Au Kwan Cheung

Au Kwan Cheung studied at Alliance Primary School in Lancashire Road at Kowloon Tong. He walked to school which took him more than 20 minutes everyday. In only passing mathematics, his performance at school was far from outstanding. Taking the initiative to do their homework in the cockloft, his younger siblings achieved better academic results. Growing up in his father's knitting factory, Au Kwan Cheung became interested in knitting machine at an early age. While his father led his apprentices to repair machines, Au Kwan Cheung watched, helped and learned by his side. During his secondary school days, Au Kwan Cheung was asked to repair machines at other knitting factories. Working in the factory on weekdays and only shopping or going to the cinema very occasionally, he had few childhood leisure activities. As the standards of living in the 1950s were low, Au Kwan Cheung slept in the noisy factory’s doorway and grew used to sleeping through the racket made. Many of his neighbours slept in similar doorways. Au Kwan Cheung made a lot of good friends with other children in the neighbourhood, playing games with plastic balls, picture cards, marbles and hopscotch after school. His father's knitting factory operated long hours, seven days a week and more than 10 hours a day without any break in between. As the factory did not hire female workers, his mother was responsible for winding the yarns and looking after the machines. She also had to take care of household chores at the same time. As his mother often spent a lot of time in the factory, Au Kwan Cheung’s father could sometimes take him to a local tea restaurant to meet business friends between 3 pm and 4 pm each day. The owners and masters of these early squatter factories used to meet and exchange trade information in such tea restaurants, occupying two to three tables when many people attended. Cotton yarn and knitting traders had different gathering places and frequented different tea restaurants.

Fuk Wah Street in the 1950s consisted mainly of three- or four-storey old-type tenement buildings without lifts. The lack of urban planning meant that commercial and residential uses were often mixed on different floors of the same building. Unlike today, the ground floors of these tenements were mostly used for residential purposes. Au Kwan Cheung thought such “front-factory-back-dwelling” modes could save production costs. Adjacent to his father's knitting factory were grocery and rice shops, garment and dyeing factories plus many other squatter-style garment factories in the upstairs and downstairs of the building. Tenement buildings were mainly occupied by working people with each unit usually shared by a few parties. While tricycles and bicycles crowded Fuk Wah Street’s available roadside parking spaces, there were very few goods vehicles or private cars around the area. As local industries had not yet taken off, there were very few factories in Sham Shui Po in those days. As there was also no sewage facility by the government, waste water was directly discharged through the sewers. That said, the young Au Kwan Cheung rarely saw wastewater floods on Fuk Wah Street, since dyeing factories usually used only small dyeing tanks and did not consume much water.

Au Kwan Cheung recalled that established before World War II and respectively producing the Chicks, 555 and Cicada singlet brands, the Chun Au, Chuen Sun and Lee Kung Man knitting factories were Hong Kong’s biggest brands at that time. As these were large-scale knitting factories which adopted a one-stop production mode, smaller squatter knitting factories had little chance of taking their orders. These long-established knitting factories imported high-quality cotton yarns from overseas and produced expensive knitted garments such as sweaters on old-type knitting equipment known as Granville Yankee machine. These factories seldom bought cloth from squatter factories to produce their brands. Most small local knitting factories only emerged after World War II.

Many manufacturers came to Hong Kong from Guangzhou where they had specialised in knitting mass market mid- and low-end fabrics. Ultimately, only the long-established large factories could supply high-quality fabrics. Au Kwan Cheung’s father and his business friends were amongst the first manufacturers to run knitting factories in Hong Kong. As knitting machines occupied a small space, a 1,000-square-foot plant could accommodate two or three machines. Since weaving factories needed much more space, they were seldom operated in home factory style but mainly by manufacturers from Shanghai.

Two notable early knitting machinery factories in Hong Kong were Fook Yuen and Tak Shing. Both of them were run by friends of Au Kwan Cheung’s father. Wah Luen and Wah Hing who came into the market at a later stage produced higher quality machines. Today, local machinery factories repair machines but no longer make them. In those days, most knitting masters began as apprentices because technical schools’ textile departments did not teach knitting technology. Au Kwan Cheung believed that one would find it easy to learn knitting technology but hard to be a skilled master as one needed to be a talent of machine.

