Xinjiang cotton at crossroads of new Silk Road

Garments made in Xinjiang are displayed at an industry fair in Urumqi, the regional capital. Zhou Hong / China Daily

Belt and Road Initiative

The president's Belt and Road Initiative, announced in late 2013, aims to restore China's old maritime and overland trade routes. Xi has said he hopes to increase trade with more than 40 countries to $2.5 trillion within a decade.

Xinjiang is at the heart of the new silk road into Central Asia. China is making huge investments in new railways running from eastern China through Xinjiang to Central Asia and on into Europe.

That should eventually cut transport times to some markets by weeks, giving Xinjiang companies an edge over manufacturers relying on ocean freight.

By subsidizing transport, staff training and insurance, and offering generous support for financing, Beijing's efforts to build a textile hub in Xinjiang could counter the tide of textiles investment pouring out of the country.

But take away the subsidies, and Xinjiang looks a lot less appealing. Freight costs on the first rail lines running west are still 50 percent higher than shipping costs.

Add a minimum wage already about 50 percent higher than that of Vietnam, one of the world's fastest-growing textile hubs, and costs in the region begin to look noncompetitive.

High costs were behind a 36 percent drop in Xinjiang's textile exports in the first eight months of last year, according to Xinjiang's customs bureau.

Beijing's subsidies are simply not enough to put much focus on exports, said Hua Jingdong, board secretary at Bros Eastern, another cotton spinner.

"Our strategy is to make our current domestic production stable, and any additional capacity to be overseas," Hua said

Texhong has recently scaled back its Xinjiang project, from an initial 3 million spindles, to just 1 million. Company officials could not be reached for comment on the change.