China's textile industrial output for 2007 is forecast to reach 3.05 trillion yuan (416.8 U.S. billion), a 21.9 percent increase year-on-year, according to a report released by the Textile Industry Association.

Large scale textile enterprises (those with annual sales exceeding two million yuan) were expected to realize profits of 115.2 billion yuan this year, a 32 percent jump over the previous year. The export value would reach 177.2 billion U.S. dollars, a 20.1 percent increase year-on-year. This was compared with the import value of 18.9 billion U.S. dollars, which experienced growth of 4.4 percent.

However, with the ongoing appreciation of the yuan and the textile export tax rebate reduction, the low-cost edge of Chinese textile products was gradually weakening.

The yuan broke through the 7.32 mark on Thursday afternoon to stand at 7.3186 yuan against one U.S. dollar, up more than 6.6 percent accumulatively.

The yuan's appreciation was hitting the country's textile industry hard. According to an estimation by webtextile.com, every rise of one percent in the yuan would cause a two to six percent drop in textile commodity profit.

Price hikes of international crude oil and wool also put chemical fiber enterprises and the wool industry under huge pressure.

As the world largest textile exporter, China made tremendous efforts to extricate itself from these predicaments. These included further exploring domestic and overseas markets and counteracting the adverse impact of rising costs by technological innovation and industrial upgrading. In addition, developing countries in Asia and Africa had become a major engine for export growth, the report said.

Despite constantly rising oil prices and the ongoing appreciation of the yuan, the export value of China's textile industry was expected to increase by 15 percent in 2008.

"Although the RMB appreciation is painful for the textile industry for the time being, it is hoped that the RMB exchange reform would help adjust export orders of the industry so that only the competitive could survive," said an industry expert.

Source: MINISTRY OF COMMERCE