STRUCTURAL TRANSFORMATION OF HONG KONG‘S GARMENT INDUSTRY
FROM PRODUCTION TO SERVICING CENTRE
by
HO SUK LING, KATY YEUNG KWAN CHING, MAXWELL
, m 吟 ^ I
RESEARCH REPORT
Presented to
The Graduate School
In Partial Fulfilment
of the Requirements for the Degree of
MASTER OF BUSINESS ADMINISTRATION
THREE-YEAR MBA PROGRAMME
THE CHINESE UNIVERSITY OF HONG KONG
May 1990
~ M R LAll HO FUK
(Advisor)
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ABSTRACT
Over the past few decades Hong Kong has had tremendous economic
growth. Alongside with the associated changes, we have witnessed
evolution in the industrial structure of Hong Kong.
Garment Industry, in particular, being the largest industry,
has pioneered amidst such waves of structural changes. Operations
have been broadened to include overseas bases, while the locality
has gradually been transformed from a production to a servicing
centre.
This is a study of transformation of garment industry- Results
of the study suggest that the process coincides with established
theoretical framework of international product life cycle developed
by famous scholars.
i i i
TABLE OF CONTENTS
ABSTRACT ii
TABLE OF CONTENTS iii
LIST OF TABLES v
ACKNOWLEDGEMENTS vii
Chapter
I. INTRODUCTION . 1
Approach of the Study 2
Purpose of the Study v
II. METHOLOLOGY 4
Literature Review 4
Survey 5
Interview 7
III. HISTORICAL DEVELOPMENT OF GARMENT
INDUSTRY IN HONG KONG 8
IV. THEORETICAL PERSPECTIVE WITH REFERENCE TO THE
DEVELOPMENT OF GARMENT INDUSTRY 12
iv
V . FACTORS CONTRIBUTING TO THE SHIFTING OF
HONG KONG‘S GARMENT PRODUCTION BASE 16
VI. SURVEY ON OFFSHORE PRODUCTION 21
VII. SCENARIO OF TWO SELECTED GARMENT GROUPS 34
Yangtzekiang Garments Group 34
M.S. Universe Group 37
VIII. CONCLUSION 42
APPENDIX 45
BIBLIOGRAPHY 59
V
LIST OF TABLES
Table 1 AVERAGE MONTHLY WAGE OF GARMENT MANUFACTURING WORKER
17
Table 2 A SUMMARY OF RESPECTIVE WAGES, FACTORY RENTS AND
APPLICABILITY OF GENERALIZED SYSTEM OF PREFERENCES OF FOUR SE ASIAN COUNTRIES 19
Table 3 COMPANY PROFILE OF SURVEY RESPONDENTS : BUSINESS NATURE 21
Table 4 COMPANY PROFILE OF SURVEY RESPONDENTS : YEAR OF
ESTABLISHMNET 22
Table 5 SUMMARY OF SURVEY FINDINGS : EXPERIENCE OF PRODUCTION
TRANSFER OUTSIDE HONG KONG 22
Table 6 SUMMARY OF SURVEY FINDINGS : TYPE OF OFFSHORE FACTORIES FOR ORDER PROCESSING 23
Table 7 SUMMARY OF SURVEY FINDINGS : ALLOCATION OF PERCENTAGE OF ORDERS TO OFFSHORE PRODUCTION, 1987 - 1988 24
Table 8 SUMMARY OF SURVEY FINDINGS : TRANSFER OF
PRODUCTION OUTSIDE HONG KONG IN 1990 25
Table 9 SUMMARY OF SURVEY FINDINGS : ALLOCATION OF ORDERS TO OFFSHORE PRODUCTION IN 1990 26
Table 10 SUMMARY OF SURVEY FINDINGS : LOCATION OF OVERSEAS
FACTORIES 27
Table 11 SUMMARY OF SURVEY FINDINGS : PERCENTAGE OF ORDERS
TRANSFERRED TO RESPECTIVE COUNTRIES IN 1989 29
Table 12 SUMMARY OF SURVEY FINDINGS : FACTORS DRIVEN TO
OFFSHORE PRODUCTION 3〇
Table 13 SUMMARY OF SURVEY FINDINGS : DIFFICULTIES IN OFFSHORE
PRODUCTION COORDINATION 31
Table 14 SUMMARY OF SURVEY FINDINGS : RESTRUCTURE OF HONG KONG
GARMENT INDUSTRY FROM PRODUCTION TO SERVICING 32
Table 15 SUMMARY OF SURVEY FINDINGS : RESTRUCTURE PERPETUITY
TILL 1997 32
V i
Table 16 YANGTZEKIANG GARMENTS GROUP : SALES MARKET SHARE BY COUNTRY 34
Table 17 YANGTZEKIANG GARMENTS GROUP : PRODUCTION BASE
DISTRIBUTION BY COUNTRY 35
Table 18 M.S.UNIVERSE GROUP: SALES MARKET SHARE BY COUNTRY … 37
Table 19 M.S.UNIVERSE GROUP: PRODUCTION BASE DISTRIBUTION BY COUNTRY 38
vii
ACKNOWLEDGEMENTS
Foremost, we 己re pairticulairlY indebted to ouir advisor, Mr H F
Lau, whose guidance through the steps of our MBA project as well as
insights on the topic were so enlightening and invaluable.
We are grateful to the Textile Council for permitting us to
adopt some of the findings from the Clothing/Textile Industrial
Study by the Survey Research Hong Kong Limited as supporting
materials.
Mr Y C Fung and Mr W S Shek of the Yangtsekiang Garment
Manufacturing Co Ltd and M S Universe Textile Ltd respectively also
contributed much to our study by sharing with us their corporate
development and operational details.
In the meantime, we wish to extend our heartfelt thanks to Miss
Yucca Leung for her professional skill and patience displayed in the
type up of this report and also to Miss Lilian Au who kindly
assisted in the preparation of our survey questionnaires.
Finally, we wish to extend our sincere thanks also to the
companies that were kind enough to have spent time in filling our
survey questionnaires.
1
CHAPTER I
INTRODUCTION
Hong Kong's garment industry budded in the 1950s and grew
rapidly during the following two decades. It surpassed the textile
industry in the 1960s and has then taken the lead in both the export
and employment share of the manufacturing sector. Apart from
producing fashionable garments, it has also upgraded to make
sophisticated items like leather and fur clothings. Inevitably, the
prosperity of Hong Kong is credited with the role played by the
garment industry in the economY.
In the early 1960s, the garment manufacturers started to
allocate orders to Singapore, Malaysia and Thailand for production.
Afterwards, the scale of offshore production has been expanding not
only in the South East Asia, but also in China. Some large
manufacturers even set up plants in buyers‘ countries like the
United States and United Kingdom at the turn of the 1980s. The
production base in Hong Kong has been diminishing in importance,
instead Hong Kong is now becoming the marketing, administrative and
co-ordination centre with the support of well-established
infrastructure.
2
Approach of the Study
The study would be stemmed from the theoretical framework of
the product life cycle for international trade which helps explain
the evolving nature of the garment industry in Hong Kong.
First of all, we carried out a survey on a sample of local
manufacturers regarding the extent of their orders being placed
outside Hong Kong. Information would also be gathered so as to
determine what factors have been driving the relocation of
production and which are the most popular countries. This may
further justify to say that the production function in Hong Kong is
fading out. Next, two garment groups, namely Yangtzekiang Garment
Manufacturing Company Limited, and M.S. Universe Textile Limited
were selected for indepth study by means of interview. Analysis
will be centred on their strategies of overseas investments and the
criteria or rationale in choosing the countries for investments.
Purpose of the Study
Since the garment industry still remains the most important
industry in Hong Kong, it deserves a thorough study particularly on
the following aspects:
3
1. A study of the changing phenomenon of the garment industry from
a production to a servicing centre;
2. To verify the past trend and its evolving nature with the theory
of the product life cycle for international trade;
3. To gain an insight to the strategical move to overseas
investments from the analysis of two large manufacturers； and
4. To study the functions taken by manufacturers after relocating
major production outside Hong Kong.
Hong Kong‘s manufacturing base is under the process of
transformation, particularly the garment industry. Above all, this
project specifically proves if it is now approaching being a design,
administrative, co-ordinating and marketing centre rather than a
mere production centre.
4
CHAPTER 工工
METHODOLOGY
Information and data were collected through literature review,
a survey on local manufacturers as well as interviews with top
management of two established garment groups in Hong Kong.
