Gov.cn Reports that Textile Firms May Face Bankruptcy on Yuan Appreciation
On July 13, 2010, Gov.cn reported that the China National Textile and Apparel Council stated that half of China's textile firms may risk going bankrupt if the value of the Chinese currency yuan rises 5 percent against the U.S. dollar…
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given the industry's thin profit margins. Profit margins for the country's textile companies stands at 3 to 5 percent, which has been squeezed by the the appreciation of the yuan, rising raw material and labor costs. The government conducted a yuan stress test in March, which showed profit margins of labor-intensive textile companies would drop by 1 percentage points if the yuan appreciates by 1 percent.