Fashion 87 : ‘Made in Hong Kong’ Label Vies for ‘Up Market’ Image

Richard Bradley spins his brown Rolls-Royce through dank industrial streets toward his dress factory.

Other Rollses and Mercedeses rush through the tenement clutter, the Anglo passengers clamping phones to their ears.

“We think we’re well off,” said the English husband of designer Diane Freis and managing director of the $25-million-a-year dress firm. “But compared to some people here . . . they’re rich beyond your wildest dreams.”

In this manufacturing mecca of wealth, squalor, gamblers and deal-makers, many have come to make riches from rags. California-born Freis started her business here a decade ago; San Francisco-based Esprit de Corps started its Hong Kong office 15 years ago. For the past three decades, American manufacturers and retailers have used the cheap, skilled labor of this British-ruled territory, which supplies the United States with more apparel, dollar-wise, than any country in the world.

Far Eastern imports account for one third of all clothes sold in the United States; 8% of all apparel sold in America is from Hong Kong. This translates to 52% of Hong Kong’s clothing exports.

But change is hitting this hub of six-day work-weeks and no minimum wage. Hong Kong is attempting to swap its sweatshop image for a shot at design prestige.

For the first time, at the recent Hong Kong Fashion Week, the government-appointed Hong Kong Trade Development Council touted designers rather than the old manufacturing brawn. The event, attended by 6,000 buyers and visitors, hyped transplants like Freis and Esprit as well as home-grown designers unknown to most Westerners.

The push to change--like most things in this bastion of capitalism--is money. A strict new six-year bilateral agreement, signed in August, limits what had been an 8% annual growth of clothing exports to the United States to 1% annual growth. The agreement subjects additional fibers to import restrictions, as well.

All Hong Kong clothing exports are regulated by a complex quota system in which manufacturers buy and sell rights to do business with the United States. The reduced growth potential will affect exporters in varying degrees, and will make the stakes of the quota system even more competitive.

The new rules leave Hong Kong with fewer loopholes than ever in exporting garments to the United States--forcing this wily survivor of a city/state to do what it always has under pressure--adjust.

“The nature of the Chinese people is to get into a given situation, adjust, cope and carry on,” says Rene Ozorio, one of several Chinese designers featured in the show.

“Nothing’s impossible here,” notes Julius Schofield, longtime English producer of Fashion Week. “It’s American greed--in a different life style.”

Hong Kong’s new “master plan” is to bank on quality over quantity, style over volume. Unable to increase the amount of clothes sent to the United States under the new trade rules, it plans to compensate by boosting values and price tags on individual garments--in part through designer labels.

Made-in-Hong Kong imports have already made the leap in recent years from America’s mass outlets to what the Chinese like to call “the up market”--better department stores and boutiques.

“We’ve already raised the quality--now we need to add another attribute--fashion,” Ester Shau of the Trade Development Council notes.

But selling the Hong Kong look could be as difficult as defining it. Unlike Japan, which spent a decade training and marketing designers to become international superstars, Hong Kong is used to “dancing to the music of our customers,” Shau says. This chameleon of commerce is better at molding itself to needs of its foreign investors than asserting an image of its own. In the rag trade, that means taking production orders--not designing from scratch.

European-cut suits, American-inspired sportswear and avant-garde bodysuits all traipsed down the cat walk during the five-day show. The fashion direction was as laissez faire as the territory itself, where high-rise apartments jut up everywhere, and nothing so much as an auto-emission law inhibits the flow of commerce.

“There’s no such thing as as a Hong Kong look. We call it East meets West,” says Lucia Chu, editor of Hong Kong Apparel, a magazine on which you’ll find as many Caucasian, as Asian, cover girls.

“Hong Kong is more of a technical-support place than a trend-setter,” contends Michael Ying, managing director of Esprit’s Hong Kong office, headquarters for the Far East. Ying calls Esprit’s inspiration “more California than Hong Kong.”

But others are tuning into Hong Kong’s creative potential. Designer Ozorio, 34, who was trained in Canada and France, says: “Hong Kong is in a prime position to be a design center. You have all the machinery available, the so-called lost arts of beading and embroidery. It’s just a question of whether you’re going to poo-poo it or take advantage of it. But I don’t think you can seriously say Hong Kong is a design center yet.”

Unlike many Hong Kong companies who have a “fever” to sell in the United States, Ozorio wants the Asian consumer. “China is one-quarter of the world’s population,” he says, smiling.

“My major ambition is to create a Chinese image--because there is none.”

Ozorio makes the kind of uptown suits and evening wear you’d expect to find on the cast of “Dynasty.” It’s hard-edged wealth for a city of overachievers.

“People want to look tough, aggressive and well-turned-out. That’s power,” he says--an assessment that contradicts another young designer’s view of “humble” Chinese tastes.

“You have to conform here in a way--blend into your surroundings,” says Ragence Lam, who designed a black jersey collection for the show. “You shouldn’t overdo or outdo your sister-in-law.”

While others grapple for a Chinese image, established firms like Diane Freis hone theirs to a profitable art. The Freis factory turns out 15,000 pieces a month: Bright, one-size-fits-all dresses, priced $400 to $1,500, half destined for upper-crust U.S stores, the rest scattered around the globe.

She came here 12 years ago for Hong Kong’s free-spirited business climate and its proximity to Far Eastern fabric sources. She’d rather work here than anywhere--although Freis and husband Bradley did recently build a two-acre estate in L.A.’s Holmby Hills.

“I’m an American--but I don’t think about it everyday,” Freis says in a faint British accent heard often in this colony where both British and Cantonese are spoken.

“This is a city built for action. I’m motivated by the intensity. I love the hassle of it all, because it’s colorful.