Literature Review
The literature review aimed at grasping an exhaustive
understanding of the theory and the industry for analysis. Library
search, ABI/Inform and previous researches done by. several
organizations were the sources to obtain secondary data.
Intensive library search was conducted to locate articles on
the theory of product life cycle for international trade and delve
into magazines for comprehending the historical background of the
garment industry. All in all, pertinent statistics were gathered to
serve as illustrations or proof of our statements.
Next, thorough scan of the ABl/lnform Ondisc searched the
abstracts from the journals on the local garment industry's
restructuring phenomenon.
5
During the literature review process, we came to know that the
Hong Kong Equity Research, Hong Kong Government Industry Department,
Hong Kong Productivity Council and the Textile Council had also
pursued studies on this industry- We got in contact with them and
requested copies in addition to their permissions for our using some
of the findings as supportive materials.
Survey
We made use of the survey to gain primary data on the extent of
local garment manufacturers‘ moves to offshore production. Mail
survey was chosen because of the widely scattered prospective
respondents could be reached at relatively low cost. Moreover, the
questionnaire composed of more than ten questions which would be
more appropriate to be mailed to offices, where the respondents
could have time to think over the answers. The survey design
details were as follows:-
Type of Study ： The purpose was to find out whether major portion
of local manufacturers‘ orders being distributed to other countries
for production.
Nature of Study ： Since the survey attempted to describe the trend
of shifting the production base, it was descriptive in nature.
Time Horizon : It was a cross-sectional study as the data
collected would be only once.
6
Unit of Analysis: The unit of analysis was individual garment
manufacturer.
Population Frame: The population frame was derived from the Textile
Controls Registration List by the Trade Department. The function of
the textile control registration number is to apply for free quota
or transfer quota for export. There were altogether 30,228
companies in the list of 1988. The survey was proceeded in the 1989
Year end, the TCR list of 1989 was not yet available at that time.
Sample : The sample would be drawn by the simple random sampling
from the 1988 Textile Controls Registration List.
Data Collection Method : 1^000 copies of mail questionnaires were
sent out to solicit data in mid December, 1989. In order to attain
higher response rate, a self-stamped and addressed return envelope
was enclosed, and follow-up by telephone interview in case of
non-reply or incomplete answer.
Ninety-eight copies of cjuestionaires were received during
January 1990. The response rate was 9.8%. Eight copies were
partially filled in. Five of them could be further completed by
telephone interviews, whereas the remaining three had to be
discarded due to inadequate information given for our follow-up.
Thus, only ninety-five questionaires were usable and the achieved
sample was 95.
7
Interview
Visits to two selected Hong Kong based garment manufacturers
for indepth interview were made in February and early March right
after the receipt of returned questionnaires. These are well
established garment manufacturing firms, one in the woven-wear
sector and the other in the knitting sector.
The purpose of visit will be to re-confirm our survey findings
and to find out answers in greater depth for points that were
relevant to our study.
8
CHAPTER III
HISTORICAL DEVELOPMENT OF GARMENT INDUSTRY IN HONG KONG
In 1950, there were only 41 garment factories employing 1944
persons which represented about 2.4% of the total manufacturing
employment.
The swift growth of the garment industry in the 1950s counted
on a combination of factors. The influx of cheap labor,
entrepreneurial skills, machinery and capital from China created a
definite advantage. In the mid 1950s, restrictions were imposed on
Japan's exports of clothing to Europe and the United States, the
European and American buyers then turned to Hong Kong as the
alternative source of supply. Preferential entry into the British
and Commonwealth markets further posed an inducement to the Hong
Kong garment manufacturers.
The orders produced at that time were of low end items in mass
quantity, the quality was somewhat below standard.
In the 1960s, the garment industry continued to expand
resulting in at least 35% of the total domestic exports. The
Short-Term Cotton Agreement of 1961 began to effect quantitative
limits on exports to the United States and the EEC, the Hong Kong
manufacturers made strenuous efforts to improve quality for moving
up-market that enabled to increase the value of each product
exported.
9
The share in the total domestic exports worked up to a climax of
44.6% in the mid 1970s, but gradually dwindled in the years to
come. The decline in the growth was largely due to the
protectionism and restricted quantity measures like the Multi-Fibre
Arrangement (MFA) as well as the keen competition from South Korea,
Taiwan and Singapore.
In the 1980s, the garment industry kept on going up-market,
producing high value-added items and putting more emphasis on
styling. Hong Kong not only developed to become the prime producer
of designer labels, but also groomed designers to build up their own
international labels. Medium to high-priced fashion wear bearing
Hong Kong designer labels are being sold in the prestigious
department stores like I. Magnin, Bloomingdale's (U.S.), Harrod's
(U.K.〉， Hertie (F.R. Germany), Seibu and Daimaru (Japan).
Considerable investments in mechanisation such as automated
knitting machines and computer-aided design/manufacturing (CAD/CAM)
technology ail aimed at increasing productivity. The Hong Kong
Productivity Council will set up a Clothing Technology Demonstration
Centre in early 1990. The objective is to develop a quick response
manufacturing system catered for the local manufacture of fashion
clothing.
In 1988, Hong Kong became the world's third largest clothing
exporter after Italy and South Korea. Added to the re-exports Hong
Kong's total exports of clothing positioned the first in the World.
10
Thus far, the garment industry is dominant in respect of the export
earner (Appendix 1) and employment share in the manufacturing sector
(Appendix 2). The strengths to have the position sustained for
several decades attribute to the following.
A substantial number of small and medium-sized factories exist
to provide flexibility and prompt response to the changing nature of
fashion trend. In 1988, 6,999 factories employing from one to
nineteen workers corresponded to 67.2% of the total establishments.
Small and medium-sized factories in which less than five hundred
workers engaged accounted for 99.7% of the entire industry
(Appendix 3).
Hong Kong has successfully re-positioned the image of good
workmanship and possessed the expertise to make complicated and
fashionable styles. Many celebrated international designer labels
are made in Hong Kong such as Calvin Klein, Yves Saint Laurent,
Pierre Cardin, Gloria Vanderbilt, Bill Biass and Ralph Lauren.^
A provision of comprehensive sources of fabrics and accessories
(zipper, buttons, buckles, labels, threads) is greatly supportive to
the industry's development. The world's leading suppliers virtually
have offices here. For instance, Japanese fabrics from the Kanebo
or Toray Mills can be purchased through trading offices like
1 Hong Kong‘s Clothing Industry, Research Department. Hong Kong Trade Development Council, No.1 December 1989, pp.2-3
11
Kanematsu 一 Gosho ILiinited or Mitsui & Company laimited. Orders on
Korean and Taiwan fabrics can be directly placed with the Pang-Rim
Spinning Company Limited and Formosa Taffeta Company Limited. Even
the YKK Zipper Company (Hong Kong) Limited established a factory in
Tuen Mun New Town. Innumerable reputable accessories are made in
Hong Kong like the GunzetaL Limited, the number one supplier of
thread in the South East Asia.
The quota system helps local manufacturers evade competition
from non-quota competitors. In fact. Hong Kong holds the world's
largest quotas in the cotton and wool categories and out numbers the
second largest quota holding country, China by 152% and 383%
respectively (Appendix 4 & 5)
Finally, Hong Kong manufacturers benefit from greater profit
margins by shifting to produce high end items.
12
CHAPTER III
THEORETICAL PERSPECTIVE WITH REFERENCE TO THE DEVELOPMENT
OF GARMENT INDUSTRY
The theory of product life cycle for international trade is
helpful in explaining certain trade flows in manufactured products.
A good deal has been written on it by two scholars named C.T. Weils,
Jr and Jose de la Torre.
The theory of the product life cycle for international trade
was developed by L.T. Wells, Jr and Raymond Vernon. It identified
four stages:-
1. U.S. export strength
2. Foreign production starts
3• Foreign production becomes competitive in export market
4. Import competition begins
Phase One : U S Export Strength
The American proceeds with the manufacture of new products in
his home country despite comparatively expensive labor. Production
near the market and close to the specialized suppliers is justified
by the design probably undergone incessant revision. Cost at this
stage is secondary. Shortly, the increase in product awareness
abroad impels foreigners to place orders with the American
monopoly. Steady export begins to take place.
13
Phase Two : Foreign Production Starts
Foreign producer embarks upon production based on the rationale
that the market has grown large enough. Costs are lower exclusive
of duty and freight charges and incurred less in the product
development. For the time being, the American still exports to most
of the world's market but at a decelerating rate.
