China's clothing and textile industry, the world's biggest garment and shoe supplier, faces a worsening operating environment as the global financial crisis cuts demand and a rising currency erodes profits.

The deepening credit crunch could hurt China's exports, and the subsequent bailouts by Western governments will likely increase the relative value of China's currency, curbing exporter profits, Sun Huaibin, director of the China Textile Economy Research Center, said yesterday at a conference in Jinan, Bloomberg News reported.

The clothing and textile industry employs 20 million mainly rural workers, a seventh of the country's industrial labor force, according to the China National Textile and Apparel Council. The industry's slowdown may complicate China's goal of maintaining faster growth and boosting domestic consumption.

"There is a colder winter ahead of us," Sun said. As the export demand slide seems to be "gathering momentum," there is little hope for the industry's prospects to improve this year, and the "bottom" may not appear until at least the first half of 2009, he said. The yuan has gained more than 10 percent against the dollar in the last year.

China's exports of clothing and apparel only grew 1.8 percent in the first nine months, a decline of 21 percentage points compared with the growth rate at the same time in 2007, the Customs agency announced yesterday.

Investments in the sector are also slowing after the government this year tightened lending, Sun said. About two-thirds of small to medium textile producers are in financial difficulties, according to Chairman Du Yuzhou, of China National Textile.

(Shanghai Daily October 14, 2008)