Against a grim economic backdrop, local textiles giant Fountain Set (Holdings) has decided to trade its export-orientated core businesses for a mainland-focused strategy in a bid to stay afloat.
"Hong Kong's garment industry is facing its toughest time in 40 years," Fountain Set Executive Director Gordon Yen told China Daily.
He attributed the difficulties plaguing the industry on weak demand in export markets, tightening market liquidity and the rise of protectionist practices among garment and textile importing countries.
Census and Statistics Department data shows the aggregated value of the city's textile product and apparel exports last year posted negative growth for the first time in 10 years. Last year's exports dropped 5.3 per cent to HK$553 billion.
Yen cited worsening economic conditions in the US and Europe for the significant drop in import demand in those regions, particularly in the fourth quarter last year.
He believes that Hong Kong's export sector is unlikely to rebound over the next 12 months despite multi-trillion-US-dollar stimulus packages rolled out by Western governments.
To mitigate the impact of the global crisis on its operations, Fountain Set has shut down some of its production lines geared towards the US and European markets, Yen said. The move has cut production capacity by 20 per cent, resulting in a reduction of over HK$200 million in provisions in the previous financial year.
"The retrenchment of outfit is a one-off write-off. But it is hard to say if the company's business will bounce back in the forthcoming result," Yen said.
The Fountain Set executive believes the mainland market will be one of the principal areas of future growth for the company.
The company began expanding into the mainland in 2003 and it has since established two assembly plants, one in Guangdong and the other in Jiangsu. It has also forged a tie-up with well-known mainland retail brand producers, namely Li Ning and Septwolves.
"The mainland now accounts for about 5 per cent of the group's total business. We hope to increase this proportion up to 15 per cent within three to five years," he said.
