PINGHU is China's biggest clothing export center, though its role in garment production doesn't appear on the labels of merchandise it makes for global brands like Armani, Adidas and North Face.

The city, which turns out one of every 100 garments made in the world, is trying to change that image and produce its own lines of brand names.

The move has been prompted by shrinking profit margins as a global economic slowdown damps orders from abroad, especially from the giant European market. At the same time, cheaper labor in countries like Bangladesh, Vietnam and Cambodia is encroaching on Pinghu's market dominance.

"The best of times has gone," said Xu Lei, a Pinghu apparel factory boss. "When Western countries sneeze, we clothing manufacturers in Pinghu get a cold."

The city's garment industry has long thrived on foreign trade. More than 95 percent of the 300 million garments produced in the 1,400 factories in this city are exported.

"Pinghu clothing factories earn only tiny processing fees as original-manufacturing plants, though they have the world's most skilled workers and advanced machines to make top brands," said Yang Tiansheng, deputy director of the Pinghu Economic and information Commission.

Tiny fees

Now even the tiny fees are shrinking. Factories have started closing as profit margins drop to 5 percent or lower, Yang said.

"If I open production lines, I lose 70 million yuan (US$10.99 million) a year, but if I close them, I can cut the loss in half," said Xu, who was among the earliest garment entrepreneurs in Pinghu and still owns one of the biggest garment factories in the city.

Wenzhou-based causal clothes brand Metersbonwe, once a major customer for Pinghu production, has just announced that it will move 10 percent of its merchandise manufacturing abroad.

"It is a high time for the city's apparel industry to reform and create its own brands," said Yang.

He said profit margins can double to 10 percent if factories start producing their own designs, and then double again once the new labels are widely accepted.

But reform doesn't come easily.

Wang Weijia was among the first garment factory bosses in the city to create her own brand. Her EMF Textile Co has been making children's costumes for Disney since 2003, and now her own child apparel brand IKLI has opened chain stores in Shanghai, Beijing and in Zhejiang and Jiangsu provinces.

Wang said her main hurdle was the lack of good designers - a common problem for garment makers seeking to produce their own labels.

"It was not difficult to start the business and develop my own brand, but finding talent was a problem when I wanted to develop the brand," she said.

She invested a lot of money to set up an office in Shanghai to recruit designers, but in the end, she found talent in her own backyard.

Zhou Yuting, 25, had been working on her staff for four years, receiving designs from Disney and helping turn them into sample products.

"I kept the designs and patterns from Disney in my mind and later tried to design some myself," Zhou said. "Many of the designs were accepted by our US client."

Now, many of the clothes made under Wang's original label are designed by Zhou.

"There have been three designers like Zhou who were promoted from staffers," said Chen Linjian, director of the design department of the company and one of the 60 original staff when the company was first formed in 2003.

Producing a homegrown label is one thing; marketing it is quite another.

Visitors driving into Pinghu cannot miss the Pinghu China Garment Market, a modern shopping mall in the new district of the city. The mall is impressive in appearance, but inside tells a different story.

Leftovers come cheaply

The city government built the market last year and offered low rents to encourage local factories to sell their own brands there, said Li Ying, general manager of the market.

However, many factories still prefer to hawk the remainders from production of famous-brand clothes. The leftovers come cheaply.

A DKNY child's jacket, for instance, only costs 80 yuan. A Gant men's coat sells for 300 yuan, and the price is subject to bargaining.

"The garments bearing famous brands are far more popular than our local brands, and many customers come here especially to buy them," said Ding Wenli, a shop staffer from the local Xingshang garment factory.

Li said the market is now negotiating with Shanghai's Qipu Road, also known as "Cheap Road," to sell Pinghu local brands there.

Successes may be few but they do exist and hold out promise for the future of the city's garment industry.

The women's apparel brand Ne'arly is one of the leading local labels in the city. Li Shilin, the head of the company behind the brand, has adopted a marketing strategy he calls "encircling the cities from the countryside."

It costs 30 million yuan a year to rent a 300-square-meter shop on the Nanjing Road Pedestrian Mall in Shanghai, he said. At that price, Li found he could open five shops in second- and third-tier neighboring cities.

So that's what he did. He opened chain stores in the city of Jiaxing in Zhejiang Province and in Wuxi and Suzhou in Jiangsu Province.

"I will first gain popularity in these small cities and then extend battle front to Shanghai and eventually nationwide," he explained.

Wang Weijia, president and general manager of Zhejiang EMF Textile Co

Shanghai Daily: What have you achieved during the past decade?

Wang Weijia: Ten years ago, when my company was still an "original equipment manufacturing" plant, I always felt I was working for others. But now, the company has its own brand and I feel happier working for myself, despite the greater pressures on me. Still, I am proud that I developed a small trading company with only 60 workers into a garment manufacturer with over 800 workers.

SD: What's the biggest mistake most businesses in your area make in looking at the future?

Wang: Most Pinghu clothing companies felt satisfied turning out products for Western brands when the export environment was good and their businesses were quite profitable. It is too late now for some of them to develop their own brands.

SD: What's your biggest concern?

Wang: Talent is always the biggest concern. I need a group of good designers to help the development of the company's own brand.

Pinghu, with 27 kilometers of coastline along Hangzhou Bay, is about an hour's drive from downtown Shanghai.

The city's economy is built on the manufacture of clothing, luggage and electro-mechanical devices. Clothing production has made the city the biggest apparel export center in China. Most of the garments are made under foreign labels.

The city covers 537 square kilometers and has a population of 485,000. One in every five Pinghu residents works in the clothing industry.

Pinghu boasts that about 42 percent of the city is in greenery, giving the city a clean, scenic look. The city administers seven towns and three districts.

Pinghu is perhaps most famously known as the hometown of Jeremy Lin, a professional basketball player with the New York Knicks of the National Basketball Association.

537

square kilometers

485,000

registered population

1/5

residents work in the clothing industry

The Mo Mansion

Open: 8:30am-4:45pm

Admission: 20 yuan

How to get there:

Take a train from Shanghai Hongqiao Station to Jiashan South Station. A bus is needed from the Jiashan New bus station to the Pinghu South bus station before having the No.5 bus line to the Manor. A drive along the Shanghai-Hangzhou Expressway (G60) takes about 1.5 hours.