Chinatown rags to real estate. An immigrant shifts from tailoring to tycooning

SHERMAN ENG wends his way past stacks of tweed jackets bound for Bloomingdale's. Old mayonnaise jars filled with tea dot the tables where dozens of Asian women hunch over whirring sewing machines. Fluorescent lights glare overhead. A Chinese pop singer croons from a crackling speaker hung on the wall.

Welcome to Mr. Eng's garment factory in the heart of Chinatown.

Ten years ago, the Hong Kong immigrant threw in with a school chum and borrowed enough money to start a ``rag'' shop. At the height of his success, Eng was juggling the operation of this shop and 12 others.

Sliding a finger over a finished seam, he boasts of new machines and the quality of the cut. Here on the factory floor, one gets the impression that nothing could be more important to him.

But Eng has sold or closed most of his garment shops. The three remaining are run by his wife. Nowadays Eng spends his time stitching together lucrative real estate deals.

Like Eng, Chinatown's major industry is at a crossroads. The garment industry -- employing 6 out of every 10 Chinatown residents -- is being squeezed.

``You've got the union on one side, imports on the other, and landlords squeezing the middle,'' says Ken W. Chin, a prominent Chinatown lawyer and real estate partner with Eng.

Until lately, Chinatown's garment industry thrived -- even while manufacturing elsewhere in Manhattan and the United States succumbed to competition from abroad. One union official calls the Chinatown phenomenon ``a miracle of recent times.''

The boom started 20 years ago when immigration curbs on Asians were lifted. New York's tiny enclave of some 20,000 Chinese swelled to a thriving community of 150,000. Now, even nearby ``Little Italy'' and the once-shoddy Bowery have all but been absorbed into Chinatown.

This flood of new immigrants -- who spoke little English but could sew -- coincided with a 35 percent vacancy rate in lower Manhattan loft space. Toss in low start-up costs and proximity to the Seventh Avenue fashion designers and uptown clothing retailers, and a flourishing garment industry was spawned.

But now the forces of change are working against Chinatown. In the past five years real estate prices have quadrupled. The causes are citywide gentrification and a flood of capital that fled Hong Kong ahead of China's taking over the British colony in 1997.

Rent for factory space has soared 78 percent since 1981, according to the Garment Industry Development Corporation, a group set up two years ago to try to buy factory buildings before developers could.

``If the rent keeps going up, we'll all be moving out of the city. And unless the government does something about imports, they'll drive this industry out of the country,'' laments Harold Siegel, executive director of the Greater Blouse, Skirt, and Garment Association.

Competitors in Taiwan, Hong Kong, and South Korea are skirting the volume-based quotas agreed to in August by moving into higher-quality clothing -- one of Chinatown's niches. In the past, Chinatown had an edge in the quick delivery of short- to medium-size orders. But even that advantage is eroding as overseas manufacturers shorten delivery times.

With 98 percent of shops here unionized, wages are more than five times as high as in the Far East. Some Chinatown factory owners are closing up, then reopening as nonunion shops, with lower wages. Others are leaving Chinatown to set up in Brooklyn, Queens, or New Jersey. In the past year the number of Chinatown garment shops fell from 500 to 425, Mr. Siegel says.

``Unless the government, unions, and manufacturers can solve their disagreements, less than three years from now the garment industry will fade out,'' predicts Eng.

Peter Kwong doesn't buy such dire predictions. ``If you're in business in Chinatown, you want to talk about the problems you have, to depress the level of wages,'' says Mr. Kwong, the author of two books on Chinatown and an associate professor at State University Center at Old Westbury, N.Y.

Chinatown's share of the garment industry will shrink somewhat, says Kwong, but not disappear. ``Chinatown is a unique environment. New immigrants are coming in constantly. Employers can get away with a lot. It will remain a low-wage area.''

Kwong says violations of wage laws are rife. ``Most women I've talked to say they don't get the minimum wage. And the union isn't doing very much. The union gets along better with the bosses than the workers.''

Muzaffar Chishti of the International Ladies' Garment Workers' Union, Local 23-25, responds: ``We can't tell you we believe the union agreements are lived up to all the time. We cannot control the work habits of more than 20,000 people.'' He points out that it is difficult to keep a continuous flow of new immigrants educated as to their rights in this country.

If things are so bad here, asks Kwong, why did a Hong Kong manufacturer just open the 280-worker L.C. Garment Factory near Chinatown?

It was an isolated case, some say. The factory has an exclusive contract with Liz Claiborne (most Chinatown contractors scramble from one job to the next), and ``Liz Claiborne spends millions on advertising,'' says a contractor who asked to remain anonymous. ``She spends $900,000 on a factory so she can say `Made in the USA' and that she's saved the city 300 jobs.''

Emanuel Tobier, a New York University economics professor and longtime observer of Chinatown, figures that ultimately, high real estate costs will squeeze manufacturing out of Manhattan. But he sees the garment industry reemerging within the Chinese communities growing in Brooklyn and Queens and predicts the Chinese will go into fashion design and marketing.

``They have the connections now and the business sense,'' Mr. Tobier says. ``I'm seeing a lot more kids with Asian backgrounds at the Parsons School of Design and the Fashion Institute of Technology. They'll be a vital factor in the fashion business of the future.''

But Eng insists on a different vision of the future for his children. ``The garment industry was my steppingstone,'' he says back at the offices of American Integrity Capital Corporation, the mortgage financing firm where he wears the hat of vice-president.

As if on cue, his partner, Mr. Chin, unveils the plans for a $135 million luxury condominium development in Hoboken, N.J., on the Hudson River shore. It's one of the biggest yet put together by two developers.

``Sherman and I prefer mortgage banking, real estate, and finance,'' Chin says. ``We're looking toward the future. For the next generation, for our children, we want a foundation not built on the garment or restaurant business but on mainstream American business.''

Outside, a sheet of paint-splashed plastic flaps against the window. The renovation of another Chinatown rag shop into sleek office space is nearly complete.