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Producers of branded goods for exports are the only local clothing manufacturers that can expect to survive the boom of Chinese mass products that keeps increasing due to the end of import quotas.

The EU is planning to introduce a preliminary monitoring system on Chinese shoe imports, similarly to clothing imports, after the World Trade Organization (WTO) has put an end to the import quota system that was in place for almost 40 years. Importers will need to ask for a permit in advance, but they will automatically receive it. “The monitoring system will serve to provide preliminary statistics to the EU, so that the data can be used easily in the future to demand protective measures,” said Gábor Várkonyi, a department head at the Economy and Transport Ministry (GKM).

Of all the ten new EU member states, Hungary receives the highest amount of Chinese goods. Imports from China grew 235% in the first ten months of 2004, compared to the same period a year earlier.

“Only the EU can help delay the collapse of Hungary’s textile industry,” said Sándor Molnár, a department head at GKM, adding that Brussels has initiated talks with China over the need to introduce self restriction measures. As a result, China has introduced a minimal export duty on clothing items.

Due to the huge amount of Chinese imports, domestic sales of local clothing manufactures dropped 20% to HUF 7.6 billion in the January-October period of 2004. At the same time, domestic shoe sales fell 35% to HUF 1.3 billion.

“There is no significant demand for locally made, expensive, quality shoes,” said Zoltán Gyenge, CFO at Shoe Fashion Group Shoe Industry Rt. The company, which used to belong to the German Salamander-group and now is owned by Austria’s Lorenz AG, exports all of the shoes it makes. Shoe Fashion Group posted HUF 42 million profit after cutting its staff by 60. It explains its good results by purchasing leather in Asia.

Local clothing manufacturers worry that production will be relocated to the Far East, and a few Hungarian companies also plan to replace their domestic suppliers with Chinese sources.

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