Phase Three : Foreign Production Competitive in Export Market
Foreign producer now enjoys the economy of scale and cost
advantages. This makes the goods more competitive than the iinport
with the freight and duty charges taken into account. Foreign goods
gradually replace the American exports in the overseas markets.
Phase Four : Import Competition Begins
Foreign goods are exported to the United States when the
savings from the mass production compensate the costs of the tariffs
and freight charges. The iinport competition grows so severe that
the United States turns into the net importer from the former net
exporter.
14
On the other hand, Jose de la Torre applied the product life
cycle concept to interpret the development process of the
manufacturing industry. The manufacturer would start to move
production to low-wage countries as the mature product becomes more
standardized but still requires intensive labor, stable or lower
level of technology. Furthermore, the price factor poses critical
and decisive consideration in the consumer purchase decision. All
in all, price consciousness and sensitivity arising from the product
mature stage constantly compels the manufacturer to search for
places most likely the developing countries of lower operational
costs to be the production base.
The American garment industry has been evolving in accordance
with the pattern of the theory. Originally, the garment manufacture
was the leading industry during the sixties. But in the late 1970s,
countless American manufacturers relocated production to the South
East Asia, Central and South America. Some even built factories in
China upon its adoption of Open Door Policy. Foreign production was
progressively competitive in the American market that the import
drastically accelerated to 43% in the early eighties. In 1989, the
United States imported over $230 billion worth of textiles and
clothing equal to 83%. It is estimated by the year 1990, the import
will represent 93% implying the severity of import competition. The
garment industry is predicted to be displaced at the beginning of
the twenty-first century.^
1 Express (newspaper), August 29, 1988, pp.10
15
Over and above, the developed countries' moving into Hong Kong
has been quite in conformitY with the product life cycle for
international trade theory. Facing the garment manufacture being in
the maturity, they then turned to Hong Kong as the source of
production. From the beginning until the present, the Hong Kong
manufacturers concentrate on supplying markets of developed
countries like the United States, West Germany, United Kingdom and
Canada rather than the local one which is too small (Appendix 6).
Foreign production started from the sixties onwards when local
manufacturers alloted orders to the South East Asian countries
because of the quota restrictions. The move to offshore production
had been intensified in the eighties and would be continued in the
nineties by augmented quota constraints and soaring production
costs. Garments produced abroad are then exported to the developed
countries.
Hong Kong previously claimed to be the garment production
centre in spite of some shifting to overseas production at the very
outset. The garment industry has been restructuring for long and
assuming greater role in the servicing. The following three
chapters would be centred on this aspect through the analyses of
what factors have driven the restructure, the survey results on the
extent of offshore production and the scenarios of two garment
groups in managing their production activities.
16
CHAPTER III
FACTORS CONTRIBUTING TO THE SHIFTING OF HONG KONG'S
GARMENT PRODUCTION BASE
For years, Hong Kong‘s garment production function has been hit
by stricter restraints on exports, immense rent increase and
especially the rising labor cost and shortage. It is becoming more
difficult to finalize orders with buyers if costings are based on
Hong Kong production. Even though prices are confirmed subject to
local production, the profit margins would be meagre except some
prestigious labels. Therefore, these factors urge local
manufacturers to arrange overseas production so as to keep prices
competitive with other South East Asian countries since they also
deal with American and European buyers directly.
Among all factors, labor problem has the most critical impact
on moving production elsewhere. According to the breakdown of the
cost structure in 1987, labor represented 21%, while the rest were:
raw materials and supplies 64%, overhead and other operating
expenses 9% and net profit before tax 6%.^ Since labor alone
accounted for over one-fifth of the total production cost, any rise
in wages would definitely affect competitiveness to a great extent.
In 1989, the Survey Research Hong Kong Limited finished the
Clothing/Textile Industrial Study for the Textile Council. We would
like to quote some findings on the labor issue per Table 1 to
substantiate this serious problem in terms of wage and shrinking
supply of labor.
1 Honq Kong‘s Clothing Industry, Research Department, Honq Konq
Trade Development: Council , No. 1 , DGccmbor 1989, pi).
17
TABLE 1
Average Monthly Wage of Garment Manufacturing Worker
Percentage Change
1988 1987 1986 1988/87 1987/86
HK$ HK$ HK$ % %
Monthly-Rated Worker 4,173 3,737 3,459 +12 + 8
Daily-Rated Worker 3,044 2,712 2,390 +12 +13
Piece-Rated Worker
Knitting 4,199 3,983 3,711 + 5 + 7
Sewing 3,899 3,589 3,272 + 9 +10
Looping/Linking 4,633 4,376 4,044 + 6 + 8
Source: Clothing/Textile Industrial Study by the Survey Research
Hong Kong Limited.
The wage level rose within the range 5% to 12% in 1988 compared
to 1987. In addition, the Research Department of the Hong Kong
Trade Development Council found out the average wages to the garment
industry in June 1989 : HK$154/daY for operatives, HK$218/daY for
craftsmen and HK$5816/month for supervisory/technical staff.
Meanwhile, the manufacturers are facing severe shrinking labor
supply and almost three of four factories (74%) reported in the
Clothing/Textile Industrial Study encountered with labor scarcity
problem. Causes mainly are that very few new workers entering the
industry, losing workers to other industries and elderly workers
retiring.
18
Substantial vacancies have been available to be fulfilled
(Appendix 7). 工t is predicted the labor shortfall will be at 30 per
cent in 1990. ^
The increase in rentals and prices of flatted factories in turn
adds to the production costs. The rental of flatted factories was
in the range of HK$41.1 - HK$48.0 per square meter in 1987, but
jumped to HK$52.6 - HK$69.5 per square meter in 1988 (Appendix 8).
For the purchase, each square meter was sold at HK$4,273 - HK$6,343
in 1987, and at HK$6,054 - HK$9,249 in 1988 (Appendix 9). Rents and
prices were about 37% and 43% up on 1987 levels. These sharp rises
were inevitably reflected in the garment prices.
Moreover, growing protectionist sentiment and extended export
restraints from the United States and EEC countries serve grave
blows to the Hong Kong manufactures. Under final concession of the
American protectionism, a new bilateral textiles agreement was
signed in June 1986 that lasts from 1986 to 1991. It further
embraces textile products of vegetable fibres and blends, and silk
blends items in the restricted list that they previously belonged to
the unrestrained categories and reaped remarkable export growth in
the past few years. The agreement places restrictions on almost ail
of the Hong Kong‘s textile and clothing exports to the United
States .J
Hong Kong and Canada also concluded a new bilateral textiles
agreement covering the period of 1987 to 1991. The average growth
1 'Clothes Export Growth Hit by Labour Scarcity,‘ South China
Morning Post, 9 September 1989, pp. Business 3
2. Property Review 1989, A summary of Supply, Vacancies, Rentals
and Purchase Prices, Rating and Valuation Department, Honq Konq
19
rate for apparel items are tightened from 2.2 — 2.7% in the last
agreement to 1.12%. Simultaneously the limit on swing from textiles
to apparel is lowered from 5% to 1%.^
Besides, the Generalized System of Preferences still applies
tomost of the developing countries while Hong Kong was disqualified
for this privilege in January 1989.
The acute rise in wages and rents in addition to aggravating
export constraints have indeed threatened and undermined the
importance of local production. In fact, Thailand- Philippines,
Indonesia and Malaysia possess significant comparative advantages in
the manufacture on account of extremely cheap labor and rents.
Following is a brief summary of these four countries‘ average labor
and rent costs as well as the applicability of the Generalized
System of Preferences to each of them. It is notable that ail are
much more competitive than Hong Kong in particular the production
cost.
TABLE 2
A SummarY of Respective Wages, Factory Rents and Applicability of Generalized System of Preferences of Four South East Asian Countries
Country Thailand Philippines Indonesia Malaysia
Monthly Wage (HK$) $650-1,000 $850 $1,500 $1,200-1,500
Factory Rent
(HK$ per sq. ft.) $3.5 $0.1 $5.0 $5.0
Generalized System 3-8 years more than - 5-10 years of Preferences 4 years
Source: Economic Reporter, August 7, 1989
1 Hong Kong Trade Review 1986, Research Department, Hong Konq
Trade Development Council, 1987
I 香 遞 中 文 大 舉 園 你 敌 肯
20
On the whole, the importance of Hong Kong manufacturing
industries in the economy has been on the wane. Throughout the
first half of last decade, the average growth in the productivity
only attained 2.2 per cent which lagged much behind Singapore,
Taiwan and Japan (Appendix 10).
