San Jose Mercury News: With `Socks City,' China puts toe in textile market

With `Socks City,' China puts toe in textile market

SPECIALIZED MANUFACTURING AIMS FOR GLOBAL DOMINANCE

By David Barboza
New York Times
San Jose Mercury News

DATANG, China - You probably have never heard of this factory town in coastal China, and there's no reason you should have. But it fills your sock drawer.

Datang produces an astounding 9 billion pairs of socks each year -- more than one set for every person on the planet. People here fondly call it ``Socks City,'' and its annual Sock Festival attracts 100,000 buyers from around the world.

Southeast of Datang is Shenzhou, which is the world's ``Necktie Capital.'' To the west is ``Sweater City'' and ``Kid's Clothing City.'' To the south, in the low-rent district, is ``Underwear City.''

This remarkable specialization, one city for each drawer in your bureau, reflects the economies of scale and intense concentration that have helped turn China into a garment behemoth. On Jan. 1, a new trade regime will end the decades-old system of country-by-country quotas that split up the world's exports among roughly 150 countries. Now, China is banking on its immense size and efficient operators to grab an even larger share of the world's clothing orders.

Neither Adam Smith nor Karl Marx could possibly have imagined that this kind of capitalism would evolve from a communist system in quite this way, with an obscure town in the middle of nowhere becoming the world's sock capital. But these days, buyers from New York to Tokyo want to be able to buy 500,000 pairs of socks all at once, or 300,000 neckties, 100,000 children's jackets, or 50,000 size 36B bras. And increasingly, the places that best accommodate those kinds of orders are China's giant new specialty cities.

The abolition of quotas is expected to accelerate this trend over the next decade or so, particularly under the guidance of China's visible hand. The niche cities reflect China's ability to form ``lump'' economies, where clusters or networks of businesses feed off each other, building technologies and enjoying the benefits of concentrated support centers -- like the ``Button Capital'' nearby, which furnishes most of the buttons on the world's shirts, pants and jackets.

Glimpse at the future

The new era, thus, offers a glimpse into how China's incredibly fast-paced economy is developing into more than just a beehive of individual private enterprises scattered hither and yon. Beyond the entrepreneurial vigor so palpable, the textile business is a prime example of how the Chinese government's attempt to guide development more indirectly through local planning instead of outright state-ownership is starting to pay off in a big way.

China is not just becoming the leader of the pack. In many ways, it hopes to run away with as much of the market as possible.

New import limits by the United States, along with other external and internal forces, are expected to hamper China's progress in apparel and textiles for several years, if not longer. That should allow several other countries to maintain vigorous garment industries as well. But there is little question that China will be the dominant force in the business, and the growth of its industrial conclaves highlights just how powerful a force China's industries are becoming in almost every sector they have entered.

In the late 1970s, Datang was little more than a rice farming village with 1,000 people, who gathered in small groups and stitched socks together at home and then sold them in baskets along the highway.

Back then, government officials branded Datang's sock makers as ``capitalists'' and ordered them to stop selling socks. Now, they produce more than a third of the world's output, and the government has nothing but praise for such entrepreneurs and their domination of the sock business.

Signs of Datang's rise as a sock capital are everywhere. The center of town is filled with a massive government-financed marketplace for socks. The rice paddies have given way to rows of neatly paved streets lined with cookie-cutter factories. Banners promoting socks appear along streets and draped across buildings. And each year, Datang is decorated with balloons and flags for the annual sock fair.

And rags-to-riches tales abound in Datang. Just ask Dong Ying Hong, who in the 1970s gave up a $9-a-month job as an elementary school teacher to make socks at home. Now, Hong is the owner of Zhejiang Socks -- and a sock millionaire.

U.S. left behind

These kinds of gains have sharply eroded America's old sock-making might. American textile companies filed a petition earlier this year asking Washington to place limits on Chinese sock imports.

Hoping to ease trade tensions, the Chinese government said earlier this month that it would voluntarily add tariffs on some of its own textile and apparel exports to lessen their competitive thrust. That is one reason, among others, why many experts believe China's wallop will not come all at once.

Still, China already accounts for about 16 percent of all apparel imports into the United States. And several studies project that in the next few years, once all the limits are lifted, that figure could soar to between 50 and 70 percent.

``There's no question, at the end of the day, China ends up a much bigger player in the global apparel business,'' said David Weil, an associate professor of economics at Boston University.