Knitting factories in the 1950s mostly ran about 50-60 machines. With the local knitting industry taking off at that time, machines’ functions and outputs were constantly improving. Using only old-type machines, the squatter factory of Au Kwan Cheung’s father could barely produce 100 pounds or so of fabrics every 24 hours! Nowadays, modern knitting machines can produce over 1,000 pounds of fabrics within the same period of time! As old-type machines lacked automatic shut down function, they had to be deactivated manually. That was why the factories had to hire a worker to look after each machine. The old-type machine was found to be of inefficient, slow and labour intensive. For example, when a bundle of yarn thread was used up, it required someone to replace the empty bundle with a full one manually. If the machine went on knitting without one line of thread, the whole piece of fabric became defective. Au Kwan Cheung’s father focused on watching the old-type knitting machine he used in his squatter factory. Au Kwan Cheung’s mother helped by operating the yarn winding machine which fed small bundles of yarn threads into large twine balls so that Au Kwan Cheung’s father could replace the empty bundles with these twine balls on the knitting machines.

Having a small capital, squatter knitting factories could only invest in buying machines, but not raw materials. Their mode of business was to take up orders from garment factories to produce cloth from threads, with the garment factories providing them with the necessary cotton yarns when orders were placed. Hong Kong already had a cotton yarn supply in the 1950s with Hong Kong Spinners at Castle Peak Road being a well-known local cotton mill. Operating a cotton mill involved a large investment, and required a big plant. Due to their low purchasing volumes, small garment factories seldom buy yarns directly from the local cotton mills, but usually through melange yarn companies instead. Melange yarn companies were cotton mills’ agents which broke up large consignments of cotton yarns into smaller batches for sale. After procuring their cotton yarn, larger garment factories passed them to smaller knitting factories for processing. Au Kwan Cheung’s father's squatter factory produced knitted fabrics which could be used for sewing elastic garments such as sports shirts and T-shirts. Depending on the technique involved, fabrics were divided into two main types – knitted and woven. Woven fabrics, such as twill, shirt fabric, corduroy and denim, do not require knitting by needles and are not elastic. Knitting and weaving are ultimately distinct technical skills that require specific types of machines operated by different sets of mastery skills.

Sham Shui Po was a centre of HongKong's garment industry in these early years and was home to many knitting, dyeing and garment factories. This concentration of companies facilitated the circulation of raw materials and products. Knitting factories supplied fabrics to the garment factories in the district and would mostly deliver smaller orders of two or three bolts of cloth by bicycle. Larger orders of around 10 bolts required a tricycle for delivery. The same applied to deliveries to further-off areas such as Tai Kok Tsui. In the past, there were many dyeing factories in Golden Arcade, most of which later were relocated to Tai Kok Tsui and then to Castle Peak Road and Wing Hong Street near to Mei Foo. In those days, dyeing factories ran their businesses from ground level premises and operated by receiving orders from garment factories for processing. As dyeing factories had hot water supplies, Au Kwan Cheung often went to a neighbouring dyeing factory on Fuk Wah Street for a hot bath during the winter. He was of Primary Five and Six at that time.

Knitting and garment factories were more concentrated along Castle Peak Road. With the subsequent increase in their business, garment factories expanded in scale and gradually spread to Tsuen Wan and Kwai Chung. Following this expansion, knitting factories were moved out of residential premises and relocated to factory buildings for production. In the past, buildings on Fuk Wah Street were inhabited with both ordinary residents and manufacturing operators. When the government later enforced the fire safety regulations more stringently, factories were required to register and apply for operation licenses. The ground level premises of the buildings adjacent to the Au family’s home were all used as residences and changed to outlets or retail shops later on. Au Kwan Cheung’s father once had knitting factories at Sai Yeung Choi Street (near Wong Chuk Street’s Sham Shui Po section) and Fuk Wah Street. Both premises were operated on a “front-factory-back-dwelling” practice. When Au Kwan Cheung started his own business after growing up, his father's factory was inherited by the younger son. Remaining with the old style operation mode, Au remarked that the factory was not competitive and was finally closed in the 1980s.