Owing to the above-mentioned factors, Hong Kong has reacted by
laying the emphasis on servicing instead of production and shifting
the latter to elsewhere. The increasing relocation of garment
production to developing countries is seen by the contraction in the
number of garment factories and workers engaged. After reaching the
peak of 8,047 establishments (25.9%) and 257,595 persons (37.9%)
employed in 1975, both in terms of the percentage in manufacturing,
the figures began to decrease. In 1988, 10,412 establishments and
286,659 persons remained in the garment industry corresponding to
20.6% and 33.9% of the entire manufacturing sector respectively
(Appendix 11).
21
CHAPTER VI
SURVEY ON OFFSHORE PRODUCTION
Although it seems evident that production has been increasinglY
shifted to developing countries, we still conducted a survey to
verify the phenomenon.
By the simple random sampling method, 1,000 samples were drawn
from the population frame of the Textile Control Registration List
1988 and questionaires were sent out accordingiy. Ninety-eight
companies responded to this survey but only ninety-five
questionaires are usable.
Seventy-one companies represented in the survey are in the
clothing manufacturing and trading, twenty-one in the clothing
trading and three in the textile manufacturing.
TABLE 3
Company Profile of Survey Respondents : Business Nature
Type of Business No. of Companies % of Total
Textile Manufacturing 3 3.20
Clothing Trading 21 22.10
Clothing Manufacturing and Trading 71 74 . 70
Total 95 100.00
Base : 95 companies, all respondents.
22
Twenty-seven companies have engaged in the business since
1950s, thirty-six since 1960s, twenty-eight since 1970s and four
since 1980s.
TABLE 4
Year of Establishment
Year No. of Companies % of Total
1950 - 59 27 28.40
1960 - 69 36 37.90
1970 - 79 28 29.50
1980 - 89 4 4.20
Total 95 100.00
Base : 95 companies, all respondents.
Sixty-two companies have been moving at least part of the
production outside Hong Kong, whereas thirty-three have not so far.
In other words, up till present, 65.3% of the establishments in the
survey have experience of directing orders elsewhere for production
purpose.
TABLE 5
Experience of Production Transfer Outside Hong Kong
No of Companies % of Total
Yes 62 65.30
No 33 34.70
Total 95 100.00
Base : 95 companies, all respondents.
23
Twenty companies have been using offshore factories with direct
investments only, thirty have been placing order with just the
sub-contractors, whereas twelve have been putting orders in both
types of factories. At least 32.3% of the companies place orders
with overseas factories having their direct investments. This
implies that offshore production would be a long-term strategy, so
they could exercise greater control over the factory management and
capacity through investments.
TABLE 6
Type of Offshore Factories for Order Processing
Type of Offshore Factories No. of Companies % of Total
(a) Factories with Direct Investments 20 32.30
(b) Just Sub-Contractors 30 48.40
(c) Both (a) and (b) 12 19.30
Total §2 100.00
Base : 62 companies, those which have been pursuing offshore
production.
The volume put to offshore production is rising every year. In
1987, 18 companies claimed to have allocated 50% or more of total
orders to overseas plants. In 1988, 31 companies assigned over half
the order quantity to foreign countries, while 40 companies
transferred more than 50% in 1989. Complete production move-out
from Hong Kong has been increasing too. In 1987 and 1988, there
24
were 5 companies whose total orders were not made in Hong Kong. But
in 1989, 7 companies assigned 100% production to other places.
TABLE 7
Allocation of Percentage of Orders to Offshore
Production, 1987 - 1988
No. of Companies
Percentage of Orders (% of Total)
for Offshore Production 1989 1988 1987
100% 7 5 5
(11.3) (8.1) (8.1)
80 - 99% 13 5 2
(21.0) (8.1) (3.2)
50 - 79% 20 21 11
(32.2) (33.8) (17.7)
20 一 49% 22 31 44
(35.5) (50.0) (71.0)
Total 62 62 62
(100.0) (100.Q) (100.0)
Note : Figure in bracket denotes the percentage share of the
respective column's total.
Base : 62 companies, those which have been pursuing offshore
production.
25
Sixty-nine companies will transfer at least part of the
production outside Hong Kong in 1990, while 26 still will not. 7
more companies start to put production abroad this year, inferring
7.7% growth in the companies which set in to go with the stream.
The tendency is that companies will surge to follow suit in the
coming years.
TABLE 8
Transfer of Production Outside Hong Kong in 1990
No. of Companies % of Total
Yes 69 73
No ^ 71
Total 95
Base : 95 companies, all respondents.
In 1990, 12 companies will put all the production out of Hong
Kong. Altogether 46 companies including the complete move-out ones
will allocate 50% or more of total volume to overseas. The boost in
the number of companies in transferring out a significant portion is
more than double in four years' time from 1987 to 1990.
26
TABLE 9
Allocation of Percentage of Orders to
Offshore Production in 1990
Percentage of Orders
for Offshore Production No. of Companies % of Total
100% 12 16.7
80 - 99% 14 20.8
50 - 79% 20 29.2
20 - 49% ^ 33.3
Total 69 100.0
Base : 69 companies, those which will transfer production outside
Hong Kong in 1990.
China, Macau, Philippines, Thailand and Malaysia are the most
popular countries to which Hong Kong has been shifting production.
China ranks the first and 53 companies have been alioting orders to
its factories. Macau is the second attributed to the abundant
supply of labor from China and lower production costs. Our finding
also discloses South Korea and Taiwan becoming more or less the
least favourities. This somewhat coincides with the recent trend
that the production volume assigned to these two countries has been
declining as the result of their strong exchange rates and enormous
1 rise in labor costs.
1 Minq Pao Daily News, 19 October 1989, pi).12
27
TABLE 10
Location of Overseas Factories
Location of Overseas Factories
with Direct Investments or
just Sub-Contractors No. of Companies % of Total
China 53 85
Macau 21 33
Philippines 13 21
Thailand 13 21
Malaysia 11 17
Singapore 9 15
Sri Lanka 8 13
Bangladesh 5 8
Indonesia 5 8
Taiwan 3 5
South Korea 3 5
Mauritius 2 3
Base : 62 companies, those which have been pursuing offshore
production.
Note : Percentage is greater than 100 because companies might
supply more than one answer as they have been using
factories located in various countries.
28
China has become the most important production centre to Hong
Kong. Forty-nine companies have been relying on China as the source
for garment making. In 1989, 39 companies put over 50% of order in
China. Nine out of 39 companies even shifted all production there.
China attracts increasing orders largely due to the availability of
cheap export quota and unlimited labor supply in addition to
proximity to Hong Kong. Labor and land costs added up is 70%
cheaper than in Hong Kong (labor alone at one-tenth the cost).工
1 Hong Kong‘s Manufacturing Industries 1988, Hong Kong Government
Industry Department, pp.17
TABLE
11
Percentage
of
Orders
Transferred
to
Respective
Countries
in
1989
Percentage
of
Orders
for
Offshore
South
Production
China
Macau
Philippines
Thailand
Malaysia
Singapore
Sri
Lanka
Bangladesh
Indonesia
Taiwan
Korea
Mauritius
100%
9 -
- -
一
- -
- -
(14.5)
80
- 99%
20
19
6 -
- -
3 -
(31.3)
(30.2)
( 9.8)
( 4.2)
50
- 79%
10
7 15
11
8 -
- -
-(16.7)
(11.0)
(23.5)
(18.3)
(13.4)
20
- 49%
5 13
8 7
5 6
5 -
3 -
(8.3)
(21.7)
(12.5)
(10.6〉
(
8.1)
( 9.0)
( 7.9)
( 4.2)
1-19%
5 5
5 3
4 8
4 3
3 5
2 2
(8.3)
( 8.3)
( 8.8〉
(
4.2)
( 5.9)
(12.6)
( 5.7)
( 5.0)
( 4.4)
( 7.6)
( 3.0)
( 2.5)
0%
13
18
28
41
45
48
53
56
56
57
60
60
(20.9)
(28.8)
(45.4)
(66.9)
(72.6)
(78.4)
(86.4)
( 90.8)
(91.4)
(92.4)
(97.0)
(97.5)
Total
62
62
62
62
62
62
62
62
62
62
62
62
(100.0)
(100.0)
(100.0)
(IQO.O)
(100.0)
(100.0)
(100.0)
(100.0)
(100.0)
(100.0)
(100.0)
(100.0)
Note
: Figure
in
bracket
denotes
the
percentage
share
of
the
respective
column‘
s total.
