The sun set Wednesday on a quota and license system that governed China's textile trade for decades.

As the United States-China and European Union-China agreements on textiles and clothing expired with the old year, the Ministry of Commerce terminated supervision over quotas on 21 categories of textile exports to the United States and licenses on eight categories to the European Union.

Textile companies might see on Thursday -- the first day of 2009 -- as the beginning of an unfettered era of free trade, but the outlook is clouded by weakening demand and rising protectionism amid the financial crisis.

There are few signs that shipments by the world's largest textile exporter will soar.

"With global demand slumping, the expirations will not bring about a repeat of the sharp increase in textile and clothing imports from China that occurred in early 2005," said Sun Huaibin, spokesman for the China National Textile and Apparel Council.

He said that worries about such an increase and its damage to the US market were "groundless."

He said slackening demand resulted in a persistent low rate of quota usage this year.

Quota prices fell from a peak of nearly US$20 to less than US$2 within a year, said Liu Min, a trader with Shanghai Mai Si Ke Te International Trading Co. Ltd.

"Our exports declined more than 60 percent compared with last year. I heard many textile companies cut exports to the lowest level in recent years. Some even failed to use up the quotas acquired before the third quarter," said Chen Shubin, general manager of Foshan Qiaoli Textile Import and Export Co. Ltd. in Guangdong Province.

Analyst said shrinking orders in the fourth quarter and dim prospects for next year would mean a "tight" year for textile makers. Textile companies' top challenges would be to secure their market share and tailor production to the domestic market.

Pessimistic forecasters expect exports to continue slumping in the first quarter of 2009. If demand continues to shrink, small and mid-sized companies would barely survive.

Sun said although the financial crisis had diluted the stimulus from the quota expirations, textile makers should not lose confidence because they could retain global market share with cheap, good-quality products.

In November, China's textile exports dropped 3.8 percent year-on-year to less than US$5 billion. Garment exports rose 6.1 percent to US$10.4 billion.

From January to November, textile exports rose 18.1 percent to US$60.4 billion and garment shipments grew 3.1 percent to US$108.7 billion.

China did not change the export tax rebate rate for textiles and clothing in its latest round of tax rebate adjustment, announced on Tuesday, after it had raised the rate twice to 14 percent.