Au Kwan Cheung’s father's squatter knitting factory was first set up in a Fuk Wah Street ground floor shop. When the building owner later took back the premises, the production set up was moved to the 2,000-square-foot second floor of a four-storey old-type factory building in Tai Kok Tsui’s Tung Chau Street. The ground floor shop there sold iron materials while on the third and fourth floors there were garment and knitting factories. After relocating the factory to Tai Kok Tsui, Au Kwan Cheung’s family still lived in the workshop. A bunk bed was placed in a small room of the second floor while other family members just slept on cargo cartons or nylon beds. Cooking and bathing were all carried out at the factory.

When delivering fabrics to garment factories, Au Kwan Cheung observed that these factories were mostly small scale operations. Each employed around 10 workers and was equipped with cutting tables, overlocker sewing machines and other equipment. These factories combined dwellings and manufacturing in one premise. Including family members, Au Kwan Cheung’s father's factory had four to five day-shift workers plus one or two night-shift workers. Tai Kok Tsui’s small knitting manufacturers usually exchanged trade information at tea restaurants. As his father’s clients were mostly garment factories on Fuk Wah Street, Au Kwan Cheung often visited tea houses there. Stationed at the factory almost full-time, Au Kwan Cheung’s mother worked hard and lacked entertainment, playing mahjong occasionally with the bosses of another knitting factory on the fourth floor. The third floor was a weaving garment factory with which the Au family seldom got in touch with. As fabric factory on the fourth floor used Granville Yankee machine, which was however different to the type Au Kwan Cheung’s father used, the two factories had little competition between each other.

When his father's squatter factory moved to Tai Kok Tsui, it was time when Au Kwan Cheung was admitted into secondary school. Studying while working part-time, his proficiency of maintaining knitting machine had reached such a level that he could repair machines for a group of factories his father’s circle. He received a handsome income from machinery maintenance, meaning that one to two hours of work was equivalent to a worker’s daily wage. Au Kwan Cheung studied in a regular school until Form 3 before switching to Kowloon Technical School’s evening textile courses. He learned English, Mathematics, Machine Drawing (Axis, Bearing but nothing on textiles. Au Kwan Cheung thought that he would learn it after completing his first three years’ courses. Though Au Kwan Cheung repaired machines as a part-timer in the day, he often felt asleep on the evening classes. Soon, he found it difficult to balance work with study. Eventually he chose to work full time and quit school after three years of evening study. As he failed to complete the courses, he did not receive graduation certificate. As he was optimistic to the future of the knitting industry, he chose to commit his career in the trade. He reasoned that clothing was people’s daily necessity and so cloths and clothes would continue to be needed. Hong Kong’s fabric industry prospered in the 1960s. Although the technology at his father's knitting factory was lagging behind, the sector as a whole grew steadily. However some successful fabric factories could be expanded ten times faster than Au Kwan Cheung’s father’s.

Au Kwan Cheung felt that his father’s factory was old-fashioned and its technology remained at the level of the 1950s’. Shortly after dropping out from school, he started his own business with a friend who was engaged in marketing of raw materials. Au Kwan Cheung did not want to take over his father’s factory because there were many differences between his and his father’s generation in terms of operation and technology. Firstly, Au Kwan Cheung’s father did not have a high level of education and had little interest in new machinery. Contented with the volume of business sufficient for survival, he had little initiative of investing to expand its scale of production and just waited for business to come. Seeing other companies developing rapidly, Au Kwan Cheung realised the importance of advanced machinery and believed he had to improve fabric quality to attract more orders. As Au Kwan Cheung’s father had started as an apprentice, he relied on techniques learned from his mentor. Not really caring about improving production to enhance efficiency, Au Kwan Cheung’s father remained contented with the old skills learned. Having received specialized education, Au Kwan Cheung knew more about knitting and made fabrics up to standards. He also built up a documentation system to store the specification of his fabrics and production records to facilitate searching of past records. It was considered a good way to control the quality of fabric products. In placing great importance on fabric quality, he measurably reduced the return of substandard products. With reduced costs and less trouble, his customers found him more reliable than old-fashioned factories.

After moving his squatter factory from Fuk Wah Street to Tai Kok Tsui, Au Kwan Cheung’s father had added a modern knitting machine to increase output. However, his father had already grown old and was not interested in investing in more machinery. Sadly, when he eventually passed the business on to Au Kwan Cheung’s younger brother, it was technologically too backward to survive for long. While Au Kwan Cheung did not take over his father's factory, he and a friend of his founded another small knitting factory which was named Tai Hing Knitting Factory, Limited and was close by in Tai Kok Tsui. Tai Hing was equipped with the then most advanced knitting machines and used cotton yarns and chemical fibers as raw materials.