Base
: 62
companies,
those
which
have
been
pursuing
offshore
production.
ro
30
Local labor shortage, cheaper foreign labor, foreign country having
free or cheap quota as well as high local production costs are the
crucial forces pushing Hong Kong production outwards. The labor
issue is the most critical to the manufacturers. Fifty-nine
companies replied to have come across this problem in the area of
immense shortage, while 57 companies would like to take advantage of
cheaper foreign labor. The majority reported quota problem and
costs of production also warranted the move.
TABLE 12
Factors Driven to Offshore Production
Factors Driving
Offshore Production No. of Companies % of Total
Local Labor Shortage 59 95.8
Cheaper Foreign Labor 57 91.7
Foreign Country Having Free
or Cheap Quota 47 75.0
High Local Production Costs 44 71.0
Supplying Foreign Market Directly 3 4.2
Generalized System of Preferences 3 4.2
Base : 62 companies, those which have been pursuing offshore
production.
Note : Percentage is greater than 100 because companies might
supply more than one answer as they considered two or more
factors urged offshore production.
31
Even though the local manufacturers can benefit from foreign cheap
labor, free quotas and the Generalized System of Preferences, most
of them still have to deal with headaches resulting from the labor
efficiency, product quality and labor management problems.
TABLE 13
Difficulties in Offshore Production Coordination
Difficulties in Coordinating
Offshore Production No. of Companies % of Total
Labor Efficiency 50 80
Product Quality 49 79
Labor Management 44 71
Exchange Rate Fluctuations 3 4
Facilities Below Standard 3 4
Base : 62 companies, those which have been pursuing offshore
production.
Note : Percentage is greater than 100 because companies might
supply more than one answer, as they met not only one
single difficulty in coordinating offshore production.
32
Sixty companies agreed that Hong Kong garment industry is
undergoing a restructure from the previous production centre to be
the coordinating and marketing centre. Fifty-seven companies
consented to the trend which would continue until 1997.
TABLE 14
Survey Respondents‘ View:
Restructure of Hong Kong Garment Industry
from Production to Servicing
No. of Companies % of Total
Agree 60 63.5
Neither Agree nor Disagree 30 31.5
Disagree 5 51.0
Total 95 100.0
Base : 95 companies, all respondents.
TABLE 15
Restructure Perpetuity till 1997
No. of Companies % of Total
Agree 57 60.0
Neither Agree nor Disagree 32 33.5
Disagree 6 6.5
Total ^ 100.0
Base : 95 companies, all respondents.
33
As the proven fact, Hong Kong garment production function is
steadily shifting to other places. The shift has been primarily
forced by the local accelerating costs of production and labor
scarcity problems, making prices quoted subject to Hong Kong
production not at all competitive. Besides, the survey found out
production is generally moved to the developing countries, the
extent has been intensifying with respect to more and more companies
participated in the move as well as increasing order volume being
relocated.
34
CHAPTER VII
SCENARIO OF TWO SELECTED GARMENT GROUPS
In order to re-confirm our survey findings, visits to two selected
Hong Kong garment enterprises were made. These two names were chosen
because of their representativeness in terms of nature and size of
operations.
Yangtzeklang Garments Group
Company Background
Yangtzekiang Garments is a public company listed in the Hong
Kong Stock Exchange. Dating back to its formation in 1954, the company
has been engaged in the manufacture of all sorts of garments for
exporting, wholesaling and retailing.
Major Markets
As at financial year 1989, the group was generating an annual
turnover of over HK$ 1 billion (US$125 million) along the garment line
of business. Export markets of their products have a wide coverage ail
over the world. Their major markets are as follows (percentage share in
1988):-
TABLE 16
Sales Market Share By Country
Country % U.S.A. 40 U.K. 20 France 20 Hong Kong 6 W. Germany 6
Italy 4 Others 4
too
35
Production Bases
Productions are summarized as below:
Office/Factory ： Hong Kong - self-owned factories of total area
228,000 sq. ft.
Macau - self-owned factories of total area
126,000 sq. ft.
England - factory held on a five year lease
with total floor area of 45,000 sq.
ft.
Malaysia - total factory area of over 300,000
sq. ft. are in use
China - various bases
The following is a summary of regional contribution to total sales
in 1988
TABLE 17
Production Base Distribution by Country
Country %
Hong Kong 60
All Others 40
100
In addition, YGM also sub-contracts to numerous other garment
factories in Hong Kong or Macau
36
Selection Criteria for Production Bases
The following determinants are considered, in descending
importance:-
1. Quota Availability
2. Production cost and product sophistication
3. Buyer‘s Preference
When the company first started offshore production in Singapore
and Malaysia, the primary considerations were labour and quota.
These countries are conceived to have reached the saturation stage
by now and their attractiveness is lacking lustre. The company is
presently expanding towards other parts of the world like Mauritius
and the Caribbeans, where production and labour costs are even
cheaper and quota flexibility higher.
The company firmly believes that Hong Kong will remain for a
long time an important marketing, trading and service centre for
garment manufacturers.
The development of the company over the past three decades from
a Hong Kong bases manufacturer to a multinational company engaging
in manufacture, trading and exporting in an international scale has
to a very large extent coincided with the theories of
internationalization and international product life cycle.
37
M.S. Universe Group
Company Background
M.S. Universe is a private limited company incorporated in Hong
Kong in 1986. Its predecessor company, Universe Textile Corporation
was founded in 1972. The company is engaged in the manufacture and
export of all sorts of fashion garments made of satin, lawn,
sheeting, twill, knitted an denim, fabric, ranging from shirts,
T-shirts, pullovers, jackets, wind-breakers to lingerie, shorts,
pants, skirts and gowns.
Major Markets
As at financial year 1989, the Group was generating an annual
turnover of HK$400 million (US$50 million). Approximately 80% of
their sales are geared for the U.S. market and their 1989 breakdown
of sales by country is as follows:-
TABLE 18
Sales Market Share By Country
Country %
U.S. 83
U.K. 12
Japan 5
100
38
Production Bases
The company is based in Hong Kong. Its headquarter is located in
Tsuen Wan where marketing, sampling, purchasing, finance and
administration are centred.
Manufacturing facilities are available in Hong Kong,
Philippines, U.S.A. and China. Orders received from the buyers are
alloted to these countries taking into consideration factors such as
proximity to market, suitability of production facilities, delivery
schedule and quota availability etc. The following is a breakdown
of each country's production contribution to total sales in 1989:-
TABLE 19
Production Base Distribution By Country
Country %
Hong Kong 35
Philippines 30
U.S.A. 20
China 15
100
Hong Kong - A major production line handling high-quality garments
is in place within a 80,000 sq.ft. self-owned
industrial building. Also garments manufactured in
China are forwarded for finishing and packaging here.
In the meantime, the company is in close association
with over 400 satellite factories for sub-contracting
purposes.
39
China - There are 10 regular sub-contractors, owned by Hong
Kong people and located within Guangdong province,
handling middle/low quality and basic items Fabrics
and accessories are supplied to the sub-contractors
for processing only. The primary advantage is cheap
labour and to a lesser extent, quota availability.
Philippines - A factory of area 100,000 sq.ft. with over 1,00
workers in employ was set up in 1986. Like China,
garment fabrics and accessories are provided from
Hong Kong; nevertheless, finished goods are shipped
directly to buyers. Like China again, the major
attractions are labour and quota availability•
U.S.A. - A factory of area 50,000 sq.ft. employing some 200
workers was put in place in 1987. Outputs are all
for the U.S. market. Cheap labour is not longer the
major attraction here. Instead, the company chooses
to process orders of urgent nature or of expensive
quota categories here. One other major reason is
that the products are provided to Aca Joe, a U.S.
based popular fashion chain store majority owned by
the company•
40
Selection Criteria for Production Bases
The choice of the 3 offshore production bases was based on
various considerations.
China was chosen primarily because of labour advantage, both in
respect of cheap cost and common language. Adjacent location to
Hong Kong was also important as this facilitated convenient
accessibility.
The Philippines was preferred to other South East Asian
countries because of its better infrastractural set-up than say
Indonesia & Thailand. Moreover, English standard of workers was
also considered adequate for coininunication purpose.
The decision to set up a factory in San Francisco was mainly
prompted by quota advantage and market accessibility. As and when
quota for a particular line of garment becomes expensive, production
can be readily transferred to the factory there thus problem is
solved.
41
It is therefore evident that garment manufacturers in Hong Kong
responded to changing competitive environment by shifting production
bases offshore. The offshore attractions are similar for our
interviewees. Their experience co-incided with the theoretical
framework of international product life cycle, let alone the
decision of M.S. Universe Group in setting up of San Francisco
factory, which is not entirely relevant as it was primarily aimed at
market accessibility.
