The latest Sino-US textile trade agreement, though seen as unfairly restrictive to mainland exports, brought a welcome end to months of uncertainty that have vexed manufacturers in the Yangtze River Delta region, the heartland of China's textile industry.

Earlier this week, China's commerce minister Bo Xilai and US trade representative Rob Portman agreed to put quotas on 21 categories of Chinese textiles and garments, and limit the growth rate of textile exports in the next three years to between 10 to 17 per cent.

Liu Yidong, a manager of Suzhou Meishanzi Garments Co Ltd in East China's Jiangsu Province, said he is generally optimistic about the new deal.

The tumultuous textile export market in the year has taken a heavy toll on the lingerie producer. "Before the deal, we didn't know whether we should accept orders. We were not sure what the policy would turn out to be," he said. "It's difficult to measure our loss, but I am sure it was big."

Even with a general agreement in place, Liu said they could not make any big move before a specific lingerie quota and the exact allotment for his company were determined.

Nie Zhenhong, a senior manager of Nanjing Textile Import and Export Co Ltd, also in Jiangsu, said she had doubts about the terms of the agreement. But "it's still better than no agreement," she said.

"After all, we now have set a direction of what to do next," she said. But she is still unsure of the effect on the exports of merchandise in the restricted categories.

"We would still decline to accept orders of goods in those (restricted) categories," she said.

To gain greater initiative, Nie said her company is trying to change its sales approach.

It will focus more on the production of garments in categories that are not restricted, and change garment styles and use higher quality materials if necessary to maximize profit margins.

Her company has also set up processing plants in Mongolia and Viet Nam to avoid trade barriers. Last year, China exported US$97.4 billion worth of textiles and garments to all markets. About half of them came from the Yangtze River Delta region.

The region naturally bore the brunt of the year's frequent trade frictions and orders suffered considerably. At the Chinese Export Commodities Trade Fair that ended on October 30 in Guangzhou, China's garments and textiles transactions dropped by 10 per cent, while exports to the United States plummeted by up to 44 per cent over the spring session in April.

But Gong Wei, a textile analyst from Xiangcai Securities Research Institute, said through years of ordeals in the market, the region's textile companies have matured considerably.

"The trade frictions with the United States and Europe don't have a great impact on our textile companies, even less than the revaluation of the RMB," he said.

Gong predicted there would be slight increases in the next few months in the stock market, but he said while small textile producers think the deal a big deal, the listed ones will take it only lightly.

Though the deal has not reached the expectations of both the government and the industry, its significance to mainland manufacturers cannot be ignored.

Ruby Zhu, economist with the Hong Kong General Chamber of Commerce, said the deal is very positive for Sino-US trade relations. "It's an example of how the two countries can solve their trade disputes in a good way," she said, "Even though it may be difficult."

(China Daily November 12, 2005)