Chemical fibers became available in the late 1960s, becoming a new raw material for the textile industry. Nylon, polyester and terylene were the main synthetic fabrics at that time. As they offered the advantage of producing less dust during knitting, it was easier to clean the machines. The knitting principles and machinery of synthetic fabrics were similar to those of cotton yarns and were used to produce garments such as T-shirts and sport shirts. While Au Kwan Cheung was responsible for the technical aspect, his business partner who had worked in a chemical fiber import company as salesman was familiar with the marketing aspect of synthetic knitting. As the start-up capital of the two men was less than $100,000 and each machine cost about $30,000, they had to purchase their machines in two batches. Additional equipment could only be added after the company began making a profit. Tai Hing engaged solely in knitting fabrics, with raw materials supplied by the garment factories when orders were placed. Some of Au Kwan Cheung’s clients were his father’s regular customers. His partner also knew many garment factories. Coupled with a big demand for fabrics in those years, the new factory had no worry about business order. Tai Hing later was able to handle sub-contracting orders from larger garment factories.

Au Kwan Cheung and his partner founded Tai Hing in 1969, which occupied the 1,000 square feet unit on the tenth floor of a factory building in Tai Kok Tsui. The company later moved to the fifth floor of Yee Tak Factory Building in Cheung Sha Wan in 1973/1974, which was a unit of 2,000-3,000 square feet. As relocation and renovation had used up large amounts of capital, Au Kwan Cheung was initially unable to buy new machines. His wife also had to help at the factory after its relocation. The joint venture broke up two or three years after the factory relocation and Au Kwan Cheung became a sole proprietor of Tai Hing. A few years later, he took out a further 3,000 square feet of space next door and expanded the factory to over 5,000 square feet. To pay for new machines which cost several hundred thousand dollars each, Au Kwan Cheung borrowed loans from a loan company which he repaid by installments. He also received old machines abandoned by his father’s friend who closed down his own factory. By that time, Au Kwan Cheung’s factory had more than 20 machines and employed four to five workers for the day shift and three workers for the night shift. Four male workers took care of the machines and two female workers wound the yarns at noon to make it ready for the night shifts.

The years between the 1980s and 1997 were Tai Hing’s heyday. 60% of the company’s finished fabrics were used for garment products exported to Europe and the United States. The remaining 40% were used for clothing to be sold locally. Exported garments were generally produced in large garment factories. These bigger manufacturers had precise cost calculation and had a stable demand for fabrics. Au Kwan Cheung recalled that orders from two to three large garment factories would be sufficient to maintain Tai Hing’s profit margin. Hong Kong garment workers of the 1960s to 70s only cared about having enough to pay for food and clothing and so they didn’t demand for high wage. With low production cost, Hong Kong’s garment factories mostly produced inexpensive garments that attracted orders from Europe and America. The factories that produced for local demands made fashion garments. Though they were mostly small factories, they were more willing to pay higher prices to buy new fabric types. Fashion garment factories at Sham Shui Po seldom ordered grey fabrics, but required dyed and finished fabrics instead. Apart from knitting grey fabrics, Au Kwan Cheung’s factory also outsourced processing to dyeing factories. Tai Hing continued its operations until 2000. As there were many more orders during its heyday, sometimes its 5,000 square feet workshop was not enough to finish these orders. Especially at times when the production was under tight schedule, Au Kwan Cheung had to ask his business friends to do his favours by finishing some of the orders. He repaid these favours by helping out his business friends when they in turn could not meet their orders.

Tai Hing Knitting Factory, Limited, operated by Au Kwan Cheung, received orders from garment factories which provided him with the required cotton yarn raw materials. These garment factories bought in the cotton yarns and then passed them on to Tai Hing to knit into fabrics. Tai Hing’s order started like this: an overseas customer brought new samples of finished garment to Hong Kong and asked a local garment factory to submit quotations. The garment factory then took the samples to knitting factories to ask for quotations for the required fabrics. The knitting factory examined the garment samples and determined the type of cotton yarn and technique required for producing the specific fabrics. They then recommended relevant raw material or melange yarn suppliers to the garment factory. At this point, the garment factory would buy the yarn materials from some supplier and instruct the supplier to send the yarn material to the knitting factory to knit yarn into the required fabrics. The knitting factory therefore served as the intermediary between the garment factory and mélange yarn supplier. The mélange yarn supplier had to take the initiative to get acquainted with local knitting factories in order to broaden their business sources. In the past, Au Kwan Cheung’s father built very good relations with a lot of mélange yarn suppliers’ salesmen who often came up to his factory for chats.

