59     7.79     5.74    -20.02
5510   YARN (NO SEW THREAD), ART STAPLE FIB, NOT RETAIL      7.40         11.82        14.27    3.48     4.91     5.46    20.73
       SYNTHETIC FILAMENT YARN (NO SEW THREAD), NO
5402   RETAIL                                                9.17          9.52         9.98    4.31     3.95     3.82     4.89
5403   ARTIFICIAL FILAMENT YARN (NO SEW THRED), NO RETAIL    5.68          6.96         6.25    2.67     2.89     2.39    -10.23
       COTTON YARN (NOT SEWING THREAD) UN85%COT NO
5206   RETAIL                                                3.44          4.44         3.90    1.62     1.84     1.49    -12.26
5109   YARN OF WOOL OR FINE ANIMAL HAIR, FOR RETAIL SALE     3.24          2.64         2.72    1.52      1.1     1.04      2.8

        Source: Hong Kong Census and Statistics Department
                                                                           Page 15



3.2    POSITION OF ITALIAN TEXTILE

Hong Kong is a regional centre for sourcing garments over the years. Major
export markets of garments manufactured in Hong Kong include USA,
Germany, Japan, UK and China, etc. Hong Kong’s manufacturers have
moved towards higher-value-added fashion items through design and quality
improvements. Moreover, many designer labels like DKNY, CALVIN KLIEN,
POLO, ESCADA, MONDI, etc. have shifted part of their production to Hong
Kong and they require higher quality textile materials.

Italian textile, being positioned in the high price / quality segment fulfills the
requirements of these garment manufacturers. Italy is renowned of its textile
technology and innovation in Hong Kong. Italy, with the best textile machinery
in the world, together with continuous investment in research and
development, produces the highest level of fabrics and yarns. Every year,
many companies engaged in the textile industry in Hong Kong go to the textile
trade fairs in Italy to update their latest textile trend and to look for suitable
suppliers.

Italy is famous of its creativity in textile design no matter for the use of
material, blending and outlook. Although it is common that their design will be
copied by the Asian textile manufacturers, the latter usually cannot copy
exactly the pattern due to the limitations in technology and the quality will also
not be comparable with those made in Italy.

The most popular textile items imported from Italy are fabrics or yarns of
carded / combed wool or fine animal hair. These textile items are usually used
in producing high quality garments like knitwear, overcoats, suits or tailleurs.
Many designer labels use only Italian textile materials and even local chain
stores like G2000, Moiselle, Gay Giano, they will have an assortment strategy
for using the textile from Italy and from Asia.

Other popular items imported from Italy include fancy yarns (for yarns sector),
nylon/polyester fabrics, cotton fabrics, knitted fabrics and fabrics of various
blends.

With high level in quality and design, Italy is also well known for its position in
the high price bracket and therefore its popularity is limited in the Hong Kong
manufacturing industry. Fortunately Italian textile suppliers also adopt a low
minimum order strategy that usually fits the need of the garment
manufacturers. Comparison of pricing/quality or other attributes with different
countries will be presented in the coming section.
                                                                        Page 16



3.3   COMPARISON OF ITALIAN TEXTILE WITH OTHER COUNTRIES

      3.3.1 TYPES OF TEXTILES

                    China

      China has always been the leading textile supplier to Hong Kong. The
      extent of textile specialized by China is quite wide, ranging from
      various kinds of textile yarns (particularly for cotton yarns), cotton
      fabrics, knitted fabrics and other woven fabrics.

                    Taiwan

      Taiwan is the second largest textile supplier to Hong Kong after China.
      Taiwan is more specialized in producing man-made woven fabrics,
      knitted fabrics and cotton fabrics. Regarding yarns, Taiwan is good at
      filament yarns made of nylon / polyester.

                    Korea

      Being the third supplying country of textile to Hong Kong, Korea is
      strong at producing man-made woven fabrics and filament yarns of
      man-made fibres.

                    Japan

      As the fourth largest textile supplying country to Hong Kong, Japan is
      more specialized in producing different kinds of fabrics including knitted
      fabrics, woven fabrics like cotton.

                    Italy

      As the no. 1 European supplier of textile to Hong Kong, Italy is more
      specialized in producing woven fabrics of wool / fine animal hair, textile
      yarns of same material or blends thereof.


