Opinion - News Analysis

Shaoxing — little India in China

Pallavi Aiyar

In 2006, India's trade with the thriving textile city was $145 million.

— Photo: Handout

The textile market at Shaoxing.

FROM ULHASNAGAR on the outskirts of Mumbai to Ho Chi Minh City in Vietnam, Seoul in Korea, and finally the south-eastern province of Zhejiang in China, Kishore Badlani's globalised trajectory is nothing out of the ordinary in Shaoxing.

A county-level city that few outside of China have heard of, Shaoxing is, in fact, the nerve centre of the textile world connected by criss-crossing flows of fibre, yarn, fabrics, and garments to markets stretching from India to West Asia, Europe, the United States, and Australia.

It is in Shaoxing's Textile City — the world's largest textile market, spread over 2.8 million square metres of space crammed full with 12,000 shops — that the who's who of the global textile industry converge, to shop. And when they do, the middlemen or indenting agents they use to secure samples and place orders are, more often than not, Indian.

It is thus in little-heard-of Shaoxing rather than the gleaming metropolis of Shanghai or the historic capital of Beijing that one of the largest Indian communities in China is to be found. According to the city's public security bureau in 2006, 1,670 Indians were registered with the authorities as permanently residing in the city and 200 Indian trading companies were issued with business licences.

Raju Gianchandani, secretary of the Shaoxing Indian Business Association (SIBA), however, said the actual numbers of Indians who lived and worked in Shaoxing may be closer to 10,000. The majority of them a floating population of traders who spend substantial parts of the year in the city on short-term business visas, which they repeatedly renew in Hong Kong.

Last year, the trade volume between India and Shaoxing was worth $145 million. But for the Indian traders here, India is only one of many markets hungry for China's cheap textiles. Mr. Badlani, who heads KBC Trading, for example, deals primarily with the European, Southeast Asian, and West Asian markets.

"We have always followed the market," said Mr. Gianchandani, originally a Jodhpuri, who moved to Shaoxing in 1999 from Korea and was one of the first of this largely Sindhi community of textile traders to have made their home in China. "Earlier most of us were in Dubai or Korea but as China came up and became the factory of the world, it made sense to move here. Prices were cheaper here and because the market was still new, there were opportunities for everyone," he explained.

Both Messrs Gianchandani and Badlani trade mainly in polyester and synthetics, products that are manufactured in staggeringly large quantities and low prices, in Shaoxing.

At one of the city's largest manufacturers of polyester fibre, Tiansheng Group's Yifeng Fiber Co. Ltd, this correspondent was told that Yifeng alone produces some 50 million metres of fibre for export annually. Twenty five per cent of the company's $80 million a year business in conducted with India. In Shaoxing no one bats an eyelid at mind-blowing statistics such as this. Millions and billions roll off tongues in a constant flow and the county vice-governor Sun Zhe Jun rattled off a battery of figures with barely a break.

Mr. Sun said the county's GDP stood at RMB 45 billion ($5.6 billion). Last year, the per capita income of residents in its urban areas was RMB 20,460 ($2,625) while for those in the rural areas it was RMB 10,438 ($1,320). Shaoxing's 6,500 textile enterprises manufacture annual volumes of 5.3 billion metres of fabric and 200 million pieces of garments. In 2006, Shaoxing's textile exports were worth some $4 billion. Seven per cent of all China's fabric exports are accounted for by this county alone.

The single town of Shengzhou — which falls under Shaoxing County's administration — produces 85 per cent of China's ties, accounting for a staggering one third of all the world's tie production.

Discussing Shaoxing's transformation from somewhat of a backwater renowned primarily for the picturesque waterways that thread the town to global textile powerhouse, Mr. Sun said that following the economic reforms begun by Deng Xiapoing in the late 1970s, Shaoxing county started up several town and village enterprises (TVEs). In the 1990s these were gradually privatised, often sold off to their managers, so that today 99.5 per cent of the county's firms are privately owned.

In this characteristic the county is one of a piece with the entire province of Zhejiang, unique in China for its dynamic private sector. While the economies of many of China's other provinces are still controlled by state-owned-enterprises, the private sector comprises up to 80 per cent of Zhejiang's economic output.

Zhou Ru Sheng, the director of Shaoxing's Foreign Trade and Economic Cooperation Department, said he was hopeful economic exchanges with India would deepen in the coming years. Mr. Zhou visited New Delhi a few months ago, where he met executives from the Confederation of Indian Industry and held talks with the Reliance Group. Reliance, he revealed, was interested in Shaoxing enterprises setting up factories in India, particularly those involved in printing and dying. "They [Reliance] want to learn some best practices from us," he said.

But according to the Shaoxing-based Indian traders, opening a Chinese factory in India will not in itself help the country to catch up with China's manufacturing might. The reasons for Chinese superiority in textiles were many, they said, and not easy to emulate without making deep structural changes.

Mr. Gianchandani emphasised that Chinese labour was not only cheap but also far more skilful than its Indian counterpart. Data collected by the World Bank has indeed shown Chinese labour to be more productive than labour in India. The differential level of primary education in both countries is one explanation for this phenomenon. World Bank estimates of numbers of children who managed to finish Grade 5 of primary school in India, in 2000, was 46 per cent compared to 98 per cent in China.

Mr. Badlani added that China's flexible labour laws, which allow for ease in hiring and firing, and the lack of strong worker's unions in the country gave its businesses an edge over Indian enterprises. According to the World Economic Forum's global competitiveness report for 2003-04, China ranked 26th out of 102 countries on hiring and firing policies as opposed to India's 96th rank

Everyone also agreed that infrastructure and investment in capital machinery were the final and crucial advantages enjoyed by China's textile industry.

"They have the best machines here in Shaoxing. Only one worker is needed to manage four machines. In India we need four workers to manage one machine," said Mr. Badlani. Meanwhile European and American textile buyers prefer China to its competitors because of the dependability of its entire supply chain from ordering to shipping. The country's excellent infrastructure including efficient ports and broad highways help avoid the bottlenecks that in India adversely affect delivery times and costs, both crucial in the textile trade.

"Things are getting better in India now too, but for the moment China is still far ahead," said Mr. Badlani.

Food-related complaints

The collection of eight SIBA members that this correspondent met over dinner was unanimous in their complaints about Chinese food. They swapped food-related horror stories involving "hundred-year-old eggs" and chicken feet, both considered delicacies in China. Mr. Badlani came to their rescue when he opened up an Indian restaurant a few years ago, one of five in Shaoxing, but finding "good food" was still tough, they said.

The traders were also unhappy at the fact that the longest period the Chinese authorities granted work visas for was one year, necessitating a lot of paper work and administrative hassles for annual renewals. To add to their woes, competition was steadily increasing, squeezing their profits. "More and more Indians are pouring into the city everyday," lamented Mr. Gianchandani.

But despite the complaints none of them had any plans to move away from Shaoxing. "There's still a lot of potential here," concluded Mr. Gianchandani. "It's still going to grow further."

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