Counting Down to 2005: China’s Strong Currency Heightens Trade Debate

As the end of quotas nears, industry experts wonder if China will float its currency, and if the U.S. will clamp down on Chinese imports.

Kalish added that there’s one other important thing for U.S. companies to bear in mind as they structure their Chinese operations. A foothold in the country, even intended to produce goods for export, can also serve as a launching pad into the Chinese consumer market. There is a nascent middle class in China, which is buying cars, mobile phones and other consumer goods that are out of reach for many in a country with a per-capita GDP of $4,400.

Given the country’s massive population, Kalish said as a consumer market, China is “at the threshold of becoming quite important. It has been growing rapidly.”

In today’s cutthroat apparel industry, where executives fight over each nickel of cost in a garment, the birth of a significant middle class in a country is often a harbinger of the exit of U.S. importers — Mauritius, for instance, has recently weathered an exodus of manufacturers.

But considering the continuing flood of people out of rural farming districts and into cities, Kalish said China faces no shortage of low-cost workers. He said, “There’s at least another 20 years of significant apparel manufacturing in China.”
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