A textile plant in Shaoxing, China, where factories are closing. Few sectors are as crucial to the Chinese economy as the $450 billion textile and apparel industry. This was a city that globalization built.
Not long ago, there were 20,000 textile and garment factories here, their workers knitting and sewing six, sometimes seven, days a week to produce the wares sold at the world's biggest retailers, like Wal-Mart, Zara and H&M.
But now, Shaoxing, a coastal city that is one of the largest textile centers in the world, has fallen victim to the global financial crisis.
Its factories are closing. Some bosses have fled town, leaving thousands of workers in the lurch. And other owners are worried about mounting debts and the prospect of bankruptcy.
Qian Jin, an industry expert, said China textile companies are suddenly in a "struggle for survival." Beijing's warning last December was dire, too: As many as two-thirds of Chinese textile and apparel companies could go broke.
Yang Baolin, president of Siris Knitting, which operates a factory in Shaoxing with about 1,800 employees, said, "We've seen our orders cut by a third over the past few months." Yang added, "All the exporters are failing."
And the problems in the textile industry are just the start. The once-roaring economy in China is witnessing its sharpest slowdown in three decades. As many as 20 million migrant workers are already believed to be out of work. And with demonstrations over factory closings erupting in a string of coastal cities, Beijing has grown increasingly concerned about social and political unrest.
The government has announced an economic stimulus package of 4 trillion yuan, or $585 billion, to help keep factories operating. Some state-owned companies are being ordered not to lay off workers. Automakers, ship builders and electronics manufacturers have been designated for government aid.
But few sectors are as crucial to the Chinese economy as the $450 billion textile and apparel industry - proof of its global trading prowess and a symbol of the nation's development model, which is based on low-cost exports.
Last year, the industry accounted for $153 billion of China's trade surplus, far more than any other industry. And today, more than 20 million workers are employed by textile and garment makers, mostly migrant laborers from the country's poorest provinces.
For those reasons, Beijing has been paying attention to the industry's travails.
"This industry absorbs a lot of employment," said Sun Ruizhe, vice president of the China National Textile and Apparel Council. "And this is important for social stability."
Experts say that what happens in cities like Shaoxing could be a barometer of the trading might of China and a window into its social conditions.
Shaoxing (pronounced SHAOW-shing), about 160 kilometers, or 100 miles, southwest of Shanghai, took off in the 1980s, transforming its rice paddies into small businesses producing chemical fibers like nylon and dyeing fabrics for big-name retailers like Nike and Adidas.
Before long, hundreds and then thousands of textile factories came to life here. The city's population grew to four million, as hundreds of thousands of migrant laborers from the inland provinces gravitated to Shaoxing to live in company dormitories and toil long hours.
Today, no city in China has as large a concentration of textile and garment producers, industry officials say. Sales from the city's huge textile bazaar, a sprawling mall that attracts 100,000 visitors a day, topped $9 billion last year, according to the local government.
With the city's boom came new roads, BMW and Lexus car dealerships, lakeside villas and luxury residences with names like Global New York, Victoria Gardens and Money King Tower.
"This city has too many millionaires," said Zhang Guowei, the 37-year-old general manager of Tiansheng Holdings, one of the biggest wool producers in Shaoxing.
Zhang's experience is a typical rags-to-riches tale from Shaoxing. Twenty years ago, he was a mechanic earning about $4 a month. Now, he drives a Mercedes, talks about sending his daughter abroad for college and boasts about the tremendous growth of a factory complex here that has 3,000 employees, a worker dormitory, a movie theater and tennis and basketball courts.
But even Zhang said he was hurting, though he expected that his business would survive with help from the government.
But the growth of Tiansheng is yesterday's boom. Now, Shaoxing is trying to cope with this latest threat to its future. As early as 2007, rising oil prices began to drive up the cost of the chemical fibers that are used to make nylon clothing.
Rising coal prices made operating a factory more expensive. And when the Chinese currency, the yuan, also known as the renminbi, appreciated sharply against the dollar in early 2008, factories here complained about being paid for exports in a sharply weakening currency.
To add to the problems, a new labor law and fierce competition for young migrant workers pushed wages up by more than 30 percent in the past two years.
And fabric and textile buyers from America and Europe have come to expect lower prices every year.
"They set a cheaper price and say, 'Take it or leave it,"' said Yang Lairong, general manager of Jinchan Home Textile & Garment, which produces curtains and other home textiles for Wal-Mart and J.C. Penney, the U.S. retail chains. "We're really being squeezed."
Worried about the factory downturn, Beijing has responded with a series of measures aimed at supporting textile producers: tax credits and rebates, requiring state-owned banks to approve low-interest loans to factory owners and reducing water and other fees.
Last October, Beijing even dispatched one of its top leaders to Shaoxing to urge local leaders to meet the downturn head on.
"We should bravely confront today's difficulties," Prime Minister Wen Jiabao said during a speech then, while on a tour of the city's textile factories.
But since then, things have gotten bleaker. The head of the Jianglong Group, one of biggest dye factories in Shaoxing, ran off in November, leaving behind 4,000 workers and more than 1.37 billion yuan in debts.
Creditors pleaded with the government for help, and workers demonstrated.
Some industry officials say the Chinese textile industry will continue to thrive, particularly because of cities like Shaoxing - so-called textile "cluster cities" that dominate a particular end of the business by specializing and competing fiercely on price.
"We are confident China still has the advantage," said Qian, the industry expert. "We have specialty towns for shoes, socks and other items. Shaoxing is chemical fiber cloth, also dyeing. Southeast Asian countries don't have a complete integrated chain, so they can't compete with us."