The raw materials used by Tai Hing Knitting Factory in those days could be classified into three types: cotton yarns, chemical fibers and blends – each of which required slightly different production techniques. Cotton yarns were sourced locally, from China and overseas. There was only one brand of cotton yarn from China which was collectively referred to as "Nam Fung". This brand had to be bought in in large quantities at a low price. Locally produced cotton yarn tended to be better than those from the mainland. Cotton yarns from Japan, the United States, India, Pakistan and other countries were mostly special yarns and were cost higher prices. The American and Japanese cotton yarns were generally considered to be of superior quality. Sometimes when new types of raw materials could not be sourced in Hong Kong, Au Kwan Cheung would find the nearest equivalent material for production. In the 1990s, he even designed and sold his own fabrics to fashion wholesalers at Cheung Sha Wan. Unfortunately, as this kind of work brought little profit, it did not last long.

Tai Hing Knitting Factory's major customers were garment factories of two categories: production for local demand and production for export. Squatter garment factories in Sham Shui Po and Cheung Sha Wan were mostly manufacturers for local demand. Rather than producing on demand, these factories made garments and waited for fashion retailers to pick and purchase the finished products. The retailers were usually the boutique operators at shopping malls and did not have their own production line. To replenish best selling fashion items that ran out of stock, retailers would sometimes visit garment factories in person, waited by the side of the garment workers and pick the products as soon as they were finished. As local garment factories produced goods before selling them, they had to bear the risk of losing money if the products did not attract attention. For this reason, most local garment factory owners had a good eye for fashions that could sell. Alternatively, such owners would only produce a small quantity first and test it out in the market. If sales were good, garment factories would be attracted to place orders. Some squatter garment factories also handled garments servicing orders from European and American customers placed through trading companies. In those years, small local and export garment factories tended to concentrate in particular districts. The majority were later relocated to the mainland. Those still having local production were spread to Tsuen Wan, Kwai Chung, Kwun Tong and other districts.

In the 1980s, Nam Cheong Street and Yu Chau Street had high concentrations of squatter garment factories. Many manufacturers set up their factories upstairs in residential buildings resulting that sewing workshops were spread on different floors. A typical squatter factory consisted of a team of husband and wife working at home with a few workers and several sewing machines including overlocker types. All garments produced were then placed in the same premises waiting for wholesaling. Operators of retail stores knew the address of these upstairs workshops and would go there to select and buy goods from there directly. Between the 1980s and 90s, wholesale fashion factories were Tai Hing's major customers, accounting for around one third of its knitting factory’s turnover.

Since China’s economic reform and the adoption of open policy, these upstairs factories had moved their production to the mainland. The 1980s were booming years for Hong Kong’s garment industry. During this period of time, squatter factories which had already relocated to the mainland set up outlets in Hong Kong to display their samples in the ground floor shops on Cheung Sha Wan Road and Castle Peak Road in Lai Chi Kok. They also established offices at the back of their shops to make it quicker and easier for customers to place orders. After the squatter factory outlets moved to street-level shops, their customers were no longer limited to local buyers. Buyers from Africa and Southeast Asia also came to select goods and place orders. These street-level outlets were a convenient trading ground where buyers could find garment manufacturers and instantly select goods and place orders. A ground floor shop also made the mainland manufacturers look more reliable by enabling customers to keep in contact with them in Hong Kong after placing orders. Rents for street-level shops were expensive, with large shops often attracting tenants who were willing to pay over $100,000 a month. As a result, they only engaged in export wholesaling and not garment retailing.

The early 1990s were good years for Hong Kong’s knitting industry. Having studied foreign magazines to learn about popular fabric types, Au Kwan Cheung began to develop stretchable fabrics, send small quantities of these cloths to dyeing factories for dyeing and finishing and then market them to fashion garment factories. New fabric types were mainly promoted to the local market. Fashions made with new fabric materials could be sold immediately at street-level outlets on Cheung Sha Wan Road in Sham Shui Po. Such a practice enabled the quick testing of market responses. If marketing was carried out overseas, there was no such convenience for a local manufacturer like Au Kwan Cheung to test out his research outcome.

