-
Relocation and decline of Hong Knog knitting industry, Two unsuccessful attempt to start a factory in the Mainland (1)
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.
Interviewee Au Kwan Cheung Company Yick Sun Knitting Company Date 1990s Subject Industry Duration 21m24s Language Cantonese Material Type Audio Collection Post-war Industries Source Hong Kong Memory Project Oral History Interview Repository Hong Kong Memory Project Note to Copyright Copyright owned by Hong Kong Memory Project Accession No. LKF-ACC-SEG-014 
Share
Related Audio
The founder of The China Paint Manufacturing Company, Lam Kwan, native of Taishan, had good academic performance in his early age. He had studied in the United States. While Lam was studying in the U.S., he not only worked in farms picking up fruits but also taught Chinese classes for Chinese-American. He graduated from Brooklyn Institute, New York, while the U.S. was hit by the Great Depression. He recommended himself to a paint manufacturing company and got accepted. Another founder of The China Paint Manufacturing Company, Lam On, the father of Paul Lam and the brother of Lam Kwan, had studied in Guangzhou Lingnan Secondary School and Pui Ching Middle School.
After Lam Kwan returned to Hong Kong from the United States, he founded a small paint factory (The China Paint Manufacturing Company) with his brother, Lam On. Since Lam Kwan had received education on chemical engineering, he brought related skills and knowledge to the factory. At the beginning, the factory produced metal paint and wood paint. The National Lacquer and Paint Products Company were separately founded in the same year (1931).
The China Paint Manufacturing Company had a limited capital to start with; the founders collected the capital from their family while there were only 6 employees. During the Japanese Occupation, the production of The China Manufacturing Company stopped. Lam Kwan turned to produce and sell peanut candy in Liuzhou, Guangxi to sustain his living. In 1946, The China Paint Manufacturing Company was re-registered and the founders raised more fund by selling shares. However, the company scale remained relatively small.
The paint production technology was not advanced in the past. The government did not have strict safety requirements on either paint factories or paint products. The workshop of China Paint had limited facilities, it used cooking pot to boil oil and rarely maintained the machinery. The China Paint Manufacturing Company built a 3 level factory at Arran Street, Mong Kok. The ground level was the production shopfloor, the second level was office and store room for raw materials and solvents, the third floor was the living place for the Lam’s family. Paul Lam had lived in the third floor after Lam Kwan had moved out. Since the paint production process required boiling oil, which is a relatively dangerous procedure, the company rented an open area at Tai Kok Tsui to conduct the process. There were a public playground and a men’s dormitory near the factory at Arran Street. The China Paint Manufacturing Company had established the workshop at Arran Street at the time when Paul Lam was in kindergarten. Male workers were responsible for production processes while female workers were responsible for packaging. Accommodation was provided for male workers only.
Other than Paul Lam, Lam Mo Bill (The son of Lam Kwan), was also the second-generation successor of The China Paint Manufacturing Company. Paul Lam graduated from the University of California, Berlekey with Chemistry major. Lam Mo Bill graduated from Stanford University with Chemistry major too. Since there was no specialized discipline on paint technology in the universities, the only way for people to learn about paint was to study chemistry and to take courses that had contents of paint, such as polymer chemistry. Usually, paint companies would obtain knowledge of paint technology by setting up licensing arrangements with foreign companies. In 1965, The China Paint Manufacturing Company employed the first chemist.
After Paul Lam graduated from university, he had worked oversea for seven years. During that period of time, The China Paint Manufacturing Company had planned to take over a joint venture in Singapore, to improve the unsatisfactory performance of the company. Lam Kwan and Lam On invited Paul Lam to manage the company in Singapore. In arriving at Singapore, he found that the business was not a good investment, he decided to forgo the take-over and returned to Hong Kong. Although paint industry is one kind of chemical industry, Paul Lam considered himself know little about paint. Initially he had no intention to stay and work for the company. Not long afterwards, Lam Kwan died of heart disease. Paul Lam had worked in Hong Kong for less than a year and then returned to his previous employer in the United States. Under the urge of the family, he eventually returned to Hong Kong to help with the family business.
The Lam’s family used to respect the individual interests and initiatives of the younger generation and seldom imposed pressure to the descendants to inherit the family business. For example, all the children of Paul Lam did not major in science specialties and he didn’t plan to arrange his children to be successors.
Paul Lam had studied in La Salle College and then changed to Diocesan Boys' School at Form 2, where he studied until graduation. Since his parents had little knowledge about studying abroad, Paul Lam himself gathered information from his teacher and sent out an application to The University of California, Berkeley. He was admitted and left for Berkeley in early 1962. There were a good number of graduates from Diocesan Boys’ School to study abroad.
