Chinese textile companies reported an average profit margin of only 3.7 percent last year, much lower than the national average of 5.69 percent for all industrial enterprises, according to a National Development and Reform Commission (NDRC) report.

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"China's textile exports, pressured by the appreciating yuan and the reduction in tax rebates, are losing their low-cost cutting edge across the global market," said the report.

The sector generated an aggregate output of 2.5 trillion yuan (about 329 billion U.S. dollars) last year, up 21.2 percent from the previous year, registering 88.3 billion yuan (about 11.62 billion U.S. dollars) in combined profits, up 28 percent. Exports accounted for 43.8 percent of the aggregate output.

The performance was better than expected following a warning from the NDRC last September that textile companies could barely absorb the costs of the rising yuan and would start to lose money.

The central parity rate of the yuan gained a monthly high of 99 basic points against the U.S. dollar on Wednesday to 7.7496 yuan, breaking the 7.75 mark for the first time.

Last year, China's garment exports rose 28.9 percent to 95.2 billion U.S. dollars while the exports of textile yarn and fabrics climbed 18.7 percent to 48.8 billion U.S. dollars. From 2003 to 2005, both reported a growth rate of more than 20 percent.

Cao Xinyu, deputy director of the China Chamber of Commerce for the Import and Export of Textiles, predicted that textile exports would grow at a slower rate of 15 percent this year to 161 billion U.S. dollars.

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