42
CHAPTER VIII
CONCLUSION
After the analyses of Hong Kong garment industry development
with the help of our survey on manufacturer‘s extent of offshore
production and interviews confirming similar strategic moves by two
representative garment groups, we have in front of us data and facts
all justifiably conclude to say that local production is phasing
out. Before long. Hong Kong has inclined to act more like the
controlling, coordinating, administrative and marketing centre.
Irrefutably, China has contributed much to this transformation, in
particular the Southern part which has offered enormous cheap labor
and capacity serving as a relief to local production.
Nevertheless, there are still some manufacturing carried out in
Hong Kong. Manufacturers could hardly survive if they go on
producing basic items because prices no longer have any competitive
advantage. Evidently, a number of them have geared themselves to
the high-end products and re-equipped the plants through automation
or labor-saving programmes to enhance their productivity.
Penetrating into new markets like Japan, Sweden and Switzerland is
envisaged as the long-run growth strategy since high-end products
could only cope with sophisticated and quality-conscious demands.
43
On the other hand, the majority of manufacturers have
restructured the local operations to be the controlling headquarter
for the group. Many well-established local manufacturers like Laws
Fashion (Bossini), Fang Brothers (Toppy), Manhattan Garments
(G-2000) and M.S. Universe (Aca Joe) have been redirecting efforts
on marketing and embarked on new programmes involving promotion and
direct selling of their branded products in foreign and local
markets. Some have built up overseas sales distribution network by
opening retail outlets in New York, San Francisco, Singapore,
Malaysia and Taiwan. In the manufacturing aspect, they play the
coordinating role between the ‘front end' and the 'back e n d、
Front end functions include sourcing, marketing, design and
product development. They not only import technical know-how and
production management to offshore factories, but also provide
technical support whenever necessary. Staff are being sent on
regular basis to monitor overseas production progress and for
upkeeping quality standard and delivery schedule. Some even set up
regional offices throughout Asia in order to work closely with
factories for clarification of production details.
For the back end functions, they would conduct sampling,
warehousing, final quality control, shipping and financing here.
Garments manufactured in China are forwarded to Hong Kong for
finishing and packaging. Furthermore, small production space is
maintained to cater for spot or urgent orders.
44
In fact, industries in Hong Kong have been undergoing a
structural transformation process. The garment industry as the
largest industry is perhaps the pioneer in this process and is
transforming in an obvious way and to a significant extent. It is
becoming more like a regional servicing centre rather than being a
pure production centre as previously. This evolution process
appears co-incident to the framework of international product life
cycle. It is interesting to note that based on the prediction of
the international product life cycle theory, the local
manufacturing function would be gradually withdrawn to a trickle in
the future. At the moment, no one knows exactly how long the
coordinating and marketing function would last, and eventually v/hen
the entire industry be displaced.
45 APPENDIX 11
Relative Share of Domestic Exports of Major Manufacturing Industries,
1950 - 1988
(Share in percentage terms)
Industry 1950# 1955# 1960 1965 1970 1975 1980 1985 1986 1987 1988
Clothing 4.4 13.0 35.2 35.3 35.1 44.6 34.1 34.6 33.9 33.5 30.9 Electronics … 0.1 * 4.2 8.7 12.0 19.7 20.8 21.7 21.5 25.5 Watches & Clocks … 0.5 0.6 0.6 1.7 3.5 9.6 7.4 7.6 7.1 8.0 Textiles 17.6 20.7 19.3 16.6 10.3 9.4 6.7 6.0 7.1 8.2 7.1 Plastics … 0.3 9.1 13.1 12.3 8.6 9.0 8.2 8.3 7.1 5.4 Toys & Dolls - 0.7 4.0 7.5 8.5 6.4 6.9 7.2 7.2 6.1 4.4 Metal Products 2.4 4.1 4.1 3.1 2.8 2.6 3.0 2.3 2.3 2.3 2.6 Electrical Appliances - * 0.2 0.3 0.3 1.2 2.9 3.5 3.2 2.9 2.5
Printing - 1.4 1.1 0.9 0.7 1.0 1.1 1.3 1.3 1.3 1.4 Photographic &
Optical Goods - 0.3 0.2 0.4 0.6 0.9 1.2 1.3 1.2 1.2 1.3
Note : # including re-exports
Source: Hong Kong Trade Statistics, Census & Statistics Department, various issues
46 APPENDIX 11
Relative Employment Share of Major Manufacturing Industries,
1950 - 1988
(Share in percentage terms) Industry 1950 1955 1960 1965 1970 1975 1980 1985 1986 1987 1988
Clothing 2.4 3.9 23.8 25.6 28.8 37.9 30.9 34.5 34.5 34.1 33.9 Electronics 0.1 1.5 7.0 7.9 10.4 10.1 11.9 12.2 13.0 Plastics 0.3 0.8 8.3 12.8 12.9 9.4 9.7 10.0 10.3 9.6 8.6 Textiles 30.6 31.2 24.4 19.1 14.0 12.5 10.0 7.8 8.1 8.6 8.5 Metal Products 17.6 19.4 8.5 6.5 6.5 6.7 7.0 5.6 5.8 5.7 5.8 Toys Sc Dolls 3.3 5.9 7.2 5.5 6.2 6.0 6.5 5.6 4.7 Printing 7.1 5.6 4.0 4.4 3.3 2.9 3.0 3.6 3.7 3.9 4.1 Watches & Clocks 1.1 1.3 1.8 2.3 5.5 4.3 3.8 3.6 3.7 Electrical Appliances - 0.1 0.4 2.2 0.5 0.9 1.8 2.3 2.3 2.4 2.1
Photographic &
Optical Goods 0.3 0.7 0.6 0.5 0.9 1.3 1.3 1.3 1.2
Sources : (1) Figures for 1950 to 1970 from Employment Statistics, Labour Department.
(2) Figures for 1975 onwards from Reports of Employment, Vacancies and Payroll Statistics, Census & Statistics Department.
47 APPENDIX 11
Number of Establishments of The Clothing Industry in 1988
Size of Establishment No. of % Share of the (Number of Persons Engaged) Establishments Industry
1 - 1 9 6,999 67.2 20 - 49 1,800 17.3 50 - 99 1,062 10.2
100 - 199 396 3.8 200 - 499 129 1.2 500 - 999 21 0.2
1000 and above 5 *
Total 10,412 100.0
Source: Report of Employment, Vacancies and Payroll Statistics, Census & Statistics Department.
APPE
NDIX
4
Cott
on Ga
rmen
t Qu
ota
Hold
ings
of
Majo
r Co
untr
ies
to t
he US
A
(Uni
t in do
zen)
Ca
tego
ry
Repu
blic
Huiiiber
Desc
ript
ion
Hong
Kon
g Ch
ina
Phil
ippi
nes
Sri
Lank
a In
done
sia
Mala
ysia
Ja
maic
a of K
orea
Ma
urit
ius
Thai
land
333/
334
Coat
s, fiien's
& boys，
26
3,60
1 31
1,61
3 15
6,53
8 27
2,42
0 35
,550
14
0,45
0 -
100,
000
- -
335
Coat
s, wo
men'
s
& gi
rls'
32
7,92
3 31
7,52
5 10
1,89
0 17
4,90
0 90
,898
70
,225
-
i05，
000
50,5
62
-
33D
Dres
ses
(inc
ludi
ng
丨84，587
133，
90C
370,
788
80,5
60
86,1
64
259,
702
98,0
00
46,3
89
44.5
03
-
unif
orfo
s)
338/
559
Knit
sh
irts
&
blou
se o
ther
2,
788,
920
2,04
5,16
0 1,
235,
960
795,
000
681,
738
643,
863
736,
700
803,
661
238,
205
-
than
ta
nk to
ps
358/
539(
1) Ta
nk to
ps,
tops
^ ha
lter
s, k
nit
2,09
5,55
0 1,
552,
500
- 66
2.50
0 -
- -
340
Shir
ts,
not
knit
2,
670,
686
734,
514
677,
069
625,
400
467,
116
787,
475
344,
500
450,
000
331,
709
-
！41
Blou
ses,
not
knit
2,
736,
657
575,
680
599,
219
625,
400
530,
241
364,
098
432,
586
190.
