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Textiles Industry in Hong Kong

Overview

  • The Chinese mainland and Hong Kong agreed in October 2005 to further liberalise the mainland market for Hong Kong companies under the third phase of CEPA III. Under CEPA III, the mainland agreed to give all products of Hong Kong origin, including textiles, tariff-free treatment starting from 1 January 2006.
  • Hong Kong’s textiles industry serves not only the local clothing manufacturers but also those on the Chinese mainland and other offshore production bases. Capitalising on the long experience in the manufacture of textiles, many Hong Kong companies also engage in textiles trading. Hong Kong’s textiles industry is reputed as a supplier of quality dyed and printed fabrics. It is also strong in cotton spinning, denim weaving, knit-to-shape panel knitting and fine-gauge cotton knit manufacturing.
  • Hong Kong’s textile exports decreased by 7% in the first five months of 2017, following a 13% decline in 2016. Re-exports, accounting for more than 99% of total exports, fell on par over the same period, while domestic exports rose by 2%. Among those re-exported, more than 75% were originated from the Chinese mainland.
  • Asia is the leading market for textiles exported from Hong Kong, accounting for nearly 93% of the total textile exports. Of the top 10 destinations for textiles exported from Hong Kong, nine of them are in Asia, with the Chinese mainland being the predominant export market.

Industry Features [1]

Table: Industry features of textiles industry
Table: Industry features of textiles industry

The textiles industry – comprising spinning, weaving, knitting and finishing of fabrics – had a total of 446 manufacturing establishments as of March 2017, employing 2,569 workers or 2.7% of the local manufacturing workforce. The textiles industry is one of Hong Kong's major export earners, accounting for 1.7% of the total exports in 2016.

In recent years, traditional markets, such as the US, the EU and Japan, have rendered textiles exporters from developing countries, including ASEAN and Bangladesh, more preferential market access, which has in turn impaired the competitiveness of Hong Kong manufacturers. Along with rising labour costs and more rigorous environmental regulations on the Chinese mainland, an increasing number of Hong Kong textiles manufacturers have relocated their production of lower-end and mass products to Southeast Asian countries like Bangladesh, Cambodia and Vietnam. 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.

To enhance competitiveness in the global market, some Hong Kong textiles companies have formed a strategic partnership with indigenous Chinese companies. For instance, some of them have joined forces with mainland cotton suppliers in producing cotton textiles.

Hong Kong's textiles industry is a major supplier to the local clothing industry. Producing textiles locally, Hong Kong textile manufacturers have an advantage in accommodating orders from local garment manufacturers in short notice. Meanwhile, a significant portion of textile exports is destined for use in Hong Kong companies’ offshore production of garments, especially on the Chinese mainland.

Performance of Hong Kong’s Exports of Textiles [2]

Table: Performance of Hong Kong exports of textiles
Table: Performance of Hong Kong exports of textiles
Table: Performance of Hong Kong exports of textiles (by markets)
Table: Performance of Hong Kong exports of textiles (by markets)
Table: Performance of Hong Kong exports of textiles (by categories)
Table: Performance of Hong Kong exports of textiles (by categories)

After a 13% fall in 2016, Hong Kong’s textile exports decreased by another 7% in the first five months of 2017. Re-exports, accounting for more than 99% of total textiles exports, experienced a similar decline of 7%, while domestic exports rose by 2%. With more than three-quarters of the textile re-exports originating from the Chinese mainland, Hong Kong’s re-exports of textiles of China origin registered a decrease of 6% in January-May 2017.

Asia is the leading market for textiles exported from Hong Kong, accounting for 93% of Hong Kong’s textile exports in the first five months of 2017. Of the top 10 export destinations, nine of them are in Asia. The Chinese mainland remains to be the city’s predominant export market, accounting for 50% of Hong Kong's textile exports in January-May 2017.

Other major export markets of Hong Kong textiles include Vietnam, Bangladesh, Cambodia, Indonesia, Sri Lanka, the US, India, Thailand and the Philippines. In particular, because of Vietnam’s cheap labour compared to neighbouring countries and WTO membership, many foreign investors, including those from Hong Kong, have set up garment factories there. This gives rise to sustained demand for textile imports, making Vietnam the second largest market for Hong Kong’s textile exports, after the Chinese mainland.