“People here make the world turn,” Freis says. “The reason there’s so much protectionism (U.S. laws restricting Hong Kong imports) is because Hong Kong is so dynamic.”

“It’s awe-inspiring--the ability here to pick up and do and make,” adds Wilmer Weiss, an I. Magnin vice president in town for Fashion Week.

Hong Kong’s strength is its speed, flexibility, and wages that average less than one third those in the U.S garment industry. It also has the cutting-edge machinery. In the past two years, industry here has invested in more computerized knitting machines--at $500,000 each--than any country in the world.

Its weakness is the quota system, instigated by the United States to protect a domestic clothing industry thwarted by foreign imports.

The amount of imported clothing sold in the United States has more than doubled since 1980--much of that due to growing volume from cheap labor sources such as China, Korea, Taiwan, Bangladesh, India and the Caribbean, according to Carl Priestland, chief economist for the American Apparel Manufacturers Assn.

In the early ‘80s, Hong Kong imports grew by about 8% annually. But the new trade agreement limits that growth to less than 1% annually.

Companies selling from Hong Kong pay quota fees for the right to use part of that U.S. allotment. Some firms own quota rights outright for certain garments, such as cotton blouses or wool skirts; others bargain for quotas on what amounts to a volatile, mini-stock market.

Traditionally, cotton, wool and man-made fibers were subject to strict limits, while other fibers entered the United States quota-free. In August, however, ramie, linen and silk blends were added to the restricted list, leaving Hong Kong fewer loopholes than ever for selling clothes to the United States.

There’s also a growing pro-U.S. movement for Hong Kong to contend with: The Crafted With Pride in the U.S.A. Council, for example, sponsors an avalanche of celebrity TV ads in the United States to lure consumers back to Made-in-U.S.A. labels, and clothing firms back to U.S. factories.

The council asserts that there are “hidden costs” firms face when using Far Eastern labor. It also asserts that given a choice, consumers would prefer to buy domestically made clothes.

“What we’re involved with is really survival.” Bob Swift, executive director of the New York-based council, says. “The United States has lost more than 350,000 jobs in the apparel industry since 1980s. The level of imports coming into this country are the equivalent of 700,000 jobs. That’s why we were founded--to emphasize why it’s important to buy apparel that’s made here (in the United States).”

But for Hong Kong, the bigger worry is quotas.

At Camberly Enterprises, maker of the Anne Klein II and other better sportswear lines, “the quota kills our business,” says manager Margaret Lee, seated in her Hong Kong office wearing a prim Anne Klein II suit. Lee says a $10 quota fee can be attached to a wool skirt that costs her company less than that amount to produce. She acknowledges that such steep quota fees have driven some of her customers back to U.S. labor.

Esprit also feels the quota crunch. With wool so restricted, this company that calls natural fibers its “backbone,” turns increasingly to man-made fabrics.

“We would like to make everything in wool,” says Ying, in the high-tech Esprit offices near Kowloon’s waterfront. “But because of quota, prices are driven up on wool. There’s less availability. We’re forced to use acrylics.”

“The look (of Esprit) hasn’t changed, but obviously the value of the clothes has suffered,” says Ying, who blames the quota system.

Quota-Inflated Fibers

“It’s difficult for us. We have a segment of the market with a limited expendable income,” he says. That customer is 15-35, and Esprit tries to price most of its line at $25 -$45--a level that can’t always be maintained using some quota-inflated fibers, he says. The quota for wool sweaters this year is about $4 each, Ying says. “That adds $12 to the garment in the end, at retail level.”

Esprit holds about one fourth the quota it needs for its high-volume U.S. business, and has to buy the rest from other quota holders, Ying says.

The problem makes Esprit ponder other manufacturing centers--and that includes the United States, Ying reports. “Strategically, it would be better for us. If protectionism gets worse, we will have a foothold there.”

Other firms also are hedging bets outside of Hong Kong. Fang Brothers Knitting, a major Hong Kong knitwear producer, has opened factories throughout the Far East and in Ireland. Taking a cue from the Japanese auto industry, its next move is the United States, Kenneth Fang, managing director of the family-owned business, says. Without a U.S. factory, “We can’t supply enough goods to U.S. buyers,” says Fang, who says his company makes knits for numerous U.S. department stores and designers, including Liz Claiborne and Ralph Lauren. The firm also sells knits in the United States under its own rather incongruous label, Jean-Pierre.

Echoes the Need

Diane Freis echoes the need to create a presence outside Hong Kong. The company plans to open regional offices in Australia and Beverly Hills. Freis is also considering a U.S. plant “because of U.S. policies--and because of 1997,” managing director Bradley, says.

For whatever economic strategy Hong Kong businesses claim at the moment, any tack could be obsolete in 1997--the year this British territory (since 1842) reverts to Chinese sovereignty.

Both trade officials and industry sources predict China won’t upset the balance here. “Hong Kong is too valuable to them,” says Bryan Barlow, Trade Council spokesman.

“We feel it (the transition) is not going to make any difference to Hong Kong,” Barlow says. “We feel very strongly that Hong Kong will become even more international, and that internationalism will make us a sort of Switzerland of the Far East.”

Many treat 1997 as a distant obstacle--sensing there’s still time to win or lose a fortune in the fast-paced garment trade.

“I think you shouldn’t worry so much about the future,” one philosophical trade official says.

So officially, Hong Kong promotes its factories and designer pack. Unofficially, some companies find wisdom in moving part of their interests elsewhere.

But in this colony that lives by flexibility above all, no one expresses much dread over tomorrow. As they believe here implicitly--every day’s a new game in Hong Kong.