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Chinese aim to sew up more clothing sales

Can you tell something about an economy by its clothing manufacturers? In modern day China, maybe you can. CNBC’s Mike Hegedus reports.
/ Source: CNBC

Can you tell something about an economy by its clothing manufacturers? In modern-day China, maybe you can.

To date, China’s economic growth has been built in large measure by its incredible supply of land and people and its willingness to use them all to the max. But nothing lasts forever without figuring out what to do next, not even the Ming Dynasty. And that’s what the Chinese are trying to do now.

A case in point: The Youngor Group, which employs 20,000 people and is listed on China’s stock market. The company makes shirts, suits and pants at its colossal manufacturing facility in Ningbo, a port city south of Shanghai.

“China has all the facets … land, labor, capital,” said David Smith, a visiting marketing professor from Canada at Shaoxing University. “They’ve got it all and they’re putting it together well. I think they’re very hard-working. I think the Chinese are very hard-working people, and I think that’s beginning to pay off for them.”

It has certainly paid off for Youngor.

The company saw a little over $2 billion in total revenues in 2005, with $795 million in exports and a net profit of about $127 million. While it does some private label work for the likes of Tommy Hilfiger and Nike, it sells nothing under its brand name in the United States. Its  dominant market — 40 percent of its sales — is at home in China, where it has 2,000 retail partners and a chain of 400 upscale company-owned stores.

But Youngor is running headlong into what potentially could put the brakes on the Chinese economy. There just aren’t enough natural resources, including labor. And in some places jobs simply go unfilled. Youngor Group chief supervisor Leiming Zhong says there are new pressures on his company.

“One is the restricted, limited amount of production resources, like water and electricity. The other is that there are other companies moving in that do the same thing,” he said. “So we are trying to find new technology to increase productivity and lower costs.”

Shaoxing, the textile city, is an interesting place to go looking for the future of the Chinese economy. Here you can find one of the oldest streets in the country dating back 7,000 years, or a 3,000-year-old Buddha and a 1,000-year-old tree on sitting on top.

And here you can also find the China Light and Textile Industry city market — the largest in China — where they do business the way they always have. Buyers come from around the world to buy raw materials face to face.

There is something new here too, something brand new: Showrooms where buyers come and look, but then go to the Internet to place their orders, or perhaps never come at all and do all the business over the Internet. It’s the sort of innovation that David Smith at Shaoxing University thinks the Chinese economy needs.

“I think the more they bring in and can adapt technology-wise, the better [the Chinese] economy is going to be. It’s going to be very strong,” said Smith.

Which takes us back to those button holes — they are, in a sense, why David Smith is in China. He’s one of a number of professors of different business disciplines invited by the government to teach the next generation of Chinese businessmen how to be more efficient, produce more and make better and more cost-efficient goods — goods of their own and not someone else’s.

“They do things very inefficiently,” said Smith. “And I think if they’re doing so well, but being so inefficient at the same time," imagine where they can go if they increase efficiency, he said.

Imagine — the Youngor brand at a store near you. In fact, according to the company’s chief supervisor Leiming Zhong, part of the dream at Youngor Group is to bring Youngor clothes to the United States.