XStep signed up Hong Kong star Aaron Kwok to promote its brand, while Derh hired Taiwanese singer Jay Chou. But both companies have struggled with building themselves as professional sportswear or fashion.

Chinese brands have, however, succeeded in their distribution model, signing one agency in every province that then develops a retail network in the region. This model has allowed the companies to take a huge market in a short period of time. But it has also played out in the usual way, with many sportswear retail outlets competing along small shopping streets for a limited consumer population.

China makes 65 percent of the world's sportswear, according to the World Federation of Sports Goods Industry, and most of the world's sports shoes.

But with the cost of labor increasing, it is losing its manufacturing competitiveness, with more contracts going to other low-cost markets like Southeast Asia and Pakistan.

China used to make most of the world's basketballs, volleyballs and footballs, but now 60 percent of footballs are made in Pakistan.

Chinese sports product makers are mainly small and medium-sized companies whose manufacturing equipment, technology and management lag behind the international level. Some make fake or low-quality products, hurting the image of Chinese manufacturers.

Chinese manufacturers are facing unprecedented challenges, although hosting the Olympic Games could provide a much-needed boost.

The author is chief consultant to Landbird International PR Agency in Beijing

(China Daily 03/29/2007 page15)