592
268,
540
-
342
Skir
ts
culo
ttes
49
5.15
2 22
7,55
0 30
9,05
1 41
3,40
0 20
0,09
2 24
4,45
5 17
5,00
0 78
,371
17
4,90
0 -
345
Swea
ters
40
0,97
9 10
9,20
0 95
,506
10
7,06
0 24
4,15
8 93
,739
10
6.74
2 94
.779
11
9,66
^ 18
3,29
6
347/
348
Trou
sers
, sl
acks
& sh
orts
(o
uter
) 6,
383,
725
2,02
4,63
0 1,
123,
600
826,
800
883,
734
265,
669
795,
175
552,
661
477.
530
-
350
Dres
sing
go
wns,
incl
udin
g
bath
robe
s be
ach
122,
278
119,
700
- 74
,200
72
,533
-
- 13
,492
-
-
robe
s, co
ungi
ng
gown
s, h
ouse
co
ats
351
Pyjainas a
nd ot
her
riightwear
1,14
1.77
3 38
8,50
0 33
7,08
0 17
4,93
8 13
8,87
2 15
1,68
6 -
113,
611
- -
352
Unde
rwea
r 5,
621,
452
1,49
5,39
5 1.
348,
320
848,
000
二―
._J
OMOO
14
4,23
4 —
25,2
33,0
61 10
,035
,917
6,
355,
021
5,68
0,57
8 3,
430,
896
3,01
9,36
2 2,
988,
703
^39l
",36
9 m
'm
Not5
:丨i)
Qu
ota
peri
od of Ho
ng Ko
ng,
Chin
a, R
epub
lic
of Ko
rea，
Mal
aysi
a, J
amai
ca,
Phil
ippi
nes
and
Thai
land
be
ing
1/1/
89 -
12
/3/8
9,
'iii
Qu
ota
peri
od of S
ri L
anka
an
d In
done
sia
bein
g 7/
1/89
-
3/30
/90
(iii
) Qu
ota
peno
ci o
f Ma
urit
ius
bein
g 1/
1/89
-
9/30
/89.
g
3.7」''：
？：丨ij
Figu
res
for
Hong
Kon
g fr
om th
e Tr
ade
Depa
rtme
nt.
‘ii j
Fiqijres f
or th
e re
st o
f co
untr
ies
from
th
e Lo
gic
Inte
rnat
iona
l In
c.
APPENDIX 5
Wool
Garment Quota Holdings of
Major Countries to
the
USA
(Unit in
dozen)
Category
Republic
^•er
Description
Hong Kong
China
of
Korea
Sri
Lanka
Malaysia
Jamaica
Indonesia
Philippines
Mauritius
433
Suit-type Coats,
MSB
- 21,715
10,568
- -
4,〇96
-
434
Coats, M
and
B 10,219
12,373
6,802
3,030
- _
435
Coats, W
and
G 73,420
22,725
31,917
6,565
13,985
-
436
Dresses
95,624
14,140
13,511
- _
438
Knit shirts
and
blouses
839,260
24,745
64,071
- 11,446
- _
442
Skirts
84,395
39,390
45,660
13,815
17,046
- 10,795
443
Suits, M
and
B 9,175
10,605
26,838
- -
2,014
-
444
Suits, W
and
G 12,032
15,766
4,146
- _
445/446
Sweaters
1,298,097
259,200
52,465
95,950
27,056
47,945
52,030
25,133
-
447/448
Trousers, slacks
and
shorts (outer)
65,280
94,217
117,002
6,060
- 10,000
- 8,041
-
2,487,502
514,876
372,980
125,420
69,533
57,945
52,030
39,284
10,795
Notes :
(i)
Quota period of
Hong Kong, China, Republic of
Kopea, Malaysia, Jamaica and
Philippines being 1/1/89 -
12/31/89.
(ii)
Quota period of
Sri
Lanka and
Indonesia being 7/1/89 -
6/30/90.
(iii) Quota period of
Mauritius being 1/1/89 -
9/30/89.
Sources: (i)
Figures for
Hong Kong from the
Trade Department.
(ii)
Figures for
the
rest of
countries from the
Logic International
50 APPENDIX 11
Value of Domestic Exports of the Clothing Industry by Major Markets,
1960 - 1988
(Value in HK$ Million)
Market 1960 1965 1970 1975 1980 1985 1986 1987 1988
U.S.A. 376 624 1,657 3,148 8,076 24,790 26,921 32,023 30,986 (37.2) (35.2) (38.2) (30.9) (34.7) (55.2) (51.6) (49.0) (46.0)
W. Germany 84 293 628 1,997 4,262 4,561 6,328 8,642 9,392 (8.3) (16.5) (14.5) (19.6) (18.3) (10.2) (12.1) (13.2) (14.0)
U-K. 209 333 639 1,587 3,194 3,872 4,869 6,091 7,214 (20.7) (18.8) (14.7) (15.6) (13.7) (8.6) (9.3) (9.3) (10.7)
Japan 1 4 103 313 717 1,682 2,412 3,709 3,842 (〇.l) (0.2) (2.4) (3.1) (3.1) (3.7) (4.6) (5.7) (5,7)
Canada 45 49 165 401 664 1,795 2,406 2,413 2,604 (4.5) (2.8) (3.8) (3.9) (2.9) (4.0) (3.9) (3.7) (3.9)
Others 295 470 1,145 2,756 6,345 8,212 9,586 12,443 13,271 (29.2) (26.5) (26.4) (27.0) (27.3) (18.3) (18.4) (19.0) (19.7)
Total 1,010 1,773 4,337 10,202 23,258 44,912 52,162 65,321 67,309
(100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0)
Note : Figure in bracket denotes the market's percentage share of the respective column's total.
Source: Hong Kong Trade Statistics, Census & Statistics Department,
51 APPENDIX 11
Reported Vacancies in the Weaving Apparel Industry
7 8 7 9 8 0 8 1 8 2 8 3 8 4 ^ 8 6 8 7
Wearing Apparel
except Footwear 27,635 27,856 17,689 22,595 16,243 19,038 18,187 11,630 13,356 20,207
Source : Employment and Earnings Statistics Section, Census and Statistics Department
t i j
I
I
I I II I ‘I «
APPENDIX 8
Flatted Factories -
Average Rentals
(KK$
/ sq.m. per
month)
1987
1987
1987
1987
1987
1988
1988
1988
1988
1988
肚ea
1st
2nd
3rd
4th
whole
1st
2nd
3rd
4th
whole
(Average size)
Smarter
Quarter
Quarter
Quarter
year
Quarter
Quarter
Quarter
Quarter*
year*
Hong
Kong
41.4
(44.6)
(51.5)
(49.7)
43.5
(73.8)
62.3
67.6
78.1
69.5
(306
sq.m.)
Kowloon
(43.4)
(39.2)
(33.2)
(48.7)
41.1
(56.9)
(56.7)
68.3
(66.8)
67.7
(242
sq.m.)
New
Kowloon
41.8
(43.1)
(58.0)
(52.6)
48.0
(74.2)
58.9
60.7
70.3
62.3
(313
sq.m.)
New
Territories
35.3
40.6
55.8
46.9
42.1
48.4
52.5
53.2
52.8
52.6
(202
sq.m.)
Note
: (i)
* Provisional
(ii)
( )
Indicates less
than
20
transactions
(iii)
Average rentals are
in
respect of
upper-floor units only.
(iv)
Average size
relates to
the
units analysed during 1987
and
1988.
Source : Rating &
Valuation Department
ro
APPENDIX 9
Flatted Factories -
Average Prices
(HK$
/ sq.m.)
1987
1987
1987
1987
1987
1988
1988
1988
1988
1988
处 e
a 1st
2nd
3rd
4th
whole
1st
2nd
3rd
4th
whole
(Average size)
Quarter
Quarter
Quarter
Quarter
Year
Quarter
Quarter
Quarter
Quarter*
year*
Hong
Kong
4,540
4,900
5,814
6,429
5,426
6,389
7,529
8,444
9,561
7 729
(183
sq.m.)
‘
Kowloon
5,509
5,645
6,609
7,356
6,343
8,046
9,015
10,022
(10,856)
9,249
(239
sq.m.)
New
Kowloon
4,664
5,364
5,979
6,367
5,576
6,672
7,862
8,807
9,158
8,058
(201
sq.m.)
New
Territories
3,615
4,056
4,604
4,857
4,273
5,427
5,954
6,335
6,888
6,054
(171
sq.m.)
Note
: (i)
* Provisional
(ii)
( )
Indicates less
than
20
transactions
(iii)
Average prices are
in
respect of
upper-floor units only.