3.3.2 PRICE

Basically the supplying countries can be generally categorized as follows
according to the pricing of most kind of fabrics:

Highest price:             Italy / France / Spain / Germany
Middle to high price:      USA / Japan
Low to Middle price:       Taiwan / Korea
Lowest price:              China/Pakistan/Thailand/Philippines/Indonesia
Of course the above is just indicative categorization only since Japanese
textiles could be more expensive than some Italian textiles.

The range of difference among the countries of supply differs for different
kinds of fabrics. For example, it is said that for cotton yarns from China or
Pakistan can be of price a few times less than those from Italy. But of course
the Italian yarns are usually of much higher quality, for example they are
                                                                           Page 17



mercerized cotton using softer, cleaner and longer filament. Also it is said that
although the price of Italian textile is usually higher, the minimum quantity is
usually lower. This provides a competitive advantage for garment
manufacturers, which cannot import large quantity for high priced textile.

It is found that for manufacturers which produce medium or medium-low level
garments or knitwear, they would usually select fabrics or yarns from Taiwan /
Korea / China or other countries which are of medium or low price range.
Companies which mainly select European or Japanese fabrics are buying
offices of designer labels or fashion chain shops. For these companies, they
are more concerned about the quality and would be willing to pay higher price
for better quality and design.

3.3.3 Delivery and Response

For countries like China, Taiwan and Korea, due to their proximity to Hong
Kong, the delivery is usually more on-time and the response is usually quicker
as mentioned by the garment / knitwear manufacturers. Italy, being famous of
its design and innovation of its textiles, one of the major drawbacks is its
delivery and response. According to some manufacturers in Hong Kong, the
delivery of Italian suppliers is usually not on-time and the response of the mills
is usually slow. This might be because of the different mentality and the Italian
textile suppliers do not have many staffs who speak / write English well.


4.     BUYERS PROFILE

In Hong Kong, the target buyers of fabrics are garment manufacturers. While
for yarns, only industrial knitting yarns of which the buyers are knitwear
manufacturers will be concerned. It is because in Hong Kong, there are not
many weavers of fabrics and therefore weaving yarns are not popular.
Purchase concerns of both garment and knitwear manufacturers are quite
similar.

Nowadays, garment / knitwear buyers or buying offices used to purchase
directly with fabrics suppliers’ fabrics or spinners’ yarns for production of their
collection. In this case, the garment / knitwear manufacturers will have to
follow the buyers’ instructions to use the selected suppliers’ fabrics or yarns.
Or when the buyers have any ideas about the yarns to be used, the
manufacturers will have to look for suitable fabric suppliers / spinners’
products to suit their buyers’ requests.

Therefore, the garment / knitwear manufacturers have to follow the garment /
knitwear buyers’ / buying offices’ budget to choose what kind of fabrics / yarns
to be used, what country of origin to be sourced, and sometimes even what
brand name or suppliers’ fabrics or yarns to be actually used. Price is
particularly important when the manufacturers are producing medium/low
priced garment / knitwear. As mentioned by the fabric / yarns agents in Hong
Kong, garment / knitwear manufacturers are not loyal to any brand or
suppliers’ products and they will shift to other suppliers whenever they can get
a better price for similar quality.
                                                                         Page 18



5.     DISTRIBUTION NETWORK

Capitalising on the long experience in the manufacturing of textiles, many
Hong Kong companies are engaged in textiles trading. Some international
textiles companies also set up regional headquarters in Hong Kong to provide
prompt services to the clients in the region, particularly Hong Kong and the
Chinese mainland.

Hong Kong is both a leading production centre and a hub for clothing sourcing
globally. As such, Hong Kong's textiles industry is well positioned to serve
both the local and overseas clothing manufacturers and merchandisers.

The distribution network is quite simple for the textile sector in Hong Kong.
Usually the overseas textile suppliers will sell their products to the garment /
knitwear manufacturers through the following channels:

     Textile Agent
     Branch office
     Trading companies

The Internet also offers a cost-effective solution to buyers and suppliers in the
textiles and garment industries. Web-based information technology is being
used to enhance supply chain management and distribution networks. Hong
Kong companies are also embracing this phenomenon in earnest. They
provide B2B web-based support for garment traders. Prominent examples
include TexWatch.com, i-Textile.com and ApparelCircle.com.

