TNAG-0939-FCO40-1158-Visit-of-John-Nott--Secretary-of-State-for-Trade--to-Hong-Ko-1981 — Page 13

CODE 18-77

SS 8/78

Reference

ban 16%). Imports of woollen yarn were expected to increase by at least 24% (by volume) this year, so the prospects for increased UK sales were good. Mr Harrison asked what sorts of yarn the HK industry required. Mr Cheong said that both botany cuts and wool-spun yarns were in demand, but in recent years the fashion trend had been away from botany cuts and towards Shetland, angora, cashmere and the like. Most of HK's imports of woollen yarn were single-ply. Mr Regan asked whether the poor UK performance was a function of price. Mr Cheong replied that price was secondary if the quality was satisfactory. Mr Lin said that there were a number of factors involved. Some British wool, because of the spinning process used, tended to be too oily for use in the HK industry; the UK's delivery record was not good; and the price of UK yarns was 20-25% above that of Japanese yarns. Mr Wilson asked whether the industry was using all-wool yarns or mixtures. Mr Cheong replied that current fashion dictated all-wool, and there was no reason to suspect an early change. Mr Lin emphasised that HK knitters were looking for high-quality yarn of Woolmark standard. Mr Cheong commented that the UK industry had a very low profile in HK, so that buying British was not a knitter's first reaction; a higher-profile approach could well generate sales. Mr Wilson asked what size of order a HK knitter would place. Mr Lin said that the sampling weight would usually be about 500 lb, but subsequent orders would be larger. In reply to a question from Mr Harrison, Mr Cheong said that the industry was active the year round but its main activity was concentrated in the period March-October. The peak purchasing period was therefore in October to December, and a prospective supplier should aim to start discussions with his prospective customer in mid- September or, at the latest, mid-October. Mr Lin stressed the need to employ in HK an agent who knew the market well; the larger agents did not necessarily fulfil this requirement. Mr Nightingale asked about the geographical distribution of HK's knitwear exports. Mr Cheong said that approximately 16% went to the UK, 12% to the FRG and 10% to the rest of the EC. Mr Dorward pointed out that the rate of growth of access to developed country markets was low 1% for the US and 31% for the EC. Mr Regan asked about the scope for selling fancy yarns to HK. Mr Cheong remarked that HK was one of the biggest users of fancy yarn in SE Asia. The season for fancy yarn sales was the same as for standard yarns, but flexibility and a good back-up service were even more important because the initial commitment by the nature of the trade was much smaller. Mr Wilson suggested that it would be very helpful if the HK side could make available to the Trade Commission a list of suitable agents, and this was agreed.

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Mr King, representing the trousers sector, said that in 1979 HK had produced 14m dozen pairs of trousers, jeans etc. The fabrics used included heavy denim, stretch denim, cord, stretch cord and high-quality velveteen. The main sources of supply were Japan and the USA (for denim and cord) and the FRG (for velveteen). The USA was tending to supplant Japan as a supplier of high-quality fabrics to HK, for reasons of quality and price, the establishment by American companies of local offices in HK had also been an important factor, since it ensured better follow-up service. But the reduction in Japanese exports largely due to increased demand at home had still led to shortages on the HK market. Mr Wilson asked what types of woollen fabrics were used in trouser-making in HK. Mrs Tong said that mixtures - eg 65/35 worsted/polyester were used for winter wear. Mr Tien pointed out that suiting material was bought in much smaller quantities, and it was difficult to generalise. Mr Cheng commented that reprocessed wool was of particular interest to the HK suit industry. He too exphasised the need for good local representation: it was well worthwhile establishing a local office. Returning to the topic of denim and cord, Mr Nightingale outlined the market view taken by companies such as Levi- Strauss and Wrangler. Their plans were based on the assumptions that: trade in denim jeans had increased over the last ten years at about 8% pa and would con- tinue to do so for a further ten years; and that the two "classic" fabrics, denim and cord, would continue to dominate the market (say, 55% denim, 35% cord and 10% other fabrics). Mr King agreed with this assessment. Mr Nightingale asked

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