(iv〉
Average size
relates to
the
units analysed during 1987
and
1988.
Source :
Rating &
Valuation Department
U)
54 APPENDIX 10
Comparison of Productivity of Manufacturing Industries Among Asian Countries
Average Growth Rate
Country 1980 1981 1982 1983 1984 1985 (1980 - 85) (In U.S. Dollars) (%)
Singapore 10,419 11,947 11,600 13,028 14,398 14,285 5.90
Taiwan 7,930 8,885 8,575 8,958 9,528 9,791 4.02
Hong Kong 6,510 6,856 6,636 6,867 7,657 7,334 2.20
South Korea 6,212 7,011 6,732 6,812 7,412 6,920 1.88
Japan 22,035 23,768 22,148 23,740 25,329 26,500 3.48
Source :
55 APPENDIX 11
Number of Establishments and persons engaged in the Clothing in Industry,
1950 - 1988
Year No. of Establishments No. of Persons Engaged
1950 41 1,944
(2.8) (2.4) 1955 99 4,261
(4.1) (3.9) 1960 970 51,918
(18.1) (23.8) 1565 1,514 87,454
(17.5) (25.6) 1970 3,491 158,025
(21.1) (28.8) 1975 8,047 257,595
(25.9) (37.9) 1980 9,499 275,818
(20.9) (30.9) 1985 10,307 292,789
(21.4) (34.5) 1986 10,392 299,932
(21.4) (34.5) 1987 10,556 298,377
(20.9) (34.1) 1988 10,412 286,659
(20.6) (33.9)
Note ： Figure in bracket denotes the percentage share of all manufacturing industries in the respective year.
Sources : (i) Figures for 1950 to 1970 from Employment Statistics,
Labour Department
(ii) Figures for 1975 onwards from Reports of Employment, Vacancies and Payroll statistics. Census & Statistics Department.
56 APPENDIX 11
Dear Manufacturers,
RESTRUCTURING OF THE GARMENT INDUSTRY IN HONG KONG
We are the students of the three year MBA Programmes of the Chinese University of Hong Kong. Hong Kong had been the garment production centre, but has long been undergoing changes to become a co-ordinating and marketing oriented centre. We are very interested in this industry restructure which we select for our research project.
We would be grateful if you can take a few minutes to answer the enclosed questionaire and return it with the reply-paid envelope before January 12, 1990.
All replies will be kept in the strictest confidence and used for study purpose only.
Thank you very much for your co-operation. •
57 RESEARCH ON THE RESTRUCTURING OF HONG KONG GARMENT INDUSTRY
Please tick where appropriate :-
1. What type of business is your company operating?
Textile Manufacturing (Please skip to Question 12) Clothing Trading Clothing Manufacturing and Trading Others (Please specify)
2. Your company has engaged in the business since •
3. Has your company been moving production outside Hong Kong?
Yes No (Please skip to Question 6)
4. The type of offshore factories with which your company places orders :
(a) Factories with Direct Investments
(b) Just Sub-Contractors (c) Both (a) and (b)
5. The percentage of orders your company allocated to offshore production was:
In 1989 about % ‘
In 1988 about Z Z ^ H ^ %
In 1987 about ZIIIZII %
6. Will your company transfer production outside Hong Kong in 1990?
Yes No (Please skip to Question 12)
7. The percentage of orders your company allocated to offshore production in 1990 will be about %.
8. The overseas factories which your company has been using are located in:
China Philippines Macau Malaysia Taiwan Singapore Thailand Bangladesh Indonesia Sri Lanka South Korea Others
58 9. The distribution of orders among overseas factories in 1989 is:
China % Macau Taiwan Thailand ZIZIIIZIIIZII Indonesia South Korea Philippines Malaysia Singapore Bangladesh Sri Lanka Others
Total : 100 %
10. The factors driven your company to offshore production are:
Foreign Country Having Free or Cheap Quota Local Labor Shortage Supplying Foreign Market Directly Cheaper Foreign Labor Generalized System of Preferences Others High Local Production Costs
11. Major difficulties your company faces in co-ordinating offshore production are:-
Labor Management Product Quality Labor Efficiency Others Exchange Rate Fluctuations
12. i) The Hong Kong garment industry has been restructuring from the previous production centre to become the co-ordinating and marketing centre:-
Agree Neither Agree Nor Disagree Disagree
ii) The above trend will be perpetual in 1990 till 1997.
Agree Neither Agree Nor Disagree Disagree
Please fill in the below (optional). All information provided will be completely confidential:-
Company Name
Telephone No. Your Name
Position
Date
59 BIBLIOGRAPHY
Books and Periodicals
Cateora, Philip R., International Marketing, 5th ed. Richard D. Irwin, Inc., 1983.
Chen, Edward K.Y., "Multinationals from Hong Kong." Edward Chen,
Jorge Katz, Bernardo Kosacoff and Annibal Viliela eds. The New Multinationals: the Spread of Third World Enterprises. N ^ York: John Wiley & Sons, pp. 88-136.
Commerce and Industry Government of Hong Kong, Textiles Hong Kong.
Gilreath, Charles M., Jr., "Offshore Sourcing - Hong Kong: A World
Apparel Player," Bobbin vol: 29 Iss: 10, June 1988, pp. 106-107.
- G o l d s t e i n , Carl, "Hong Kong Borders on a Garment-Making Boom," Far
Eastern Economic Review (Hong Kong) vol: 139 Iss: 8, 25 February 1988, pp. 70-72.
Hong Kong Economic Survey Limited, Building Prosperity: A Five - Part Economic Strategy for Hong Kong‘s Future, September, 1989.
一、Hong Kong Equity Research, A Review of the Hong Kong Textile and Garment Industry, April 1989.
Hong Kong Government Industry Department, Hong Kong‘s Manufacturing Industries 1988, 1989.
Hong Kong Trade Development Council, Hong Kong Trade Review, 1986 June 1987. ^
Hong Kong Trade Development Council, Research Department, Hong Kong‘s Clothing Industry, No. 1, December 1989.
Kaynak Erdener, International Marketing Management, Praeger Publishers, 1984.
Keating, John, "A Chill Wind Blows," Asian Business (Hong Kong) Vol: 24 Iss: 7 July 1988, pp. 48-53.
Kotler, Philip, Marketing Management Analysis, Planning and Control. 4th ed., Prentice-Hall International, Inc., 1980.
Lau, Ho Fuk, "Development Process of the Hong Kong Manufacturing Companies: With Special References to the Garment Industry," Paper presented at the "International Conference on the Future of Industrial and Trade Development in Hong Kong", 4-6 January 1989, Hong Kong
60 Line Apparel, "The Fibre Products under the Control of the new
Multi-Fibre Agreement," Vol 37, pp. 61-66.
Mcbride, Jo, Doing Business in Today's Hong Kong, American Chamber of Commerce in Hong Kong, 1980.
Paliwoda, Stanley J, International Marketing, William Heinemann Limited, 1986.
Porter, Michael E., Competitive Strategy Techniques for Analyzing Industries and Competitors, the Free Press, 1980.
Rating and Valuation Department, Hong Kong, Property Review 1989 : A Summary of Supply, Vacancies, Rentals and Purchase Prices.
Sekaran, Uma, Research Methods For Managers, A Skill-Building Approach, John Wiley & Sons, Inc., 1984.
Survey Research Hong Kong Limited, Clothing/Textile Industrial Study, January, 1989.
Torre, Jose de la, "Product Life Cycle as a Determinant of Global Marketing Strategies," Atlanta Economic Review, September -October, 1975, pp. 9-14" ‘
Wells, Louis T. Jr., "A Product Life Cycle for International Trade?" Journal of Marketing vol. 32, July 1968, pp. 1-6.
Wells, Louis T. Jr., "Foreign Investment from the Third World: The
Experience of Chinese Firms from Hong Kong," Columbia Journal of World Business, Spring 1978, pp. 39-49. “
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I 兔 ^ 1 4 ^ t 5 力 “i对^^刊―
^ a e ^ f 1 I e fe ̂ .f ^^ u pg t o ^
a ？k Kt 卜 彳 約 , 十 斯 , 4 丨 身 ‘
^ % 'I f t 4 ^^ ̂
, /
61
Interview
Fung, Yui-ching, Yangtzekiang Garment Manufacturing Co. Ltd., Hong Kong Interview, 19 February 1990.
Shek, Wang-sang, M.S. Universe Textile Ltd., Hong Kong. Interview, 14 March 1990.
C U H K L i b r a r i e s
• • • I I I
