Chinese Market Presents Familiar Risks, Fresh Opportunities

December 31, 1999

Shanghai, China - The copying of competitors' designs is a way of life in the People's Republic of China, and this disturbed many fabric suppliers who attended the Intertextile fair held here in October. Firms are hesitant to do business with China because of its rampant copying. Already, it has cut into the business of high-end producers like Jover as well as volume players like Culp (USA). Culp has been exporting to China for about five years through Peter Niu, principal of Hua Yang Trade and Culture Corp. and Beijing Hengxin Culp Fabric Company. ''It's very hard and very discouraging when all of your designs are copied at $3, especially when you charge the customer $13 for the same design,'' said Enriqueta Boronat, Export Manager for Jover International of Spain. ''When we started with Culp in China five years ago, we didn't find copies of our items. Today, you can walk around Intertextile and see copies of our best sellers. We see similar items on the Chinese market for $3.50 a meter while we're charging $7,'' Niu complained. He knows that he is losing sales, but he's virtually powerless to do anything about it. Copy infringement cases routinely fail to hold up in China where the copyright laws are generally unenforced. There was a copyright office at Intertextile sponsored by Messe Frankfurt and manned by Hong Ying, an employee of NTD Patent and Trademark Agency Ltd., trademark attorneys in Hong King and Beijing. However, Ying said, ''Nobody has approached us with any kind of case for copying at this fair.'' The Chinese market uses low priced labor and old equipment. Sources said Chinese factory workers make about $60 a month, or about $720 a year. In 1997, average annual pay for Chinese workers was $600, so salaries are rising along with the booming Chinese economy. In addition to these conditions, which put Niu at a disadvantage, he must also pay a 40 percent duty to bring Culp products into China from America. Yet, the decorative fabric business is growing in China as it strains its resources to supply overseas importers and domestic customers alike. In the past three years, Chinese decorative fabric mills have improved their techniques and quality. Some in the industry who are trying to build roads to profit have necessarily found ways to limit the chance of their being copied. ''Because Chinese mills prefer to copy, we have to carefully control the distribution of Mastercraft designs,'' said Chow Chung Fai of Sunworlds International Ltd., a Hong Kong-based agency for Mastercraft. Boronat, who has been working for 20 years in China agreed. She claims that controlling distribution is ''the secret of success in China.'' Kenny Wong, principal of H.K. bond Faith Textiles Co., Jover's agent in Guangzhou said that some Chinese furniture makers buy the original article first and then have it copied by another supplier. To avoid being copied, Wong looks at all potential clients with a discriminating eye. ''We carefully select the customer and never leave samples with them,'' he said. However, Henry Rawson, principal of Small World based in the U.K. sees ''no reason why Chinese textiles would be synonymous with copying. Our approach to the bedding market is to produce distinctive designs in China,'' he said. ''Our goal is to produce 30-40 designs a month in our Hong Kong-based design studio.'' Small World has recently sold 25 percent of the company to Turner & Bianca, a major bedding importer and distributor in the U.K. ''We also purchased a majority interest in a Shandong, China factory to produce our bedding ranges,'' said Rawson, who has been in the business for seven years and turning over $14 million in sales. ''Our aim is to be a major Chinese bedding supplier to all of the best retailers in the U.K., France, Spain, Germany, Holland as well as in Australia and New Zealand.'' He markets his products under the Margaret Muir brand, named after his grandmother. The Belgian company, Bekaert, is also undeterred by the Chinese copy-culture. According to Bekaert Export Director Herman Tack, the company plans to construct a wholly owned mattress ticking plant here in the near future.

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