The government's priority has been to curb the skyrocketing trade surplus in formulating policies. But now that exports have indeed slowed down, more problems have surfaced and both industry and government bodies are worried.

Chinese textile companies have been hit the hardest as many of them rely on exports for profits and the profit margin for most is narrow. Faced with rising raw material costs, no export tax rebate and rapid yuan appreciation, many textile manufacturers are saying this is going to be the toughest year ever.

If a lot of these labor-intensive textile companies do go under, the government will be faced with a rising unemployment rate. Official figures show the textile industry alone employs over 20 million people across China, most of whom are migrant workers.

Textile and garments exports make up nearly 13 percent of China's total exports. Total export value of textile and garments in the first quarter of this year was $38.5 billion, up 19.47 percent over the corresponding period last year. Experts say that although it is still increasing, the pace of growth has slowed down.

The rate of growth in regions that focus more on exports is lower than other parts of China. Exports in Guangdong province, for instance, amounted to $7 billion, up only 0.87 percent.

Many export-oriented small enterprises have already been shuttered, while some small foreign-invested textile enterprises have moved to other places.

This state of affairs has alarmed government officials. Cao Xuejun, an official in charge of textiles from the National Development and Reform Commission, said the government is "very concerned".

At a recent conference, Cao said the situation this year is not good for textile companies given the state of domestic and world markets.

While some industry players have appealed for policy support such as adjustment of export tax rebates to tide over the crisis, many experts and textile companies realize the turmoil in the industry could also be a good opportunity to restructure it.

Cao said the development of the industry has shifted from quantity-driven expansion to a new stage where companies need to focus more on innovation and product upgrade.

Echoed Huang Yiren, a vice-president of Fujian SBS Zipper Technology Ltd, the largest zipper maker in China, saying it is time for Chinese enterprises to improve their management rather than simply competing for the lowest price.

"Good companies will finally survive and will develop even better," Huang said.

Commerce Minister Chen Deming had earlier gone on record saying the government will help enterprises through better guidance and providing more information.

(China Daily May 9, 2008)