China's textile companies say the government should slow yuan gains and raise tax rebates to assist exporters weathering a decline in global demand.

The currency has risen 7 percent against the dollar this year, more than double the pace of appreciation for the same period in 2007, and that, coupled with higher costs, is hurting earnings, Du Yuzhou, President of China Chamber of Commerce for Import and Export of Textiles, said at an industry conference in Shanghai.

Most textile companies had been unprofitable for the first five months of the year, he added.

"We'll all be dead if the government doesn't increase tax rebates and slow the appreciation," Tang Zhenya, a salesman at the Changshu Shengtian Knitting & Clothing Co Ltd, told Bloomberg News. He estimates that up to 30 percent of the more than 10,000 textile manufacturers in eastern China's Changshu City have shut down this year.

The yuan on Thursday dropped the most in seven weeks on speculation that China's leaders will slow its advance to protect exporters after the government reported the weakest economic growth since 2005.

The Ministry of Commerce has urged China's cabinet to rein in currency gains and boost the amount of tax returned to companies selling abroad, a ministry official said on Monday.

"Not every company is able to overcome the difficulties," Du said on Tuesday at the China Textile Industry's Top 500 conference in Shanghai. "Two-thirds of the companies have improved labor efficiency but are still unable to offset the negative impact of higher costs and a stronger currency."

There are signs the government will help companies such as Changshu Shengtian, which has about 1,000 employees and is typical of the Chinese manufacturers that US and European law makers have said relied on an undervalued currency to compete. Changshu Shengtian sells T-shirts to retailers, including Wal-Mart Stores Inc, for typically US$1 to US$2 apiece, of which about 5 percent is profit, Tang said.

Rebates for textile shipments will be increased to 13 percent from 11 percent this month, and those for clothing to 15 percent from 11 percent, the official China Securities Journal reported last week. The payments were cut in July last year to help ease trade frictions with the US and Europe.

China's export growth cooled to 18 percent in June.

(Shanghai Daily July 18, 2008)