An average 20-percent increase in employees' wages, more costs in power consumption and a doubling of shipping costs had slashed profit margins of exporters to a very low level.

"If we bow to US government pressure and let the yuan rise further and faster, the outlook for those companies will become worse," he said.

The US House of Representatives approved a bill on Sept. 29 allowing the Commerce Department to impose tariffs on imports from countries with "fundamentally undervalued" currencies.

However, a stronger yuan is very likely to be the last straw for many Chinese exporters.

A survey by the Foreign Trade and Economic Cooperation Department of the Guangdong Provincial government showed the province's exporting firms were struggling as production costs -- particularly labor -- rose sharply this year.

"Due to more anti-dumping and anti-subsidy investigations by the US and European governments, it's already very difficult for our company to survive this year," said Qian Jin, head of Hongyuan Motorcycle Exporting Corporation in Guangzhou, capital of south China's Guangdong Province.

"If the yuan's appreciation accelerates, exporters like us will suffer huge losses when we sell our foreign exchange to get Renminbi," he said.

Xinhua's survey found the profit margin for labor-intensive exporters industry such as producers of textiles, garments, footwear, toys and auto parts has dropped below 5 percent this year, leaving little room for those companies to afford a stronger yuan.

Every percentage point rise of the yuan's value in real terms equalled an 0.63-percentage-point reduction in the volume of exports of machinery and electronic products, and a 1.47-percentage-point contraction in exports of textiles and garments, according to a study by the Jiangsu Provincial Academy of Social Sciences and the province's Department of Commerce.

Xu Weimin, president of Jiangsu Dongdu Textile Group Co., Ltd., said the general textile industry's average profit margin was between 3 percent and 4 percent.

"If the yuan rises by more than 5 percent, about two thirds of textile companies will lose," Xu said.

(Xinhua News Agency October 3, 2010)