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Xinjiang cotton at crossroads of new Silk Road

Updated: Feb 15,2016 8:39 AM     Reuters and China Daily

An employee of Huafu Top Dyed Melange Yarn works at the company’s plant in Aksu, the Xinjiang autonomous region.[Photo/Xinhua]

1 million textile jobs to be created by 2023 in the autonomous region

The Youngor cotton spinning factory is one of the biggest employers in Aksu, an agricultural town on the edge of the Taklamakan desert in the Xinjiang Uygur autonomous region.

Youngor, one of China’s largest shirtmakers, opened the plant in 2011 to be closer to the main cotton-growing region in the Xinjiang region. Soon it will be joined by others: China wants to create 1 million textile jobs in Xinjiang by 2023.

According to the regional government’s 13th Five-Year Plan (2016-2020), Xinjiang will become a key hub for textile production. It will also extend the industry chain from cotton spinning to making garments. By 2020, Xinjiang is expected to produce about 500 million garments annually and create more than 600,000 jobs.

Aksu, in southern Xinjiang, will become one of three textile cities in the region, the plan for 2016-2010 said. It also will encourage residents to start their own textile workshops to make traditional ethnic clothing and carpets.

Xinjiang fits into Beijing’s larger vision of shifting labor-intensive industries such as textiles out of the Pearl River Delta and into the interior. China is putting less value on being “the world’s workshop” amid labor shortages and competitive pressures from Southeast Asia.

The textile hub is also a key initiative in President Xi Jinping’s Belt and Road Initiative, which seeks to link development from western China to Central Asia and onward to Europe.

“We must promote employment as a permanent cure to maintain social stability and achieve long-lasting peace, and particularly solve the unemployment problem for people in southern Xinjiang,” a 2014 official document stated, outlining a massive expansion of Xinjiang’s textile industry.

Xinjiang, which is home to more than half of China’s Muslims, has always been China’s front line on religious extremism that is blamed for terrorist attacks in the region in recent years. The regional government believes employment and better education can help young people stay away from such extremism.

Farmers harvest cotton in Changji, Xinjiang.[Photo/Xinhua]

Migrating to cities

Almost all of the 520 employees at the Youngor factory are from the Uygur ethnic group. The average factory floor salary is around 3,000 yuan ($456) a month, and comes with food and lodging. That compares to roughly 4,000 yuan for textile workers in the southern China factory belt.

“There are still a lot of people to come out of (Xinjiang’s) countryside,” said Xu Zhiwu, general manager at Youngor’s Aksu factory, referring to government data that show 2.6 million rural residents sought work in Xinjiang’s cities in 2014.

Xinjiang Youngor Cotton Spinning, a unit of Youngor Group, is planning to expand its factory, built among apple orchards on Aksu’s outskirts, Xu said.

Yarn maker Huafu Top Dyed Melange Yarn is already at work on a 5 billion yuan plant outside Aksu. And Texhong Textile Group, one of China’s top spinners, is targeting a 1-million spindle project in the region.

“The scale of the project has to be big to ask for more favorable policy support from municipal governments,” Texhong reported in a stock exchange statement, referring to subsidies Beijing offers to lure firms to the region.

Cotton to garments

More than 60 percent of China’s cotton crop is grown in Xinjiang. It’s a major advantage for companies that process the fiber into cotton thread to be close to supplies. The automated spinning factories also benefit from electricity prices around half those in coastal provinces.

Spinning needs relatively few workers. Creating 1 million textile jobs will require a build-out of the entire industry chain, from dyeing to weaving to garment production. And that poses a far greater challenge than attracting more spinners.

Dyeing, bleaching and washing of fabric would demand substantial supplies of water in the arid region. Much of Xinjiang, including Aksu, is classified as “high risk” for water stress by the nonprofit World Resources Institute. The institute has designated Shihezi and Kuerle, two cities also targeted for major textile expansion, as “extremely high risk”.

Aksu is consulting with textile companies on plans to build a 50,000-metric ton wastewater treatment facility to handle discharges from future dyeing operations, said Youngor’s Xu, who has attended recent government meetings on the issue.

A similar facility is also under discussion for Shihezi, near Urumqi, but some companies are wary of proceeding with dyeing in the area.

“We are not sure whether the capacity of the facility could meet all the demand and protect the environment from damage,” said Zhao Yang, general manager of three Xinjiang spinning factories owned by shirt maker Esquel in Hong Kong.

“Compared with Guangdong, where our fabric mill sites are, Xinjiang’s water is very scarce,” he said.

Xinjiang’s location, more than 4,000 kilometers from Shanghai in the east or Guangzhou to the south, is also a hurdle for companies rushing to meet tight deadlines for overseas clients, Xu said.

Like Youngor, Esquel, maker of men’s shirts for brands such as Lacoste, Tommy Hilfiger and Ralph Lauren, has no plans for downstream operations in Xinjiang, Zhao said.

Garments made in Xinjiang are displayed at an industry fair in Urumqi, the regional capital.[Photo/China Daily]

Belt and Road Initiative

The president’s Belt and Road Initiative, announced in late 2013, aims to restore China’s old maritime and overland trade routes. Xi has said he hopes to increase trade with more than 40 countries to $2.5 trillion within a decade.

Xinjiang is at the heart of the new silk road into Central Asia. China is making huge investments in new railways running from eastern China through Xinjiang to Central Asia and on into Europe.

That should eventually cut transport times to some markets by weeks, giving Xinjiang companies an edge over manufacturers relying on ocean freight.

By subsidizing transport, staff training and insurance, and offering generous support for financing, Beijing’s efforts to build a textile hub in Xinjiang could counter the tide of textiles investment pouring out of the country.

But take away the subsidies, and Xinjiang looks a lot less appealing. Freight costs on the first rail lines running west are still 50 percent higher than shipping costs.

Add a minimum wage already about 50 percent higher than that of Vietnam, one of the world’s fastest-growing textile hubs, and costs in the region begin to look noncompetitive.

High costs were behind a 36 percent drop in Xinjiang’s textile exports in the first eight months of last year, according to Xinjiang’s customs bureau.

Beijing’s subsidies are simply not enough to put much focus on exports, said Hua Jingdong, board secretary at Bros Eastern, another cotton spinner.

“Our strategy is to make our current domestic production stable, and any additional capacity to be overseas,” Hua said

Texhong has recently scaled back its Xinjiang project, from an initial 3 million spindles, to just 1 million. Company officials could not be reached for comment on the change.

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