Textile makers pay price of stronger yuan
Source: Shanghai Daily Date: 2007-07-18
Overseas sales of Chinese textiles and garments may grow at a slower pace this year as a stronger yuan dampens the global competitiveness of domestic products and government export rebates take hold, the nation’s planning body said yesterday.
The combined value of textile and garment exports may total US$165 billion in 2007, up 16 percent from a year earlier, the National Development and Reform Commission said. Last year exports expanded 25.2 percent.
"The yuan will continue its upward momentum and further weaken the price advantage enjoyed by Chinese textiles and garments, thus exerting more pressure on domestic textile companies," the top planning body said in a statement.
The yuan has appreciated 8.6 percent since China abandoned the decade-long fixed exchange rate of 8.28 to the US dollar on July 21, 2005, and replaced it with a basket of currencies.
Meanwhile, the reduction in export subsidies has also raised the costs of textile companies.
"Our net profit has declined about six to eight percent after the government cut the tax rebate from 13 percent to the current 9 percent," said Chen Zhemin, president of Shanghai Longfengxinyu Headwear & Accessory Co Ltd.
The hat maker and many other textile and garment exporters are upgrading their product mix to increase profit margin and alleviate the impact brought by the costs of the increase.
China has lowered the export rebate for textiles and garments twice since September last year.
The China National Textile & Apparel Council forecast that the move will bring a total profit loss of 4.8 billion yuan (US$634.3 million) in the garment industry in the second half of this year.
An unstable trade environment including expiring textile export quotas with the European Union and the United States will also threaten exports, the planning agency said.