6.     IMPORT REGULATION

Hong Kong is a free port with no particular rules on import of textile from other
countries. There is also no duty or tax on imported textile and there is no
particular specifications required for labeling and packaging. Only the
following documents will be required:

     Import license form 7 (to be applied by the importer in Hong Kong before
     shipment)
     Import declaration form 1 (to be submitted by the importer in Hong Kong
     within 14 days after shipment)


7.     PAYMENT TERM

The most common form of payment is by letter of credit which is usually
issued by the garment / knitwear manufacturers’ banks to the textile suppliers
directly. However if the order amount is too small, usually the textile agents
can pay on behalf of the manufacturers to their principals. Usually the textile
agents can offer up to 30 days credit period to the local manufacturers. While
the textile suppliers can offer up to 60 days of credit period to their agents in
Hong Kong.

Regarding the commission, it is usually settled every 3 months by the textile
suppliers with their agents in Hong Kong.
                                                                           Page 19



8.    PROMOTION ACTIVITIES

The textile industry is mainly promoted through various exhibitions, seminars
and specialized trade magazines in Hong Kong.

8.1   EXHIBITIONS

             Interstoff Asia
             This is a textile show in Hong Kong, which is held twice a year in
             March and October at the Hong Kong Convention & Exhibition
             Centre. Major exhibits include all kinds of textile fabrics like silk,
             cotton, wool, knitted, man-made, coated, linen, ramie. Textile
             yarns, fabrics for lingerie and swimwear, embroideries, lace and
             accessories, etc. are also presented. Moreover, new
             technologies for design / styling, CAD/CAM/CIM, plus publishers
             of textile related magazines also take part in this exhibition to
             reach the textile buyers and garment manufacturers.

8.2   JOURNALS

      Some major industrial magazines of textile are also popular for the
      industrial people in Hong Kong as below:
           Inside Fashion
           Textile Asia
           ATA Journal
           China Textile & Apparel
           Textile & Clothing Bulletin
           Garment World
           Accessories Collection


8.3   LOCAL ASSOCIATIONS RELATED TO TEXTILE SECTOR

      The followings are some local associations in Hong Kong related to the
      textile sector.
              The Federation of Hong Kong Garment Manufacturers
              The Federation of Hong Kong Cotton Weavers
              Hong Kong Garment Manufacturers’ Association
              Hong Kong Association of Textile Bleachers, Dyers, Printers &
              Finishers
              Hong Kong Chinese Textile Mills Association
              Hong Kong Cotton Made Up Goods Manufacturers Association
              Hong Kong Cotton Spinners Association
              Hong Kong Embroidery Merchants Association Ltd
              Hong Kong Institution of Textile and Apparel
              Hong Kong Knitwear Exporters & Manufacturers Association
              Hong Kong Piece-Goods Merchants’ Association
              Hong Kong Weaving Mills Association
              Hong Kong Woollen & Synthetic Knitting Manufacturers’
              Association
              IWS International Pty. Ltd.
              Textile Council of Hong Kong
                                                                            Page 20




9.      CONCLUSION

In recent years, Hong Kong government encourages the garment industry to
focus on high fashion and to become a competitive fashion centre. Therefore,
the local garment manufacturers are of increasing interest to improve the
technology and to purchase higher quality materials to add value to their
textile products.   With improved functions and high level of comfort,
multipurpose fabrics are expected to be increasingly popular in outerwear and
activewear. For instance, greater attention has been given to the fabrics with
functions like waterproof, anti-bacteria, odour-prevention and quick drying.
Also fancy and fashionable fabric and yarns still have great demand from
Hong Kong importers. Besides, China's accession into the WTO benefits
Hong Kong manufacturers in terms of increased access to overseas markets
for China-origin textiles and clothing products, and further opening of the
mainland's consumer market.


10.     RECOMMENDATION TO ITALIAN TEXTILE SUPPLIERS

Although competition is keen for textile supply from other countries, Italy is still
the number one high quality textile supplier to Hong Kong. For countries like
China, Taiwan, Korea and Pakistan, though they attain a very large market
share regarding Hong Kong’s textile import, they are primarily supplying textile
of lower-priced segment.

Nevertheless, in order to maintain its leading position in the niche market of
high level textile and to adapt to Hong Kong’s changing market needs as to
move towards high quality garment production, Italian suppliers have to strive
their best particularly in the following areas:

      Good price in good quality
      Innovative design
      Shorter lead time
      Rapid response

				
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