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Rising costs and an appreciation of the yuan are squeezing Chinese cotton textile companies, making nearly half of them want to quit, a new industry survey reveals.
According to Xinhua, the official press organization of the government, the survey was conducted by the China Cotton Textile Association and covered cotton textile companies in 17 provinces. In total, 49.2% of the companies surveyed said they wanted to quit and restart in other businesses.
About 27.3% said the pressure they felt from the yuan appreciation had become unbearable, while 44.4% started selling some export-oriented products on the domestic market.
The companies also cut investment in cotton textiles by an average of 15.5% last year because of the yuan appreciation, lowered tax rebates and soaring costs in both labor and raw materials. The companies said they made more investment in the real estate sector, equity markets and other businesses.
A recent survey by the China National Textile and Apparel Council showed the industry's profit margins averaged 3.9% last year. Two-thirds of the companies surveyed reported an average profit margin of only 0.62%.
Chinese textile exporters are turning to non-US dollar currencies in pricing and settlement to offset rising losses from the yuan's appreciation against the greenback.
The majority of more than 1,000 textile producers said they had switched to other currencies in a survey by WebTextiles.Com, a major textile information website.
The Chinese currency has risen more than 4 percent against the dollar this year, with its central parity rate setting a high of 7.002 against the dollar on Monday.
The continuous appreciation, together with rising costs from export tax rebate cuts and more expensive labor and raw materials, has squeezed profits in China's textile industry.
"We're losing out to neighboring countries like India, Pakistan and Vietnam, whose textile exports are now much cheaper than ours, " said Wang Gongzhu, general manager of the east China-based textile producer Huamao Group. "We surely want the prices up, but we have little room to move."
Chinese textile and garment exports in the first two months rose only 9.6 percent from the same period last year, compared with previous year-on-year increases of about 20 percent.
NTCO News
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