Hong Kong’s textile industry grew strongly between the 1950s and 1990s which began to decline after 1997. When the government began introducing labour regulations such as limiting the working hours of female workers and prohibiting female workers from working overnight in the factories, Au Kwan Cheung began to hire men only to run his 24-hour operations. With the amount of loans too small and repayment periods too short for small and medium enterprises, Au Kwan Cheung felt that the government had not offer enough support for small manufacturers. Around 90% of local garment factories had already been relocated to the mainland where there was sufficient cheap labour to produce large quantities of garments. Dyeing factories had also been severely hit by the regulation of sewage management and other environmental protection measures in recent years. With operations becoming more difficult, most dyeing factories have now followed the footsteps of garment factories to move to the mainland.

Dyeing factories that stayed in Hong Kong were mostly small-scale operations applying technology that remained at the level of the 1970s-1980s. As bleaching and dyeing products did not meet specifications and prices were quite high, business became very difficult. Au Kwan Cheung shipped most of his fabrics to the mainland for bleaching and dyeing only doing small amounts in Hong Kong occasionally. Garment factories which had already relocated to the mainland faced many import and export restrictions and complicated procedures. This was especially true when shipping fabrics produced in Hong Kong to China for bleaching and dyeing. In doing so, garment factories needed to apply for a “customs manual” for listing out the fabric types and quantities. As applying for a customs manual involved a lot of procedures, those garment factories who wanted to save themselves the trouble would simply subcontract the processing job to a mainland knitting factory which would work with a mainland dyeing factory. Such practices inevitably had adverse effect on Hong Kong’s knitting industry. The local knitting industry began to decline after 1997 and Au Kwan Cheung’s factory began losing money in 1999. Au Kwan Cheung estimated that the number of local knitting factories that were still in operation at the time of interview was less than 20, a drop of 95% from the industry’s peak. At present, Au Kwan Cheung’s knitting factory only took local orders.

Following the footstep of local garment and dyeing factories’ relocation to the mainland, Au Kwan Cheung had tried twice to set up factories in China in the 1990s but both attempts had failed. What he did was like this: through the introduction of a business friend, he co-operated with an enterprise in Zhongshan to set up a knitting factory there in 1990. Sadly, he had no real control over the end-to-end production process and the business performance was poor. There were also accounting problems. Considering the factory to be unviable, Au Kwan Cheung gave it up within just two years. A few years after the failure in Zhongshan, Au Kwan Cheung tried again and set up a wholly-owned factory in Foshan’s Zhangcha District where there was a concentration of small local knitting factories. Relocating half of his machinery at Hong Kong factory to China, he tried to carry out production in both places at the same time. As he felt he was unable to compete with his mainland counterparts, he finally ceased operating the Foshan factory after four or five years. Au Kwan Cheung estimated that the success rate of knitting factories that had relocated to the mainland was just 30 percent.

As there was an abundance of knitting factories in China, Au Kwan Cheung’s garment factory customers would not necessarily continue their co-operation with him after their operations were relocated to the mainland. The northward-relocated Hong Kong knitting factories did not really trust their new mainland masters. Many skilled masters went to work at their employer’s mainland factory. The monthly wage for these Hong Kong masters was more than $10,000 while that of a mainland master was just $1,000. Additionally, Hong Kong investors faced many restrictions to operate a factory in the mainland. They had to hire people to handle procedures such as setting up fire safety measures and reporting tax returns. As production costs were not much reduced due to the above complications, they were also less competitive than mainland’s individually-owned factories. Au Kwan Cheung observed that Hong Kong knitting factories were more experienced, understood customer requirements better and their knitted fabrics were more superior in terms of quality than that of their mainland counterparts. That said, most garment factories put their focus on price only. Although the quality of mainland’s fabrics was not of good quality, they offered lower prices and so many garment factories still found it more profitable to place orders with them. Au Kwan Cheung believed that the only advantage Hong Kong’s current knitting industry had was that the tax rebate on cotton yarns imported to Hong Kong made local grey fabrics cheaper than those from China. However, there was a lack of local dyeing and garment factories to carry out the necessary work processes. As a result, Au Kwan Cheung believed that if the policy and operating environment remained unchanged, the prospects for the local knitting industry were not optimistic.

