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  Story Name | CHINA, INC. MADE IN CHINA: TIE CITY | |

|  Notes |  |

Introduction: In this clip, Jim Sciutto explores the concept of specialization in production. As you listen, think about what factors might limit the extent of specialization.

18:43:59 BOB WOODRUFF

(OC) President Bush will be in China tomorrow. Among other things, he will try to convince the Chinese to slow the flood of cheap goods into the US. China has underpriced so many American companies because of inexpensive labor and a very efficient method of manufacturing, in many cases, dedicating entire towns to making a single product. In our series, "China, Inc.," tonight, ABC's Jim Sciutto is in the city where neckwear is king.

18:44:24 JIM SCIUTTO, ABC NEWS

(VO) It doesn't look like a fashion powerhouse, but the small city of Shengzhou is the necktie capital of the world. 40% of the world's ties, even popular American brands, are made right here. Julie Yuan is the first lady of neckties. Her company, Maidilang, sells $40 million worth every year -- to Asia, Europe and America. A multimillionaire at 35, she started out as a farmer. "We started out from nothing," she told us. "Now, we have so many foreign clients coming here from all over the world." Shengzhou undercuts the international competition by making quality ties on the cheap. Factory workers are well-trained and experienced, but paid just 75 cents an hour, compared to more than $10 an hour in the US and Italy. Another secret is government help -- such as free land and cheap loans -- but here they say their biggest advantage is that they make just one thing really well. "All the people in the tie business are enthusiastic and devoted to it," he said. "Actually, everyone here is an expert." It is a formula applied across the country. There is a sock town -- it makes eight billion pairs a year -- a cigarette lighter capital -- even underwear city. So why ties in Shengzhou? It's part accident -- it started with one foreign contract 20 years ago – and part history.

18:45:55 JIM SCIUTTO

(OC) The city of Shengzhou has been making silk for hundreds of years and then shipping it on to countries, such as Italy, to be made into ties and scarves, you name it. Now, they produce the silk and the ties and they get even more of the profits.

18:46:06 JIM SCIUTTO

(VO) We did notice that most people in necktie city don't wear neckties. Mr. Liu had to borrow one for our interview. He told us they're too busy making them. Jim Sciutto, ABC News, Shengzhou, China.

18:46:19 BOB WOODRUFF

(OC) Can't always wear what you make.

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