Since the beginning of this year, the Chinese textile industry has been experiencing unfavorable business conditions due to the accelerating yuan appreciation, the tightening of monetary policy, significant wage increases because of the newly implemented labor regulations, a greater burden on enterprises from tighter environmental standards, skyrocketing raw materials and fuel prices and from damage caused by excessive snow.

From January to February 2008, the top one third of companies among all textile companies above a "certain size" saw an average profit margin of 8.73%, while the rest faced an extremely difficult situation, with a loss of 1.685 billion yuan from a 1.641 billion yuan profit in 2007. Of those 11,072 companies were in the red, which increased by 47.51% from the end of November 2007, with a loss of 4.866 billion yuan, up by 37.2% over the same period last year. The number of employees working in money-losing companies reached 2.73 million, an 810 thousand increase from the end of 2007.

In this situation, the amount of facility investment is decreasing as well. The amount of fixed asset investment from January to March was 44.09 billion yuan, a 13.1% increase from the same period last year, but that of facility investment dropped compared to the same period last year.

Note: Companies above a "certain size" refers to government-owned companies and private enterprises with over 5 million yuan in annual sales.