After the Beijing pro-democracy movement in 1989, there was braver steps by the government to implement economic reforms and a faster pace to open up China’s markets. This had accelerated the movement of local garment and dyeing factories’ from Hong Kong to the mainland. In the past, smaller garment factories in Sham Shui Po carried out their production and sales activities upstairs in their workshops in residential buildings. When small factories’ production lines moved to the mainland, only the wholesale section remained in Hong Kong. At present, less than ten garment factories remained in Hong Kong. When the government required manufacturers to adopt sewage treatment measures in the 1990s, the local dyeing factories faced a lot of restrictions. This in turn prompted the northward relocation of the bleaching and dyeing industry. With the disappearance of local garment and dyeing factories, the knitting manufacturers which relied on them found it harder to survive after 1997. Faced with the trend of northward relocation, Au Kwan Cheung lost up to 90% of his customer base. At present, only around ten knitting factories remained in Hong Kong.

Steadily losing customers, Tai Hing Knitting Factory reduced its labour force and stopped purchasing new machines. Au Kwan Cheung was finally forced to follow the trend and set up operations in China in the 1990s. Following the introduction of a business friend, Au Kwan Cheung’s first attempt was a joint venture factory in Zhongshan with a local entity. Due to differences of opinion with the local partner, Au Kwan Cheung gave up a year later as he felt the business was not profitable. He subsequently set up a wholly-owned factory in Foshan, renting a 10,000-square-foot plant and moving some machines from Hong Kong to there. While the bulk of Tai Hing’s manufacturing moved northward, the company still maintained some production in Hong Kong. As Au Kwan Cheung still had to take care of these Hong Kong operations, he was unable to manage both factories, finally closing the operation in Foshan. Requiring a hands-on approach to manage his investments in the mainland, rather than delegating the work to others, Au Kwan Cheung found it difficult to adopt Hong Kong style of management in China’s environment. After cutting the business in the mainland, his Hong Kong factory gradually shrank in size as he sold the machines off one by one. Even when his workforce was cut down to just three workers, Au Kwan Cheung still found it difficult for the operation to survive.

At the time of interview, Au Kwan Cheung’s knitting factory continued with a small volume of production, producing fabrics only for local demand. This generally involved fabric samples in small quantities and urgent orders for under-layer and inner-layer fabrics, for example. As mainland knitting factories focused on mass production, they would not take up these small orders, leaving one last tiny survival space for local factories. In recent years, Au Kwan Cheung had stopped developing new fabrics. Lacking advanced machinery, it was difficult for him to produce these new products in larger quantity. South Korea and Taiwan produced a large number of new products and their exports to Hong Kong put added pressure onto local manufacturers. Lacking sources of raw material, Hong Kong could not compete with the imports from these countries. In addition, even if new fabrics were successfully developed, their design might also be copied for production in China. Even though he had launched several new fabrics, Au Kwan Cheung was unable to attract a good size of orders. At present, he just waited for fabric samples from customers, taking orders within his ability. In addition to maintaining a small production business, Au Kwan Cheung also provided intermediary services for the garment factories that had moved northward by liaising with mainland’s knitting manufacturers on their behalf for processing yarns into cloths.

In the old days, Au Kwan Cheung’s father often went to tea restaurants to meet his business friends to exchange trade information. By the time Au Kwan Cheung began running his own knitting factory, there was far less socialising occasions in the industry than before. Local knitting factories expanded their scale of operation after the 1970s and spread to different districts. As a result, business friends had fewer opportunities to get together and more often used the telephone to keep in contact instead. For a short period of time, Au Kwan Cheung had joined tea gatherings with business friends in Tsuen Wan. These meetings did not continue because people tended to save time from travelling. In those days, different factories faced similar operating environment and business kept on coming. As fellow knitters offered similar prices with a deviation of just $0.20-0.30 per pound for fabrics, customers preferred not to switch their suppliers. As a result, there was more co-operation among fellow factories than competition and companies often helped each other out when delivery schedules were tight.

