The International Textile Group (ITG), a major US textile manufacturer, started construction of a denim clothing plant in China yesterday amid quarrels between the two countries over the textile trade.

The company had a ground-breaking ceremony yesterday for what will be a state-of-the-art factory in the city of Jiaxing in East China's Zhejiang Province. Investment in the project is estimated at US$95 million.

The operation will be a joint venture called Cone Denim (Jiaxing) Ltd, with 51 per cent owned by a subsidiary of ITG and 49 per cent owned by a subsidiary of Novel Holdings Limited. Novel's principal China businesses include yarn and knitwear, and brand names such as Michael Kors and Pepe.

Wilbur Ross, chairman of ITG, said this initiative would establish another major global site in line with the company's strategy of expansion.

The Cone Denim (Jiaxing) facility is expected to be operational by late next year and will have a production capacity of approximately 30 million yards annually. When operating at full capacity, the plant is expected to produce annual revenues of about US$100 million. The factory will employ about 700 people.

John L. Bakane, president and CEO of Cone Denim, said the China operation will provide the firm with the ability to expand its global reach so it can better serve its customers. The China operation will mainly produce textiles for exports.

The venture is in line with plans to transform ITG into a global textile company, producing and selling products around the world. ITG has investments in Turkey, India and Viet Nam.

The company co-operated with China Ting Group to invest in a dyeing and finishing plant in Hangzhou in December and is also planning to invest in a synthetic fabric plant.

China Ting Group has also entered into a licence agreement with ITG to develop Burlington House Retail as a home furnishings store in China.

ITG is increasing its stake in China at a sensitive time, as the United States is trying to block Chinese textile imports.

China and the United States failed to reach an agreement on their textile row on Monday at the 16th Joint Commission on Commerce and Trade, although the US has promised to be prudent when applying safeguards against Chinese textile exports. Before the meeting, two rounds of talks had already been held.

The US has applied special import quotas on seven categories of Chinese textile imports since late May, although global textile quotas were abolished on January 1.

In addition, US textile groups asked its government on Tuesday to impose import restrictions on more Chinese textile products, such as shirts, skirts, pyjamas and swimwear.

ITG's Ross, a financier who bought Cone Mills and Burlington Industries out of bankruptcy to form ITG, is famous for re-energising money-losing companies, something he has achieved in the steel and coal industries.