Product-wise, Hong Kong’s exports of knitted or crocheted fabrics, textile yarns, woven fabrics, textile made-up and floor coverings registered respective declines of 3%-64% in the first five months of 2017. However, finishing accessories and special yarns and fabrics increased by 3% and 2%, respectively, in the first five months of 2017.

Sales Channels

Hong Kong is both a leading production centre and a global hub for clothing sourcing. As such, Hong Kong's textiles industry is well positioned to serve both local and overseas clothing manufacturers and merchandisers. While many Hong Kong textile manufacturers and traders supply their products to the clothing manufacturers in Asia, particularly on the mainland, international textile companies are using Hong Kong as a gateway to promote their products to other Asian economies. For instance, an increasing number of fashion brands and designers from Latin American and Central and Eastern Europe are attempting to leverage Hong Kong’s trade platform to promote their textiles and apparel on the Chinese mainland.

The industry is capable of producing either a wide range of quality products in bulk or specialised items within a short lead-time for varied applications. Its competitive edge lies in the superb quality and swift response to fashion trends and market demand. The industry has also earned a worldwide reputation for unique quality, expertise, workmanship and flexibility.

Hong Kong is an ideal one-stop shopping centre for buyers looking for new and trendy fabric materials. The Interstoff Asia Essential, held twice a year in spring and autumn, is a significant marketing and sourcing platform in the region for both fabric manufacturers and buyers alike. Organised by the HKTDC, the Hong Kong International Home Textiles Fair offers a wide range of high-quality products such as bathroom textile, bedroom textile, kitchen textile, carpet and floor covering. It is a specialist platform, giving exhibitors and buyers of home textiles immediate access to markets in Asia and beyond.

Industry Trends

In line with the global manufacturing landscape and fierce competition across the board, Hong Kong's textiles industry has been moving up the value chain to cater to the demand for upmarket textile products with original designs or brands. Today, the operation of the textiles industry in Hong Kong is focused mainly, if not all, on higher value-added activities such as sales and marketing, quality control, designs and development, while offshore plants are specialised in production operations. This, in turn, results in a high proportion of re-exports (almost 99%) in Hong Kong’s textiles exports portfolio.

With rising labour costs, volatile raw material prices and stringent environmental regulations on the Chinese mainland, many Hong Kong's textiles manufacturers have relocated their production facilities to other South-east Asian countries, like Vietnam, Cambodia, Myanmar and Bangladesh. A few companies have even set up offshore production in Latin America (e.g. Mexico) and Africa (e.g. Nigeria) to take advantage of preferential treatments allowed by regional trade agreements such as North American Free Trade Agreement (NAFTA) and the EU’s GSP scheme.

To stay tuned to the advancements of manufacturing technology and product requirements, the textiles industry, as a capital-intensive business, has invested heavily in keeping up with the latest technological trends. Advanced production technologies are sourced mostly from vendors from Germany, Italy, Spain, Switzerland, Japan and South Korea. Modern technologies like automatic web spreading, nano bio-functional materials finishing and Texparts® Zero Underwinding are no strangers to local manufacturers.

In the meantime, the Hong Kong Research Institute of Textiles and Apparel (HKRITA), which was established in 2006, also help enhance the competitiveness of the industry by developing and transferring fashion and textile technologies. At the 45th International Exhibition of Inventions of Geneva in 2017, HKRITA won two gold medals with jury’s commendation, one gold medal, four silver medals and two special awards for all seven participating entries, including new functional textiles made from bio-based and degradable fibres, and fine worsted yak yarns and fabrics using a newly developed spinning method and system. As such, Hong Kong textiles manufacturers are able to offer a wider range of fibres, yarns, and fabrics to clients.

To comply with the global trend of green manufacturing, more textile corporations have adopted the bluesign® standard – one of the industry’s major voluntary standards for environmental sustainability. To be qualified, a corporation must reveal its chemical processes, dye compositions and relevant green workplace initiatives for scrutiny. Apart from the bluesign® standard, Global Organic Textile Standard (GOTS), the Oeko-Tex® Standard 100, Oeko-Tex® Standard 1000, Global Green Tag® and NSF Sustainability are other popular product labels that textile manufacturers used to show their environmental awareness.

In line with the 13th Five-Year Plan, China's Ministry of Industry and Information Technology (MIIT) is expected to issue a development plan for the textile industry, aiming to promote comprehensive upgrade of China's textiles industry management and boost the development of high-end textiles for industrial uses, especially for the fast-growing automotive industry.

