THE CHINESE businessmen who visited Pakistan early September have shown interest in buying cotton yarn from here but textile millers say this is much less than what they had anticipated.

Local textile millers say they wanted the Chinese businessmen to enter into joint ventures in manufacturing; work out some arrangements for the transfer of technology and export low-cost machinery to Pakistan. They say Pakistan needs all this to be able to compete with its export rivals in the quota free markets from January 2005.

“But what we have got so far are only individual inquiries for yarn,” laments a leading local textile miller.

During their visit to Pakistan the 12-member delegation led by the vice chairman of the China Chamber of Commerce had a long dialogue with leading members of the All Pakistan Textile Mills Association to see how the two sides can benefit from each other.

Local textile millers say they told the Chinese delegation that Pakistan was looking for establishing long term relationship with them to improve its textile manufacturing and exports. “Our idea was to attract the Chinese investment through joint ventures in the upgrading and expansion of the textile sector,” says an official of APTMA. But he says that the Chinese side appeared more inclined towards using Pakistan as a supplier of textiles raw materials including yarn to its companies.

Lately Japan has relocated its manufacturing facilities into China which has increased the need of the Chinese textile sector to import yarn from Pakistan. The yarn that the Chinese now want to buy from Pakistan is meant for consumption by those companies that are producing finished goods for Japan. Naturally then the Chinese cannot offer as good a price for Pakistani yarn as the country can fetch through direct exports to Japan. In addition to this there is another major disadvantage.

“The Chinese want us to sell the entire production of say a 1000-spindles unit to them,” points out a textile exporter who has got Chinese offer to lift the yarn produced by his company.

“We do not want to tie up our entire production to a single party because that may create serious problems,” remarks the exporter. He says that the yarn supplied by him to the Chinese importer will be used in making finished products in China and exporting the same into the world market. “What will happen if the Chinese textiles are rejected and the Chinese manufacturer shifts blame on the quality of the yarn he buys from us? We will be in trouble.”

Pakistan’s textile sector that accounts for one-fourth of the large scale manufacturing grew by 4.26 per cent in fiscal July/ June 2001/02 up from 2.76 per cent a year earlier on the back of better cotton crop; greater use of modern technology and quota concessions given by some developed countries. What else helped this sector post a decent growth was a sharp decline in the rupee value vis-a-vis the major European currencies.

The textile sector that earns about two-third of the country’s total exports has been making efforts to equip itself with the necessary tools that are needed in the quota free world by 2005. That is why this sector has already spent more than $700 million on BMR and expansion projects. In addition to this the textile sector has also been making efforts to seek foreign investment in the shape of joint ventures and transfer of technology. It was against this backdrop that the local textile millers had pinned some hopes on the visit of the Chinese delegation in September.

But as a Lahore-based textile miller puts it “expecting too much from China makes little sense as it is one of Pakistan’s competitors in textile exports.” He feels that the Chinese are trying to optimise their own ability” to meet the challenges of the post-quota textiles regime that would dawn on them in 2008 —whereas Pakistan would enter into quota free world three year earlier. “They want to take advantage of these three years,” remarks the textile tycoon, adding that the Chinese interest in buying quality yarn from Pakistan should be seen in this light.

The vice chairman of APTMA, Mushtaq A. Vohra, proudly points out that Pakistan has started producing a much better quality of yarn than in the recent past—thanks to the investment made in the upgrading of textile technology. “We have come a long way from 20-count yarn to 60-count yarn,” he says,adding that whereas yarn is often treated as a finished product in Pakistan “it is just a raw material for the Chinese” who are much ahead in value-addition.

For the past few years the production and export of yarn have been on the rise: Pakistan produced 1,730 million kg of yarn in fiscal 2001/02 up from 1,679 million a year ago. Yarn exports also rose to 545 million kg in 2000/01 from 513 million kg in 1999/00.

Textile millers say one of the reasons why China is seeking bulk supply of cotton yarn from Pakistan is that its own industry has remained more focussed on blended yarn making in the near past. But lately Chinese textile industries have been trying to makeup for this shortfall. Businessmen having close links with China say Chinese industries have booked six month orders for local yarn manufacturing that has made it impossible for them to spare machinery for export to Pakistan.

This explains why the Chinese delegation that visited Pakistan early September could not make any commitment for the supply of Chinese machinery. But there is another thing that has limited the scope of import of Chinese textile machinery into Pakistan.

“We can buy Chinese looms if they promise to us that they will buy the additional production that these looms would make,” says zonal chairman of Towels Manufacturers Association S.M. A. Rizvi. “We raised this point in our discussions with the Chinese delegation. But they seemed unreceptive to this proposal,” he says.

Rizvi says a couple of years ago import of 120 or so Chinese shuttleless looms had given a boost to towels manufacturing in Pakistan. “The Chinese looms were a bit less sophisticated than those from the Europe but they were much cheaper.”

Though the most immediate outcome of the visit of the Chinese delegation is limited to the trade inquiries for yarn that the Pakistani exporters have received so far yet enough seems to be in store. (Sources in textile industry say that despite certain reservations that Pakistani exporters have on conditional export of yarn to China—one exporter has sold some 100 containers of cotton yarn to a Chinese buyer.)

“There is large scope for Pakistani products in China,” says Mushtaq A. Vohra. Since Japan has shifted most of its weaving and stitching facilities to China “they can sub-contract or shift extra job to Pakistan.” The Chinese can do this easily as they have “a much larger market access in the USA” than Pakistan has.

He hopes that exchange of delegations “will create political changes that may result in better business for Pakistan in the future.”

He suggests that Pakistan should establish a permanent desk in the Board of Investment and in Pakistan Embassy in China to keep Beijing reminding that “China being big brother should share its expanding economy with Pakistan.”

Textile millers believe an industrial exhibition being held in Chine in mid-October will provide with a good opportunity to send this message across to the Chinese policy makers and businessmen.

Members of APTMA say many of them will be participating in the exhibition that would enable them to establish one-to-one direct relationship with the Chinese businessmen and get first hand knowledge of what the Chinese need.

Pakistan has been in trade deficit with China over the years: In fiscal 2000/01 its imports from China stood at $525 million as against the exports of $304 million.

Pakistan earns one-third of its total exports to China through textile yarn and fabrics. Other major items that Pakistan exports to this friendly neighbouring country are: (i) petroleum and its products, (ii) leather and leather manufactures, (iii) organic chemicals, (iv) articles of apparel and cloth accessories, (v) fish and (vi) chromium ores and concentrates.