Numerous Chinese textile mills may go bankrupt

14 Jul '10

1 min read

Five percent appreciation of Yuan against dollar may drag half of the Chinese textile mills into bankruptcy, as mills would badly lose their meager margins due to Yuan appreciation. The country is currently experiencing growing world pressure for revaluing its currency.

Profit margins of the country's textile mills are just three to five percent. Those of the labour-intensive textile units will witness one percent decrease with one percent appreciation of Yuan, revealed a Yuan stress test undertaken by the Government in the month of March.

The statistics of the Ministry of Commerce showed that, China's textile industry directly employs over 20 million people, while more 140 million are engaged in cotton farming. So, millions of jobs will get affected with high upward revaluation.

Appreciation of yuan along with rising raw material and labour prices has already reduced profit margins of China's textile companies. During 2005 and 2008, Yuan witnessed 21 percent appreciation against US dollar. And, recent relaxation of restrictions on the appreciation of Yuan, by the country, led to its 6.80 to 6.76 percent appreciation against dollar.

Fibre2Fashion News Desk - India

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