While still young, Au Kwan Cheung went to knitting factories to repair machines and became acquainted with many fellow knitters. That said, Au Kwan Cheung did not participate in trade associations as he did not understand the running of organisations like Chinese Manufacturers' Association. He did, however, know more about the knitting trade union. As a union, members should in theory be workers, but this body was historically run by manufacturers or factory owners. Au Kwan Cheung’s father was a trade union member, but after forming his own company, Au Kwan Cheung did not become a member and only occasionally attended union activities. The trade union’s main function was socialising, arranging social activities for workers and owners, rather than commercial activities. Au Kwan Cheung believed there was harmonious employer-employee relation in the knitting industry, with employers and employees often chatting, playing mahjong and going to swim together.

Au Kwan Cheung felt that government support for the knitting industry was not satisfactory. This could be due to the fact that the role of the knitting industry in the textile sector as a whole was not significant and it failed to attract sufficient attention of the government. Au Kwan Cheung cited loans for small-and-medium sized enterprises (SME loans) in recent years as an example. Early on, Au Kwan Cheung had tried to revive his knitting factory and therefore had applied for bank loans. As Au Kwan Cheung had his factory plant as collateral, his machines were new and there were many orders, obtaining bank loans was not difficult. In recent years, when business became poor, the knitting factory’s machines became obsolete and business turnover fell, the banks became reluctant to approve his loan applications. At this point, Au Kwan Cheung applied for government SME loans. However, the approval procedures were very complicated and loan amounts were small. As a result, he only successfully obtained $30,000 as a loan. In its heyday, Au Kwan Cheung’s knitting factory had a monthly turnover of $5,000,000. Although his monthly turnover later had dropped to $100,000, a $30,000 loan was just a drop in a bucket that did not help much.

Furthermore, Au Kwan Cheung criticised that following China’s reforms and its open-up policy, the Hong Kong government had not implemented effective complementary measures. Mainland restrictions on immigration entry and departure, transportation, contract and taxes also made it difficult for local manufacturers to operate. On the other hand, the government could not attract the mainland dyeing and garment factories to invest in Hong Kong. This made it very hard for local knitting factories to survive. Au Kwan Cheung stressed that to revive the textile and garment production in Hong Kong, the government should strengthen co-ordination with China and bring the business environment of the two places closer.

Au Kwan Cheung got married in his early 20s, founding Tai Hing Knitting Factory with a partner after his marriage. When Tai Hing moved from Tai Kok Tsui to Wing Hong Street at Cheung Sha Wan, his wife began to help in the factory office, working till 4-5 pm on weekdays. Only after the knitting factory’s business started booming did Au Kwan Cheung hire regular staff. The factory office was small mainly for preparing monthly statements, acknowledging receipts and book keeping. Recording of receiving and delivering of fabrics was done by male workers who helped to share much of the office workload. Immediately after production, the worker kept information of production quantity, serial number of the order and delivery record in order to reduce the risk of fabrics being stolen. Au Kwan Cheung did not insist that his children took over the business. As the second generation enjoyed a better quality of life when growing up, he hoped his children would focus on their studies and did not ask them to help out in his factory. He tried his best to support their studies. His children eventually studied in Canada where the family emigrated in 1995/1996. Au Kwan Cheung still stayed in Hong Kong to look after his knitting factory, asking a childhood friend to be in charge of the workshop. While Au Kwan Cheung’s eldest son wanted to join the trade and help run the Foshan factory, he eventually lost interest and gave it up. The other children were not interested in running their father’s business.

Complicated procedures for shipping locally produced fabrics to the mainland meant that most local companies could now only supply their products to the Hong Kong market. This made survival very difficult for them. Au Kwan Cheung had already entered a state of semi-retirement and his knitting factory had been reduced to 1,000 plus square feet. The company now operated in the form of a trading company, outsourcing fabric production and dyeing to mainland factories upon receiving customer orders. Au Kwan Cheung is familiar with his fellow knitting professionals with factories on the mainland. This helped lower the processing costs of knitting and dyeing fabrics, thereby reducing production costs and earning him meager profits as an intermediary. Au Kwan Cheung foresaw that it would be difficult to revive the local knitting industry and planned to close his factory upon his retirement. In reviewing his past career in the knitting industry, he considered the most glorious time to be the years when he did not have to worry about business! Those were the happiest days he had ever lived. After the decline of the local knitting industry, Au Kwan Cheung twice set up factories in the mainland. Though neither attempts were successful, he remains to be happy that he had made the effort to try.