Paul Lam did not have particular expectation about his future after graduation. He had a lot of interests and activities and work was only one of his concerns. At that time it was not difficult for one to find a living in the United States. Therefore, Paul Lam did not worry about his career future. Upon graduation, he joined the Specialty Gas industry, which was a challenging industry that provided him with great satisfaction. He witnessed the rapid growth of the electronics industry in the 1970s. At that time, electronic companies like Pioneer and Dupin applied a special poisonous gas rather than atomic particles to produce chips for the brands’ circuit boards.
The company he worked for was a material supplier for electronic companies. In 1969, his company supplied the disinfection gas to the American astronaut Armstrong when he returned to the Earth after landing on the Moon. It was common for the American hospitals to use the same disinfection gas. In 1970s, he was relocated to Los Angeles, a city which was faced with serious air pollution. His company provided gas for General Motor to detect the gas exhaustion level. His company also produced heavy water, a material for producing atomic bomb. The production of atomic bomb was a dangerous industry as carbon monoxide was emitted as a by-product. When he was the Chemist of the company, Paul Lam had witnessed explosion in the company. Therefore Paul Lam was experienced in managing accidents and hazards in the paint industry. Back in the U.S., Pau Lam was promoted to branch manager since he showed good performance in handling an accident caused by hydrogen chloride in the Intel Corporation. He was then the youngest and the only expatriate branch manager of the company.
The Lam’s family had urged Paul Lam to return to Hong Kong several times. He made such move after he had obtained the resident identity (literally called Green Card) after marriage. To maintain his resident status in the U.S., he returned to the U.S. after he had worked in Hong Kong for around one year. To make good use of his mobility, the Lam’s family arranged Paul Lam to for Sherwin Williams, which engaged in a partnership of technology transfer with China Paint. Sherwin Williams was the largest paint company in the United States. Paul Lam was employed as a salaried technician for 9 months. He was there to learn the skills necessary for producing the brand name products under China Paint. The two companies signed a 10-year partnership agreement for technology transfer. China Paint was allowed to use the technology and the brand name of Sherwin Williams to produce paints in Hong Kong. Because of this partnership, the production technology of China Paint was improved. Paint companies needed chemists to produce paint and made adjustment according to client’s request. However, Paul Lam believed the company could not rely on the paint manufacturing formula only. Fulfilling the need of customers and providing quality customer service would also be important. The marketability of paint products relied on proper chemical formula, sale network, adequate combination of materials and the skill knowledge of technicians. Therefore, instead of focusing on chemical formulas, China Paint employed consultants to teach its staff with the chemical knowledge and properties of paint materials.
After Paul Lam left Sherwin William, he returned to China Paint and worked at the Kwun Tong factory. At first, he engaged in the administrative section to improve the company’s work environment, efficiency, labour structure and promotion system. Then, he worked on market research, doing analysis on the market shares and profit margin of the company and its competitors.
The development of The China Paint Manufacturing Company (Part I): Plant, products variety and industrial paint expansion
In the 1970s, there were six major paint factories, Kin Kwok Lacquer Manufacturing Company and several small factories in Hong Kong. The market competition was intense. China Paint had two plants in Kwun Tong, one of which was built by the company. It was a 6-level building of 40,000 square ft. The factory moved to Sai Kung later, which had a total area of 160,000 square ft. Nowadays the company had a factory in Shenzhen with a total area of 58,000 square meters, which was still not sufficient for operation. At the time when Paul Lam started to work for the company, the sales figures were only of 8 digits. In terms of market share, the company was the smallest among the major paint factories, with National Lacquer and Paint Products Company being the largest among all. Nowadays the China market contributed 90% of the company’s sales.
The company’s products used to be exported to overseas markets. In the 1970s, as many of these import countries imposed various kinds of import restriction, China Paint began to develop local market. At that time, Hong Kong’s industries was growing rapidly. With the help of foreign companies, Paul Lam and his cousins switched to produce industrial paints. In the early stage of China’s economic reform, the company started to relocate its production to China, which led to an increase of orders from the industrial sector. The company’s industrial paint could be used for producing rattan, electronic fans and toys. Types of toy included metal toy cars, both soft and hard plastic toys and PVC dolls. Different types of toy required different kinds of paint. The paints for toy were mostly classified into the followings: paint for metal, paint for hard plastic such as Acrylonitrile Butadiene Styrene (ABS) paint, paint for soft plastic such as Polypropylene (PP) paint, Polyethylene (PE) paint and Polyvinyl Chloride (PVC) paint.
During the production of the company’s industrial paint, the chemists had to try different combinations of chemical materials in order to fit with the receptivity of different material surface. Once the chemists successfully fit a type of paint with the kind of material, they would focus on cost reduction. 30% to 40% of the company’s revenue came from toy paint, which representing 70% of the Hong Kong market demand. Paint for architectural construction composed the major part of the company’s revenue. Brand name “Flower” was specialized for architectural construction while “GIRAFFE” was specialized for paint for wood.
