Cotton Yarn Returns to US as Chinese Labour Rises

Twenty-five years ago, Ni Meijuan earned $19 a month working the spinning machines at a vast textile factory in the Chinese city of Hangzhou.

Now at the Keer Group’s cotton mill in South Carolina, which opened in April, Ms. Ni is training American workers to do the job she used to do.

“They’re quick learners,” Ms. Ni said after showing two fresh recruits how to tease errant wisps of cotton from the machines’ grinding gears. “But they have to learn to be quicker.”

Textile production in China is becoming increasingly unprofitable after years of rising wages, higher energy bills and mounting logistical costs, as well as new government quotas on the import of cotton.

At the same time, manufacturing costs in the United States are becoming more competitive. In Lancaster County, where Indian Land is located, Keer has found residents desperate for work, even at depressed wages, as well as access to cheap and abundant land and energy and heavily subsidized cotton.

The prospect of a sweeping Pacific trade agreement that is led by the United States, and excludes China, is also driving Chinese yarn companies to gain a foothold here, lest they be shut out of the lucrative American market.

Keer’s $218 million mill spins yarn from raw cotton to sell to textile makers across Asia. While Keer still spins much of its yarn in China, importing the raw cotton from America, that is slowly changing.

But surging labor and energy costs in China are eroding its competitiveness in manufacturing. According to the Boston Consulting Group, manufacturing wages adjusted for productivity have almost tripled in China over the last decade, to an estimated $12.47 an hour last year from $4.35 an hour in 2004.

In the United States, manufacturing wages adjusted for productivity have risen less than 30 percent since 2004, to $22.32 an hour, according to the consulting firm. And the higher wages for American workers are offset by lower natural gas prices, as well as inexpensive cotton and local tax breaks and subsidies.

Today, for every $1 required to manufacture in the United States, Boston Consulting estimates that it costs 96 cents to manufacture in China. Yarn production costs in China are now 30 percent higher than in the United States, according to the International Textile Manufacturers Federation.

Rising costs in China are causing a shift of some types of manufacturing to lower-cost countries like Bangladesh, India and Vietnam. In many cases, the exodus has been led by the Chinese themselves, who have aggressively moved to set up manufacturing bases elsewhere.

The Carolinas are now home to at least 20 Chinese manufacturers, including Keer and Sun Fiber, which set up a polyester fiber plant in Richburg, S.C., last year. And in Lancaster County, negotiations are underway with two more textile companies, from Taiwan and the Chinese mainland.

But cutting and sewing clothes, still relies so much on labor that “it’s just impossible for the U.S. to be competitive.”

Investment in American textiles has not come just from China. Last year, the ShriVallabh Pittie Group, a leading textile manufacturer in India, broke ground on a $70 million factory in Sylvania, Ga., the area’s first new manufacturing plant in four decades.

“The whole textile world is looking at us,” Vinod Pittie, chairman of the ShriVallabh Pittie Group, said at the factory’s groundbreaking ceremony, predicting that the success of the venture would draw other entrepreneurs to open plants in Georgia.

The outcome of stalled negotiations over the Trans-Pacific Partnership, a free-trade agreement that leaves out China, will also affect Keer’s American prospects. American negotiators are pushing for rules that would require apparel makers in member countries to use yarn from within the trade zone to enjoy tariff reductions. By producing yarn in America, Keer is hedging its bets, making sure it can continue to supply yarn to apparel manufacturers to countries like Vietnam that are within the T.P.P. trade zone.

As she walked through the factory floor, Ms. Ni pointed to digital screens at the end of each row of spinning machines, which displayed in real time, out of a score of 100, how efficiently those machines were kept running by their operators. The screens flashed: 76, 85, 90. Experienced workers in China rarely let that number drop below 97, she said.

“They’re learning,” she said. “I have to be patient.”