CEPA Provisions

On 18 October 2005, the mainland and Hong Kong agreed to further liberalise the mainland market for Hong Kong companies under the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III). Under CEPA III, the mainland agreed to give all products of Hong Kong origin, including textiles, tariff-free treatment starting from 1 January 2006. According to the stipulated procedures, products which have no existing CEPA rules of origin will enjoy tariff-free treatment upon applications by local manufacturers and upon the CEPA rules of origin being agreed and met. But non-Hong Kong made textile products will remain subject to average tariff rates of 10-25% when entering the mainland.

Details of CEPA tariff preference, including origin criteria, are available from the following hyperlink:
http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2017.pdf.

General Trade Measures Affecting Exports of Textiles

Despite the elimination of textile quotas among WTO members in 2005, the US and EU had subsequently imposed safeguard measures against imports from the Chinese mainland. Starting 1 January 2009, however, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU. Meanwhile, textile and clothing shipments to the US made on or after 1 January 2009 are no longer subject to any quotas.

Product Trends

Among various kinds of fibres, cotton remains the most preferred material for consumers in the apparel market. Cotton-rich apparel continues to attract European consumers, while consumers in China, India and Japan agree that cotton and cotton blend are the most comfortable, authentic and sustainable, compared to other man-made fibres.

From the perspective of product innovation, microfibres are drawing greater attention from textiles manufacturers. The major benefits of textile products made of microfibres are its light in weight and superior performance in keeping warm. Uniqlo, the leading clothing retailer in Japan, also makes use of microfibres for its ‘AIRism’ collection. Aside from microfibres, many innovative new fibres and fabrics have brought demand in many different areas. To answer the needs, more and more breathable, flexible, anti-bacterial, anti-ultraviolet, wrinkle-free, water-resistant and environmentally friendly materials are invented and marketed. For instance, TENCEL® invented by Lenzing Group is a kind of lyocell fibre that possesses several functional advantages over cotton, while Salvatore Ferragamo has pioneered the use of sustainable fabrics made from citrus fruit.

Technology and innovation will continue to be the buzzwords in the coming seasons. Fancy weaves and prints will give more flexibility in the choice of manufacturing processes, while digital prints, as well as artisanal decoration, will make textiles more malleable. Meanwhile, hand-crafted excellence, original visuals and exceptional handles will continue to be sought after, given consumers’ ever-growing appetite for uniqueness and distinctiveness. Solar-powered handbag made of a textile photovoltaic surface that powers a battery inside to charge a mobile phone and “climate costumes” that sense changes in carbon emission with light patterns using conductive thread and LEDs are just some examples of how technical textiles are shaping the future textiles industry. As wearable technologies are becoming more accessible, technical textiles are widely applied over a wide range of industries such as automobile, aerospace, architecture, healthcare and sports. Luminescent and heated garments as well as smart knee bandages are cases in point.

Consumers, particularly in developed markets such as West Europe, the US and Japan, are enthusiastic about the environmentally friendly properties of biodegradable natural fibres like organic cotton, soy fibre and ahimsa silk. To keep up with this trend, manufacturers have also expanded their production of green textiles by utilising more bio-degradable materials and environmentally-friendly manufacturing processes, including high-efficiency management practices, process control, special processes, and recycling of wastewater. Fashion brands like Stella McCartney, H&M, Zara, Ralph Lauren, ASOS and Quiksilver have already pledged to end sourcing fibres from endangered forests.

Apart from rising green consciousness, product safety remains a major concern for consumers, not confining to developed markets, but emerging markets. For instance, a number of disqualified apparel fibres consisting of unsatisfactory levels of pH value, formaldehyde content and banned azo dyes have been reported on the Chinese mainland in recent years. In fact, Chinese consumers are increasingly in favour of foreign apparel brands, which usually guarantee product safety. Meanwhile, in traditional markets, for example, the EU’s Rapid Alert System for Non-Food Products (RAPEX) revealed that textiles, clothing and fashion items were the third most common product category notified (behind only toys and motor vehicles), representing 13% of the total number of notifications of dangerous products in 2016.

With economic stability, rapid urbanisation and the marriage and baby boom, the demand for high-end household textile products is growing rapidly on the Chinese mainland. It is reported that the annual growth rate of consumption of household textile products will exceed 20% in the next 10 years, while the sector of household products is expected to challenge the garment industry to present the leading demand for textiles.


[1] Industry statistics refer to production in Hong Kong only.

[2] Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

Content provided by Picture: Louis Chan
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