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.

Company Yick Sun Knitting Company
Subject Industry
Duration 21m24s
Language Cantonese
Material Type
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
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